China’s deepening engagement in the global trading system and the threat of its export
capacity have affected the negotiation, formation, and rules of international trade agreements.
Among other changes, China’s 2001 accession to the World Trade Organization (WTO) introduced
new allowances for existing members to deviate from core WTO principles of reciprocity
and most-favored-nation (MFN) treatment by giving existing members access to a discriminatory,
import-restricting China safeguard based on the threat of “trade deflection.” This paper asks
whether there is historical evidence that imposing discriminatory trade restrictions against China
during its pre-accession period led to Chinese exports surging to alternative markets. To examine
this question, we use a newly constructed data set of product-level, discriminatory trade policy
actions imposed on Chinese exports to two of its largest destination markets over the 1992-2001
period. Perhaps surprisingly, we find no systematic evidence that either U.S. or EU imposition
of such import restrictions during this period deflected Chinese exports to alternative destinations.
To the contrary, we provide evidence that such import restrictions may have a chilling
effect on China’s exports of these products to secondary markets - i.e., the conditional mean U.S.
antidumping duty on China is associated with a 20 percentage point reduction in the relative
growth rate of China’s targeted exports. We explore explanations for these puzzling results as
well as potential implications for the sustainability of the rules of the world trading system.