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Causes of global spread of anti-dumping under research lens

11 Nov, 2018 KDIS News Center 1,365

Professor Tabakis

With the strengthening of countries’ tariff commitments with the General Agreement on Tariffs and Trade/World Trade Organization and the worldwide decrease in applied tariff rates, other forms of trade policy have become very important. Anti-dumping (AD) is nowadays the most widely and commonly used instrument to grant trade protection. From an empirical perspective, the most astonishing fact is that the set of countries using AD on a regular basis has become much larger in the last few decades. While only a handful of developed countries were the almost exclusive users of AD in the 1980s, developing countries such as Argentina, China, and India began using AD systematically in the 1990s and are, at this point, among its most active users, targeting both the developed and developing countries.

In the article “Antidumping Echoing”—published in Economic Inquiry in April 2017—Prof. Chrysostomos Tabakis (KDI School) and Prof. Maurizio Zanardi (Lancaster University Management School) document the empirical relevance of AD echoing, whereby a given product exported by a given country becomes subject to AD measures in different (and potentially several) importing countries at the same time. Considering the worldwide AD caseload over the period 1980 to 2005, the first contribution of the article is to show that AD echoing is a widespread practice that involves developed and developing countries and a variety of sectors. In particular, 20.5 percent of all AD petitions that were concluded with the imposition of measures are involved in echoing.

Given its empirical relevance, the authors present a dynamic game in which two competing importers can choose to impose an AD duty on a third exporting country in one of two periods, if at all, so that they can theoretically explore the determinants of AD echoing. In line with the literature on trade policy in general, and on AD in particular, they assume that governments are politically motivated, attaching an extra weight to the profits of their domestic import-competing industry in their objective function. The predictions of the model are intuitive but not necessarily obvious.

The authors find that AD echoing occurs if a country’s political-economy parameter lies in an intermediate range. In such a case, a country chooses to impose an AD duty in the second period of the game if and only if the competing importer has done so in the first period in order to offset the trade-deflection effects entailed by the competing importer’s action. Instead, a government will introduce AD measures independently of the competing importer’s actions if it cares a lot about its domestic industry.

These conclusions are confirmed by the econometric analysis, which looks at the AD activity of the 15 most active users of AD. Although there are some differences in the results between the traditional—i.e., Australia, Canada, the European Union, New Zealand, and the United States—and the new users of AD, and the authors uncover heterogeneous sectoral effects, their econometric analysis provides robust evidence of the nonlinear effect on a country’s AD activity of the interplay between its government’s political-economy motivations and the AD measures previously introduced by other countries on the same products and against the same exporting countries as the ones currently targeted in its own AD investigations.

In conclusion, this article highlights yet another peculiar feature of the AD system, shedding light on an important strategic effect to which AD can give rise. More specifically, the political-economy-driven AD actions of different countries are shown to be interdependent (to some extent), implying that they cannot be fully understood when each importing country is analyzed in isolation.

Furthermore, the findings presented in the article suggest a novel political-economy explanation for the global proliferation of AD use over the last few decades, highlighting a trade-deflection-based channel whereby AD activity might spread across countries, which was not previously studied in depth.

 


Prof. Chrysostomos Tabakis, KDI School of Public Policy and Management