Policy makers selectively protect certain firms against international competition.

The Core Argument:

This letter argues that policy makers tailor trade policies to specific firms, particularly those with high levels of fixed assets. Firms possessing more specialized assets face higher costs when reorganizing production and are thus hurt more by international competition. In response, policymakers grant greater trade protection to these asset-heavy companies.

How This Works:

Firms strategically compete for trade protection benefits from antidumping duties (ADDs). When one firm receives protection through ADD petitions, it affects the protection granted to other firms, creating a diffusion dynamic across different industries. The analysis uses financial data on firms filing ADD petitions combined with unique datasets.

What We Found:

Using spatial autoregressive models, we found that asset-specificity significantly correlates with higher levels of trade protection received by firms. Importantly, these dynamics vary within and between product groups, showing how firms can influence their exposure to trade policies.