Anti‐dumping Duty and Firm Heterogeneity: Evidence from Korea

Abstract

1 Countervailing duties are tariffs in addition to ordinary custom duties that are imposed to counteract certain subsidies bestowed on exporters by their governments. Alternatively, safeguard measures are defined as temporary trade restrictions, typically tariffs or quotas, which are imposed in response to import surges that could lead to 'serious injury' to a competing industry in importing countries. While there is no concrete answer as to why countries frequently use AD measures, many economists point out its arbitrary rules and unlikelihood of provoking trade retaliation. In particular, since WTO AD rules are not grounded on microeconomics, any investigative authority can impose WTO-consistent AD duties under any possible scenario. For instance, while dumping should be determined by investigating price behaviour of foreign firms, in many reported cases, dumping is determined based on foreign firms' profitability rather than price. Moreover, unlike the safeguard statute, WTO AD rules are known for not requiring the AD duty-imposing country to offer compensating tariff reduction to the affected country. 2 According to the Korea Trade Commission reports and statistics, Korea has initiated 121 AD investigations and eight safeguard investigations over the post-WTO period, while 25 AD and 25 safeguard investigations were initiated during the pre-WTO period . Examining the countries accused of dumping, while developed countries such as the European Community, Japan and the United States, accounted for 52 per cent of all AD investigations during the pre-WTO period, developing countries accounted for 62.7 per cent of all AD investigations over the post-WTO period. Among these developing countries, in particular, 73 per cent of AD investigations were initiated against Asian countries, of which China accounted for the largest share (33 per cent).3 Several trade studies also analyse foreign exporting firms' behavioural responses to AD duties; for instance, Anderson (1992Anderson ( , 1993, Ohno (1998), Blonigen andPark (2004) examine firms' dumping behaviour under different ex ante expectations that AD investigation will likely occur, while Blonigen and Haynes (2002) study firms' pricing behaviour under AD duties. Moreover, considering that AD procedures reveal cost information of domestic and foreign firms through the injury inquiry and dumping margin determination, Staiger and Wolak (1992b), Prusa (1992), Hartigan (1994), Veugelers and Vandenbussche (1999) examine AD duty effects on collusive behaviour between domestic and foreign firms in a protected market.

Value-Added Trade, Trade Barriers, and International Technology Spillover—Evidence from China’s Manufacturing Industry

“…For tariff barriers, in view of the availability of data, we use the average tariffs established by China for the most favored nations (MFNs). For non-tariff barriers, anti-dumping is the most used by governments (Sun and Lee, 2017). And in order to quantify the non-tariff barriers, we select industries' average anti-dumping duty rate, out of other main forms of anti-dumping measures such as margin.…”