The Spillover Effect of US Industrial Subsidies on China’s Exports

Round 1

Reviewer 1 Report

• Brief summary

The manuscript intends to assess the effects on China's exports of US subsidies to its (national) industries. It is concluded that the most negative effects (of those subsidies) occur in the case of medium- and high-technology industries, being insignificant in the case of resource-based or low-technology industries.

• Broad comments
• areas of strength

It is a manuscript that addresses an extremely important issue, not only for the two countries under analysis, but also, precisely through spillover effects, for all world trade. The methodology used to study the issue is one of the appropriate ones –   complementary methodologies such as input-output modeling, or even spatial econometrics, could also have been considered – and it is applied, in a very competent way.

• areas of weakness

It is my opinion that there are two areas where the manuscript can be improved:

1. Given the extreme relevance of the effects of national protectionist policies on world trade, I believe that the manuscript could have provided a better motivation for its focus of analysis;
2. The concluding section is incomplete.

• Specific comments

Considering those two areas of possible improvement:

1. As is well known, protectionism to national industries, for example through the granting of subsidies in order to make them more competitive and, thus, make it more difficult to import (similar) goods produced abroad, is, as a general rule, more beneficial than free trade, only if other countries do not adopt, for example by retaliation, the same kind of policies. In other words, protectionism in world trade is an example of the so-called prisoners’ dilemma (of game theory). Using this result, it can be seen that, for the United States themselves, subsidies to its industries can, indeed be harmful to those industries, if China adopts the same kind of industrial policies and, due to some sort of a spillover effect, protectionism spreads to third countries. So, eventually after the paragraph on page 3, lines 132-136: “However, ..., domestic industries”, I recommend that the authors elaborate a little on this point of view of game theory as a way of motivating yet better the need to study the spillover effects that the manuscript intends to assess. It will be easy to find references on this subject but I would suggest to begin with MccGwire, J. (2018). A Game Theory Analysis of Donald Trump’s Proposed Tariff on Chinese Exports. The Student Economic Review, 30, 69-77. [Obviously, I have no relationship whatsoever with this reference.]
2. As usual, the concluding section should contain not only the conclusions but also the limitations of the study which may serve to conduct further studies. Such is not only the recognition that the study, as all studies, has limitations but, more importantly, that the authors thought about how to overcome/reduce them.
3. Finally, a minor issue that I hope will not be understood (by the authors) as excess detail. In some references, throughout the text, the authors do not always put a blank space (between the comma and the year), or else they put too much, or do not use the comma. For example: “Carballo,2008; Pellegrini and Muccigrosso,2017” [page 3: 48]; “Kirchweger et al. , 2015” [page 3: 57]; “Santos 2019” [page 3: 58]. And, still in relation to the references, the list containing them must be carefully revised, in order to standardize all references according to what is required by the Journal.

Author Response

Please see the attachment. Thank you very much.

Author Response File: Author Response.pdf

Reviewer 2 Report

Your paper provides very interesting and topical findings and I appreciate much effort you have put in your research.

I have the following remarks:

• the aim of the paper should be clearly specified,
• you could consider to improve your introduction section by taking into account more references specially those providing more theoretical background,
• the method section should be more clearly presented, with regard to the models used. Cf. Table 7 - do these results refer to the model presented in line 159?

Author Response

Please see the attachment. Thank you very much!

Author Response File: Author Response.pdf