Size matters! Who is bashing whom in trade war?

Abstract

In this paper we present a dynamic model of trade wars in contingent protection. We find that “market size” matters in trade wars in the sense that countries are more likely to initiate anti-dumping cases against countries having sufficiently smaller home markets relative to their own, but less likely against countries with larger markets. We test this “selective-targeting hypothesis” using World Bank data of worldwide anti-dumping filings during the years 1995–2014, and find strong support for it. Thus, our study indicates the importance of relative market size in understanding recent patterns of anti-dumping filings and contingent protection in world trade.