Multi-mode Trade Policy Retaliation1

Abstract

Abstract Previous studies have found evidence that countries may choose to retaliate against countries for certain trade actions. What has not been empirically examined is the use of multi-modal retaliation in trade policy. Using an exporter-importer-sector panel of antidumping (AD), sanitary and phytosanitary (SPS), and technical barriers to trade (TBT) actions between 1995 and 2019, we find evidence of both cross-sector and cross-agreement retaliation: importers are statistically more likely to initiate an AD petition against an exporter if they have an ongoing SPS-related concern against that exporter. The World Trade Organization’s dispute settlement body (DSB) was initially seen as promoting the stability of the global trading system by limiting such unilateral retaliation, widespread throughout the 1980s. We find statistical evidence suggesting that countries may be increasingly engaging in unilateral actions, particularly through SPS and TBT, in response to trade policy disputes as confidence in the WTO DSB falls. Our findings suggest that countries may expect more unilateral retaliatory action through SPS and TBT if recent efforts to reform the WTO DSB fail.