May 2th, Song Huasheng (Zhejiang University)

Lecture：Song Huasheng (Zhejiang University)

Topic: Size matters! Who is bashing whom in Trade wars

Time：May,2th, Thu, 13：30-15：00pm

Venue：Boxue 1120

Abstract: Anti-dumping (AD) enforcement has been on the rise for the past decade, most of which reflects increased use by developing countries, which have used it to retaliate against industrial countries. To explain this pattern of AD activities, we develop a model with a dynamic setting where countries trade every period in which we analyze bilateral incentives to initiated AD and incentives to retaliate by countries of differential sizes. We show that industrial countries continue to initiate AD against small developing countries despite retaliation by the latter but not against larger countries, i.e., selective targeting occurs in equilibrium. Furthermore, countries are more likely to engage in AD when home market demand turns sour. The empirical evidence based on world-wide AD cases during 1995-2010 is well in line with the theoretical predictions. This study clearly points out that trade wars cannot be understood entirely when ignoring the importance of trade partners’ relative size.