Countries with different levels of state capacity have access to different sets of policies. In particular, countries with strong state capabilities are able to draw from a broader menu of policies than countries with lower capabilities. We apply and test this insight to the case of exposure to trade‐related risk. So far, most of the literature has considered that only one type of policy—the one that increases government size—can help to overcome the challenge imposed by openness. However, there are a number of policies that can mitigate trade‐induced risks, many of which do not have the necessary implication of increasing public spending. Yet, many such policies require governmental capabilities not available to any country. For that reason, while the choice of a particular policy within a menu depends on political conditions, the relationship between openness and the size of government might be mediated by the capabilities of states. This paper provides reduced form evidence confirming that the empirical relationship between openness and government size is conditional on state capabilities. Therefore, public policies cannot be assessed independently of the capacity of the State that would have to implement them.