Retaliatory Use of Public Standards in Trade
NBER Working Paper No. 27255
This research investigates the extent to which countries use public standards as a means of political retaliation in the international policy arena. We construct a dataset that matches the adoption of sanitary and phytosanitary (SPS) standards between 1996-2015 with SPS committee data on specific trade concerns and annual, bilateral trade flows. We evaluate the presence and frequency of retaliation by assessing the extent to which measures imposed by one country against another increase the probability that the country targeted by the original measure will respond with a measure of their own. We observe that this type of tit-for-tat behavior commonly occurred outside the product group of the original measure and for politically strategic goods. At the two-digit level, we find that about 3,000 bilateral trade flows globally--or just over $110 billion in trade--were subject to retaliatory standards in 2015.
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Document Object Identifier (DOI): 10.3386/w27255