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The Globalization of AD

The Globalization of AD. Thomas J. Prusa March 2004. Outline. Why AD? Globalization of AD Emergence of new users Who’s who Consequences Prospects for reform… Where will we be in another hundred years?. ten. Why AD?. Major trade laws Antidumping Countervailing duty

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The Globalization of AD

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  1. The Globalization of AD Thomas J. Prusa March 2004

  2. Outline • Why AD? • Globalization of AD • Emergence of new users • Who’s who • Consequences • Prospects for reform… • Where will we be in another hundred years? ten

  3. Why AD?

  4. Major trade laws • Antidumping • Countervailing duty • Intellectual property • Safeguard • Until early-1970s not many trade disputes under any statute • “About 10 AD disputes per year” (J. Schott, 1994)

  5. Antidumping – King of the Hill Since 1980, more AD disputes than all other trade laws combined! Source: Rowe & May (2001)

  6. AD – Devil in the Details • Allegation against foreign firm (not gov’t) • Weak injury standard • “Material” injury (AD) vs. “Significant” injury (safeguard) • LTFV calculation (almost always positive) • Economically meaningless • Sufficiently complicated that all but experts quickly become lost in minutia • Average margin: prohibitive

  7. AD – Devil in the Details • Agencies have more discretion and are subject to far more political pressure than F-H-N (1982) asserted • Rhetoric unbeatable • Has a candidate ever won with a platform that states he/she is for unfair trade? • Bottom-line: AD is WTO-consistent exception • Mike Finger: “protectionism with good PR”

  8. AD – The New Protectionism • Could have this trend been anticipated? • Yes. • Ethier (1982) warned that antidumping would be “the principal battleground for the ‘new protectionism’ as concerns trade in manufactures among the developed economies.”

  9. The Globalization of AD

  10. GATT/WTO and the Globalization of AD • Success • GATT/WTO Rounds have significantly reduced applied and bound tariff rates • Offered AD as a means to diffuse political pressure for protection • Uruguay Round brought AD into the agreement (previously part of annexes)

  11. GATT/WTO and the Globalization of AD • Failure • GATT negotiators looked the other way when it came to AD [EU/US insistence] • AD was really only a significant trade impediment for a handful of countries • Most countries either did not have an AD statute or chose not to use the law

  12. 97%+ of cases from 4 countries No. of Countries Using AD

  13. The Emergence of New Users

  14. Long-Run Steady Growth in AD Activity…

  15. … or not?

  16. Striking increase in AD use by new users

  17. Top AD Users - 1980

  18. Top AD Users - 2002

  19. Who’s Who of AD

  20. A word about the data • GATT/WTO members required to submit semi-annual reports • Database of 4600+ AD disputes since 1980 (change in rules) • Adjust for cases against EU (4200 cases) • Significant Limitations • No info on AD use by non-WTO countries • Settled/withdrawn cases not always reported • WTO provides little info on either the products or level of protection

  21. Who has used AD? Who’s Who of AD

  22. The intensity of AD use • More trade over past two decades, logical for more trade disputes Filing Intensityct = (#AD Disputes Filedct)/Importsct Named Intensityct = (#AD Namedct)/Exportsct • Normalize so Filing Intensity for US =100 (1980)Named Intensity for Japan =100 (1980)

  23. Who has been hit by AD actions? Who’s Who of AD

  24. AD Balance Sheet Who’s Who of AD

  25. Drop Steel Industry

  26. Consequences of Proliferation

  27. Trade Effects • Econometric estimates indicate large impact of imposition of duties • Investigation effects (Staiger/Wolak) • Direct impact on subject country (Prusa) • 3rd party effects • Negative: Subject country diverts to other markets (Bown/Crowley) • Positive: 3rd parties fill the void (Prusa, B/C)

  28. Trade Impact - Investigation effect • Preliminary duties imposed 60-120 days after petition filed • Almost always affirmative (80% of cases) • Duties based on petitioner submission • About half of trade restraint occurs during the investigation

  29. Trade Impact – 3rd countries • Imposing duties has consequences in other markets • Subject country exports to other markets increases (Bown/Crowley)

  30. Trade Impact - Duties • Subject Countries • Value falls by 50-60% • Quantity falls by 66% • Non-Subject Countries • Lots of diversion; varies greatly from case to case • On average, about ½ to ¾ of subject country supply diverted

  31. Prospects for Reform

  32. Prospects for reform • AD reform only when EU/US change their position • Is the “Tipping Point” imminent? • Not likely • EU/US are strongly opposed to AD reform • US Senate • sought to separate fast-track authority for AD from rest of agreement

  33. Prospects for reform • Even modest reforms a challenge • Mandatory sunset • Lesser duty • Zeroing • Facts available • Causality • If there exists an opportunity for change  regional agreements • Australia-New Zealand pact

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