US Safeguards on Steel and the Markups of European Producers |
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Authors: | Hylke Vandenbussche Ziga Zarnic |
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Institution: | (1) Department of Economics, Catholic University of Leuven, Place Montesquieu 3, 1348 Louvain-la-Neuve, Belgium;(2) CEPR, London, UK;(3) LICOS, AFI-KUL, Leuven, Belgium;(4) LICOS-KUL, Leuven, Belgium |
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Abstract: | This paper is among the first to explore the microeconomic impacts of a trade policy on foreign firms. We empirically investigate
the effects of the US safeguard protection of steel imports in 2002 on the markups of EU steel firms. Using a large panel
of affected EU steel firms between 1995 and 2005, we find that the protection they faced abroad significantly reduced their
markups. Our results indicate smaller adverse effects on multi-product EU firms. Our study has wider implications as it quantifies
the cost that trade protection imposes on trading partners, an externality currently not considered in any trade regulation.
The US safeguard protection also resulted in some diversion of EU steel especially towards China, aggravating the situation
on the Chinese steel market and ultimately resulting in the Chinese trade protection of steel imports.
JEL no. F13, L13, L61 |
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Keywords: | Firm data price-cost margins safeguard measures steel industry trade diversion |
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