Antidumping and tariff Jumping: Japanese firms’ DFI in the European union and the United States

Antidumping and Tariff Jumping: Japanese Firms’ DFI in the European Union and the United States. — The relationship between EU and US antidumping measures and direct foreign investment (DFI) is examined through a micro-econometrical analysis of Japanese firms’ plant establishments in the electronics industry. After controlling for firm and industry capabilities, market size, transport cost, and product cycle effects, antidumping actions are found to have a substantial positive effect on Japanese DFL EU antidumping is roughly twice as likely to lead to tariffjumping DFI as US antidumping, which is ascribed to marked differences in antidumping procedures. Tariff jumping makes antidumping ineffective in combatting anticompetitive behaviour by foreign firms and may result in increased market concentration.     

Innovation through Protection: Does Safeguard Protection Increase Investment in Research and Development?

We perform the first empirical study of the impact of temporary trade protection on firm investment in R&D. Using a firm‐level panel of the beneficiaries of safeguard protection between 1975 and 2005, we find support for predictions from the theoretical literature that temporary tariffs stimulate investment in R&D, but we find no evidence that this effect disappears as the termination of protection approaches, as predicted by some models. We also find little evidence that quotas impact firm investment in R&D, which we believe is because of the great deal in variation in how restrictive safeguard‐related quota protection has been over the last 35 years.     

Are Antidumping Duties for Sale? Case‐Level Evidence on the Grossman‐Helpman Protection for Sale Model

Do contributions to politicians affect trade policy? To examine this question, we have compiled a new, unique database containing information on political donations by the specific firms and labor organizations that have petitioned for antidumping protection from imports, as well as data on the outcomes of their requests. Using an empirical framework based on the 1994 “protection for sale” model, we examine the relationship between antidumping decisions and political activism. Our results indicate that money does matter. We find that politically active petitioners are more likely to receive protection and that antidumping duty rates tend to be higher for that group. In addition, the relationship between the import penetration ratio and duties imposed depends on whether or not petitioners are politically active—antidumping duties are positively correlated with the import penetration ratio for politically inactive petitioners but negatively correlated for politically active petitioners, consistent with the Grossman‐Helpman model's predictions.     

Economic effects of rules of origin

Economic Effects of Rules of Origin. — Rules of origin exist because governments wish to discriminate amongst products on the basis of their “country of origin”. Since the components and activities that make up the total value added of many products are not created in a single location, rules to define a unique geographical source for products must be somewhat arbitrary, and inevitably introduce distortions into production and trade patterns as producers seek to provide their products with the most favourable origin. This paper considers the structure of such rules and their economic consequences.     

THE STRATEGIC USE OF ANTI-DUMPING IN INTERNATIONAL TRADE

Although anti‐dumping duties are the official countermeasure to the unfair trading practice known as injurious dumping, it is alleged that in some cases anti‐dumping duties are being used to protect certain strategic industries against competitive rather than dumped imports. Although conventional economic wisdom is against such protectionism, some economists argue that certain sensitive and strategic industries may need to be protected against competitive imports even at the cost of economic welfare. This paper argues that more attention should be paid to those strategic industries to establish what is really happening in these industries, while less time and effort should be spent trying to change the Anti‐dumping Agreement.     

ANTI-DUMPING AND MARKET ACCESS: A NOTE

For the duration of the currently stalled round of trade negotiations (the Doha Development Round) attention focused on the plight of developing countries under the current trade rules. One of the aspects under discussion is market access, and in particular the (ab)use of anti‐dumping measures to limit market access so that the progress made towards trade liberalisation is eroded. A popular assertion is that developed countries use anti‐dumping measures to protect their own industries against competition from developing countries. Part I of this short research note briefly takes stock of developments in this regard since the inception of the World Trade Organisation (WTO) in 1995. How has the use of anti‐dumping (AD) measures evolved? Who are the most active initiators of AD investigations and who are the victims? What is the spread between initiations of AD investigations and the actual imposition of AD measures? In Part II we consider selected AD issues, such as the determination of dumping margins and injury, administrative discretion, and the longevity of AD decrees.     

An analysis of ITC decisions in antidumping,countervailing duty and safeguard cases

An Analysis of ITC Decisions in Antidumping, Countervailing Duty and Safeguard Cases. — This paper investigates the economic factors that best explain the decisions of the International Trade Commission in administering the injury provisions of U.S. antidumping, countervailing duty, and safeguard laws during the 1980s. Utilizing the economic data collected by the Commission for each investigation, it attempts to ascertain through regression analysis how strictly the commissioners have been interpreting these laws in recent years in terms of the economic conditions required for finding that an industry has been injured and for establishing a casual relationship between imports and this injury.     

Antidumping as Strategic Trade Policy under Asymmetric Information

Trade liberalization under GATT/World Trade Organization (WTO) has been partly offset by an increase in antidumping protection, possibly due to the inclusion of sales below cost in the definition of dumping. This article investigates the domestic government's antidumping duty choice in an asymmetric information framework, in which the foreign firm's cost is observed by the domestic firm, but not by the government. We show that by designing a tariff schedule contingent on firms' cost reports and accompanied by a threat to collect additional information for report verification, the domestic government may not only be able to extract the true cost information, but also succeed in implementing the full‐information, governmental welfare‐maximizing duty. The antidumping framework within GATT/WTO may thus not only offer the means to pursue strategic trade policy disguised as fair trade policy, but it also helps overcome informational problems with regard to correctly determining the optimal strategic trade policy.     

Economic integration, market size and the welfare effects of trade liberalisation

Economic Integration, Market Size and the Welfare Effects of Trade Liberalisation. — This paper examines the welfare effects of regional and global integration in a model where market size matters. Regional integration leads to higher welfare in the countries of a preferential trading arrangement (PTA), but to lower welfare outside. In case the countries also decide to form a customs union (CU), both countries will experience further gains if the creation of the CU means that the average external trade barriers are raised. In turn, the outside country will in this case experience further welfare losses. If it retaliates and creates a trade war, this will lower welfare in all countries. In contrast, global integration mostly benefits both PTA countries and outside countries.     

Endogenous timing in trade policy games: Should governments use countervailing duties?

Endogenous Timing in Trade Policy Games: Should Governments Use Countervailing Duties? - Trade policy under oligopoly is analysed in two multistage games with endogenous timing of trade policy. At the beginning of the games, the domestic and foreign governments choose whether to set trade policy at stage one or two. It is shown that in the subgame perfect equilibrium of both games, the domestic government will set its tariff (and production subsidy) at stage one and the foreign government its export subsidy at stage two. The domestic country commits not to use a countervailing duty in both games, and both countries are better off than when they set trade policy simultaneously.     

The economic and strategic motives for antidumping filings

The Economic and Strategic Motives for Antidumping Filings. — This paper looks at worldwide antidumping activity during the last two decades. We examine the motives for AD filings by countries in an attempt to identify whether economic or strategic concerns are driving the recent upsurge in AD use. We begin by providing a comprehensive overview of the data on cases initiated in the 1980–1998 period. We then use nonparametric methods to identify motivations for the use of antidumping and find considerable support for strategic motivations. This suggests that the rise in AD activity cannot be solely explained by an increase in unfair trading practices.     

Does antidumping stimulate FDI? Evidence from Japanese firms in the UK

Does Antidumping Stimulate FDI? Evidence from Japanese Firms in the UK. — This paper explores which factors influence the number of Japanese firms in the UK and the level of employment and fixed assets in those firms, at a highly disaggregated sector level. We are interested in whether trade policy has had a role to play in the entry and expansion of Japanese firms. The results give some support to the hypothesis that antidumping action has acted as an incentive for Japanese direct investment in the UK. However, it has a relatively modest effect —antidumping cases can explain a maximum of 8 per cent of the expansion in employment by existing Japanese firms in the UK, while they appear to have no influence on the arrival of new firms.     

Intra-industry trade of India: Trends and country-specific factors

Intra-industry Trade of India: Trends and Country-Specific Factors. — The analysis in this paper confirms that trade liberalization biases trade expansion towards intra-industry trade (IIT) in India. The increased level of IIT is largely exportled, that is, caused by a faster growth of exports than of imports. India’s IIT is more intense with high-income countries and is characterized by a greater extent of complementarity. Further, certain country-specific factors which are found to be crucial in the models of vertical IIT are pertinent in influencing the pattern of India’s bilateral IIT.     

The effects of Europe’s internal market program on production and trade: A first assessment

The Effects of Europe’s Internal Market Program on Production and Trade: A First Assessment. — The paper analyzes the extent of structural changes that have occurred inside the EC since the launching of the internal market program. The first part of the paper examines intersectoral shifts in the pattern of specialization within EC manufacturing and finds relatively little change from 1986 to 1992. The second analyzes the trade impact of the internal market program, and finds that internal and external trade creation have both prevailed. The third uses regression analysis to explain the share of intra-EC imports in total EC imports in 1986 and in 1992, and identifies the impact of the internal market program.     

Horizontal and vertical intra-industry trade between Eastern Europe and the European union

Horizontal and Vertical Intra-Industry Trade Between Eastern Europe and the European Union. — The share of intra-industry trade (IIT) in total trade between central and east European nations and the EU is broken down into various components. Vertical IIT is found to account for 80 to 90 percent of total IIT. Controlling for country-specific effects, it is positively associated with product differentiation, labor intensity of production, economies of scale, and foreign direct investment (FDI). Horizontal IIT is also positively correlated with FDI and product differentiation; however, a significant negative relationship is found for scale and labor intensity.     

Rent sharing in the multi-fibre arrangement: The case of Mexico

Rent Sharing in the Multi-Fibre Arrangement: The Case of Mexico. —This paper investigates the existence of market power and the distribution of rents in the market for Mexico’s exports of apparel to the United States under the Multi-Fibre Arrangement (MFA). In the case of Mexico, rents from MFA restrictions are probably very small. The adjusted price of Mexican exports is consistently below the price for U.S. production, indicating that rent sharing may be taking place. Alternative explanations for the price difference are tested. The final result indicates that rent sharing may exist in woven shirts and underwear. In particular, U.S. importers may receive up to 49 percent of available rents.     

Free trade or protection? belgian textile and clothing firms’ trade preferences

Free Trade or Protection? Belgian Textile and Clothing Firms' Trade Preferences. -This paper examines the positions of Belgian textile and clothing firms on trade policies. Observations on positions are generated by a survey. Along the lines of the political economy of protection and anti-protection we test whether firm-specific characteristics influence textile and clothing firms' trade policy preferences. The results show that international competition and having foreign establishments significantly determine firms' positions, but that product differentiation does not. A Chow test indicates no significant difference between firms' sensitivities in the textile and clothing industries. This suggests that the two professional organizations should co-operate on trade issues.     

The effects of changing U.S. MFN status for China

The Effects of Changing U.S. MFN Status for China. — This paper focuses on the effects of the U.S. not renewing Most Favored Nation (MFN) trade status for Chinese imports. An applied general equilibrium model is used to simulate the increase in tariffs from the column 1 (MFN) to the column 2 (non-MFN) duty level. Using 1992 data, the results show Chinese exports to the U.S. drop by approximately $11 billion, or over 50 percent. The U.S. and China both experience a decline in real income. While these results suggest MFN withdrawal would have a larger detrimental effect on the Chinese economy than on the U.S. economy, the estimates do not include Chinese retaliation.     

Trade regimes and spillover effects of FDI: Evidence from Uruguay

Trade Regimes and Spillover Effects of FDI: Evidence from Uruguay. — This paper examines differences in the character and impact of FDI entering Uruguay during import substitution, pursued until 1973, and the subsequent more outwardoriented trade regime. Regression analysis shows that the labor productivity of local firms is positively related to the presence of older import-substituting MNCs in their industry. The presence of foreign affiliates established after 1973 has no apparent impact on local productivity, but seems to raise the likelihood that local firms engage in exporting. This may be a sign of export spillovers, indicating that local firms may pick up some exportrelated skills from the operations of outward-oriented foreign MNCs.     

Antidumping jumping: Reciprocal antidumping and industrial location

Antidumping Jumping: Reciprocal Antidumping and Industrial Location. — Antidumping policies are often justified as legitimate actions by governments in their efforts to protect domestic producers from unfair foreign competition. The authors investigate the impact of antidumping rules on firms’ production decisions as to how much and where to produce. Antidumping measures may have unforeseen effects if they induce direct foreign investment and consequently increase domestic competition. The authors therefore focus on location choice and consider the strategies of national governments attempting to advance the interests of their citizens through antidumping legislation. The analysis also has implications for the effects of market integration policies, such as Europe 1992.