Antidumping Duties in the Antidumping Duties in the Agriculture Sector:Agriculture Sector:

Trade Restricting or Trade Trade Restricting or Trade

Deflecting?Deflecting?

Nisha Malhotra and Shinan KassamNisha Malhotra and Shinan Kassam

WE would like to thank TARGET (UBC) for funding the WE would like to thank TARGET (UBC) for funding the above project. www.econ.ubc.ca/ineabove project. www.econ.ubc.ca/ine

MotivationMotivation The large and growing use of antidumping

throughout the world: an interesting phenomenon, theoretically and empirically.

Do antidumping duties amount to trade protection for domestic producers?

• Unambiguously yes, when all foreign firms would be restricted access to the domestic market, but Unclear when only certain firms/countries singled out

• Antidumping - by its nature discriminatory among exporters.

ImportanceImportance

A significant amount of work - study effectiveness and ramifications of AD investigations for an importing country:• There have been quite a few empirical studies carried out

analyzing the trade effect of ANTIDUMPING investigations for various countries: US, EU, Mexico and more recently for a few other developing countries.

Formal empirical research on the use or the effect of the AD law in agriculture is quite scarce.

LiteratureLiteratureSumming over all commoditiesSumming over all commodities

Prusa (1997) : trade effects of US antidumping Prusa (1997) : trade effects of US antidumping actions actions

antidumping duties restrict trade named countries. antidumping duties restrict trade named countries. Trade diversionTrade diversion to the ‘non-named’ countries to the ‘non-named’ countries

Vandenbussche et all (1999): case of European Vandenbussche et all (1999): case of European Union. Union.

antidumping duties restrict trade ‘named’ countriesantidumping duties restrict trade ‘named’ countries No trade diversionNo trade diversion to the ‘non-named’ countries to the ‘non-named’ countries

Niels (2003) shows Niels (2003) shows that for Mexico there isn’t significant trade diversion that for Mexico there isn’t significant trade diversion

after AD duty is imposed on the named countries.after AD duty is imposed on the named countries.

ImportanceImportanceFormal empirical research on the use or the effect of the AD law in agriculture is quite scarce.

Concentrating upon agriculture in exclusion of Concentrating upon agriculture in exclusion of industrial goods might yield different results due industrial goods might yield different results due to the different nature of commodities in the two to the different nature of commodities in the two sectorssectors

--aspects of seasonality, perish ability, identification aspects of seasonality, perish ability, identification by genetic code and an outlet for surplus product. by genetic code and an outlet for surplus product.

-Since over 80% of the cases are in the -Since over 80% of the cases are in the manufacturing sector in the US study manufacturing sector in the US study

Out of which - over 50% cases are in the steel sector Out of which - over 50% cases are in the steel sector for the US study – results might be driven by them.for the US study – results might be driven by them.

Antidumping Cases Initiated Antidumping Cases Initiated (Number of Cases)(Number of Cases)

4

5

5

6

6

7

7

9

13

23

0 5 10 15 20 25

New Zealand

European Community

Latvia

Australia

Argentina

Brazil

Peru

Mexico

Canada

United States

Number of Petitions

Source: World Trade Organisation: AD Statistics from Reporting CountriesRest of the World: 26 cases

cc

US – Significant and the largest US – Significant and the largest number of AD cases filed.number of AD cases filed.

4

5

5

6

6

7

7

9

13

23

0 5 10 15 20 25

New Zealand

European Community

Latvia

Australia

Argentina

Brazil

Peru

Mexico

Canada

United States

Number of Petitions

Source: World Trade Organisation: AD Statistics from Reporting CountriesRest of the World: 26 cases

cc

QuestionQuestion

Trade effects of AD policy in the agriculture sector in the US.

Effective in restricting trade from Countries named in the AD petition?

Trade diversion to other non-named countries thus making AD ineffective as a protectionist tool.

Question-Why?Question-Why?

These questions are also relevant from a These questions are also relevant from a policy point of viewpolicy point of view

• Trade Restriction: AD duties like any other Trade Restriction: AD duties like any other

tariff translate into higher prices. These higher tariff translate into higher prices. These higher prices penalize industries that use these prices penalize industries that use these protected goods and also hurt final consumersprotected goods and also hurt final consumers

• Trade Diversion: Beneficiary of AD duties is not Trade Diversion: Beneficiary of AD duties is not the domestic industry (or only), but exporters the domestic industry (or only), but exporters to whom trade is divertedto whom trade is diverted

DATADATA• Level of Imports: The import data for each

investigated product, at the 8 digit HS level as well as at the country level was provided by the US department of Agriculture

• Antidumping Data: US International Trade Commission

• We subsequently combed through US ITC reports for the 8 digit HS level code for the products code for the products

• Import price index obtained from the US Bureau of labor statistics.

• The AD data is available from the authors. nisha@interchange.ubc.ca

Countries named in US AD investigations Countries named in US AD investigations 1991-20021991-2002

Exporting Countries-Named Number of Petitions against the Country

Percentage of Total petitions

NORTH AMERICA: Canada México SOUTH AMERICA: Argentina Chile Ecuador EUROPE: ASIA: China

7 4 3 6 1 4 1 6 9 6

25.0% 14.0% 11.0% 21.5% 3.6% 14.0% 3.6% 21.5% 32.0% 21.0%

Trade Restriction Trade Restriction (Eyeball)(Eyeball)

0.75

0.8

0.85

0.9

0.95

1

1.05

1.1

-5 -4 -3 -2 -1 0 1 2 3 4 5

time (year) (t0-Year the Petition was files)

Lo

g Im

po

rts

(Mea

n)

*

Named (restricted) Non-Named (restricted)

Trade Diversion Trade Diversion (Eyeball)(Eyeball)

0.75

0.8

0.85

0.9

0.95

1

1.05

1.1

1.15

-5 -4 -3 -2 -1 0 1 2 3 4 5

time (year) (t0-Year the Petition was files)

Log

Impo

rts

(Mea

n)*

Named (not-restricted) Named (restricted)

Empirical SpecificationEmpirical Specification

lnm: Log Importslnm: Log Imports a: affirmativea: affirmative n: negativen: negative u: Undertakingu: Undertaking t(1-3): Years after AD t(1-3): Years after AD

is filed; t1: one year is filed; t1: one year after petition is filedafter petition is filed

Interaction termsInteraction terms Include year Include year

dummiesdummies

Models:Models: Ordinary Least Ordinary Least

Square Square RegressionsRegressions

Fixed Effect ModelsFixed Effect Models

ResultsResults Sizeable trade restriction effects: Strong evidence of

substantial (60%) trade restriction from named countries(55% - Fixed effects)• Comparison (Prusa(2001)): Substantial (50%) import drop from

the named sources in the first period

No Trade Diversion: For cases with affirmative decisions, there is no significant increase in imports form countries not named • Comparison (Prusa(2001)): imports from non-named countries

increase by 36%, 28 % and 47 % respectively in the first(t1), second (t2) and third (t3) year

No strong indication of an “investigation”/“harassment” effect: a negative dumping determination has no significant trade effects for both named and non-named• Comparison (Prusa (2001)) trade is restricted from the named

countries even when there is a negative decision; the value of imports declined by roughly 30 % in the first year.

Dependent variable: Log value of imports

Named Non-Named

OLS Fixed-Effects OLS Fixed-Effects log value of imports in t-1 0.899 0.802 0.882 0.880 (24.55)** (14.55)** (83.87)** (82.17)** dummy - affirmative decision -0.310 0.611 (0.76) (0.52) dummy - negative decision -0.188 0.173 (0.43) (0.15) Negative*t1 -0.080 0.037 0.454 0.403 (0.26) (0.10) (2.05)* (1.38) Negative*t2 0.031 0.203 0.093 0.131 (0.10) (0.50) (0.42) (0.43) Negative*t3 -0.137 0.072 0.269 0.336 (0.44) (0.17) (1.20) (1.04) Negative*t4 -0.066 0.067 0.525 0.818 (0.17) (0.12) (1.41) (1.92) Affirmative*t1 -0.921 -0.802 0.074 0.207 (4.62)** (2.98)** (0.75) (1.53) Affirmative*t2 0.077 0.155 -0.114 0.088 (0.37) (0.48) (1.16) (0.54) Affirmative*t3 -0.415 -0.247 -0.075 0.191 (1.85) (0.66) (0.69) (0.96) Affirmative*t4 -0.152 -0.005 -0.117 0.175 (0.63) (0.01) (1.05) (0.76) Year Dummies Yes Yes Yes yes Constant 2.561 2.950 -0.187 -0.393 (3.01)** (2.72)** (0.15) (0.33) Observations 163 163 1973 1973 R-squared 0.88 0.68 0.79 0.78 Absolute value of t statistics in parentheses; * significant at 5% ** significant at 1% {t=-3...0...5} with t1representing the year after the petition was filed Excludes the cases for Honey and Tomato both of which were suspended.

Dependent variable: Log value of imports

Named Non-Named

OLS Fixed-Effects OLS Fixed-Effects log value of imports in t-1 0.899 0.802 0.882 0.880 (24.55)** (14.55)** (83.87)** (82.17)** dummy - affirmative decision -0.310 0.611 (0.76) (0.52) dummy - negative decision -0.188 0.173 (0.43) (0.15) Negative*t1 -0.080 0.037 0.454 0.403 (0.26) (0.10) (2.05)* (1.38) Negative*t2 0.031 0.203 0.093 0.131 (0.10) (0.50) (0.42) (0.43) Negative*t3 -0.137 0.072 0.269 0.336 (0.44) (0.17) (1.20) (1.04) Negative*t4 -0.066 0.067 0.525 0.818 (0.17) (0.12) (1.41) (1.92) Affirmative*t1 -0.921 -0.802 0.074 0.207 (4.62)** (2.98)** (0.75) (1.53) Affirmative*t2 0.077 0.155 -0.114 0.088 (0.37) (0.48) (1.16) (0.54) Affirmative*t3 -0.415 -0.247 -0.075 0.191 (1.85) (0.66) (0.69) (0.96) Affirmative*t4 -0.152 -0.005 -0.117 0.175 (0.63) (0.01) (1.05) (0.76) Year Dummies Yes Yes Yes yes Constant 2.561 2.950 -0.187 -0.393 (3.01)** (2.72)** (0.15) (0.33) Observations 163 163 1973 1973 R-squared 0.88 0.68 0.79 0.78 Absolute value of t statistics in parentheses; * significant at 5% ** significant at 1% {t=-3...0...5} with t1representing the year after the petition was filed Excludes the cases for Honey and Tomato both of which were suspended.

Dependent variable: Log value of imports

Named Non-Named

OLS Fixed-Effects OLS Fixed-Effects log value of imports in t-1 0.899 0.802 0.882 0.880 (24.55)** (14.55)** (83.87)** (82.17)** dummy - affirmative decision -0.310 0.611 (0.76) (0.52) dummy - negative decision -0.188 0.173 (0.43) (0.15) Negative*t1 -0.080 0.037 0.454 0.403 (0.26) (0.10) (2.05)* (1.38) Negative*t2 0.031 0.203 0.093 0.131 (0.10) (0.50) (0.42) (0.43) Negative*t3 -0.137 0.072 0.269 0.336 (0.44) (0.17) (1.20) (1.04) Negative*t4 -0.066 0.067 0.525 0.818 (0.17) (0.12) (1.41) (1.92) Affirmative*t1 -0.921 -0.802 0.074 0.207 (4.62)** (2.98)** (0.75) (1.53) Affirmative*t2 0.077 0.155 -0.114 0.088 (0.37) (0.48) (1.16) (0.54) Affirmative*t3 -0.415 -0.247 -0.075 0.191 (1.85) (0.66) (0.69) (0.96) Affirmative*t4 -0.152 -0.005 -0.117 0.175 (0.63) (0.01) (1.05) (0.76) Year Dummies Yes Yes Yes yes Constant 2.561 2.950 -0.187 -0.393 (3.01)** (2.72)** (0.15) (0.33) Observations 163 163 1973 1973 R-squared 0.88 0.68 0.79 0.78 Absolute value of t statistics in parentheses; * significant at 5% ** significant at 1% {t=-3...0...5} with t1representing the year after the petition was filed Excludes the cases for Honey and Tomato both of which were suspended.

Next StepNext StepDependent variable: Quantity of Imports

Named Non-Named

Random-Effects Random-Effects log value of imports in t-1 dummy - affirmative decision dummy - negative decision Negative*t1 Negative*t2 Negative*t3 Negative*t4 Affirmative*t1 Affirmative*t2 Affirmative*t3 Affirmative*t4 Year Dummies Constant Observations R-squared

Next StepNext StepDependent variable:

Quantity of Imports Named Non-Named

Random-Effects Random-Effects log value of imports in t-1 dummy - affirmative decision dummy - negative decision Negative*t1 Negative*t2 Negative*t3 Negative*t4 Affirmative*t1 Affirmative*t2 Affirmative*t3 Affirmative*t4 Year Dummies Constant Observations R-squared

Comparing the resultsComparing the results

Prusa(2001): substantial (50%) import drop from

the named sources in the first period

Vandenbussche et al.(2001): comparable imports restrictions of 67% determination

Possible refinements: does product homogeneity/heterogeneity matter?

a time-effective protectionist tool: significant reduction in imports from named sources, concentrated in the period immediately after the imposition of duties

little to no evidence of imports being diverted toward non-named countries or firms

Possible refinements: does product homogeneity/heterogeneity matter? Why no effect for undertakings?

ConclusionConclusion