Trade Liberalization and Antidumping: Is There a Substitution Effect?

Abstract

Many nations have undergone significant trade liberalization in the last twenty years even as they have increased their use of contingent protection measures. This raises the question of whether some of the trade liberalization efforts, at times accomplished through painful reforms, have been undone through a substitution from tariffs to nontariff barriers. Among the new forms of protection, antidumping is the most relevant, as its use has spread from few developed countries to a large set of developing countries that are now among the most intense users of this instrument. This paper uses a newly developed database to examine to what extent the use of antidumping in a large set of countries is systematically influenced by the reduction of applied sectoral tariffs. The data set includes information on 29 developing and 7 developed countries from 1991 through 2002. After controlling for time-varying sectoral information as well as macroeconomic conditions, we find evidence of a substitution effect only for heavy users of antidumping among developing countries. In particular, a one standard deviation increase in sectoral trade liberalization increases the probability of observing an antidumping initiation by 32 percent. There is no similar statistically significant result for other developing countries or developed countries. We also find robust evidence of retaliation and deflection effects as determinant of antidumping filings across all subsamples.

Trade Policy Substitution: Theory and Evidence from Specific Trade Concerns

“…Examining tariff cuts and AD initiations in 35 countries (29 developing and 6 developed) over the period from 1991 to 2002, the authors also dispose of a larger set of importing and exporting countries, a longer time span, more disaggregated sectoral information and a more complete AD database. Overall, Moore and Zanardi (2011) find that reductions in applied rates do not lead to a higher probability of AD petitions. But for a small group of developing countries that have become heavy users of AD, they obtain a statistically significant impact of trade liberalization on the probability of AD filings.…”

“…This variable can control for systematic differences across sectors, deriving, for instance from lobbying activity. As explained by Moore and Zanardi (2011), sectors with higher tariffs may be the ones that do not need other forms of protection (in the form of non-tariff barriers). In this case, the sign on this coefficient would be negative.…”

“…Given these limitations, Moore and Zanardi (2011) conduct a similar study, focusing on applied rather than bound rates and controlling for additional factors that may affect AD initiations. Examining tariff cuts and AD initiations in 35 countries (29 developing and 6 developed) over the period from 1991 to 2002, the authors also dispose of a larger set of importing and exporting countries, a longer time span, more disaggregated sectoral information and a more complete AD database.…”

“…Building in particular on the econometric methodology by Moore and Zanardi (2011), we refine existing identification strategies of policy substitution, including by employing measures of actual import protection and of general application.…”

“…Owing to their exporter-specific nature, AD measures have often led to increases in imports from third countries (which -as shown by Brenton (2001) -may also have supported the initial AD petitions), and, hence, can hardly be seen as a policy substitute for a general reduction in import protection. Adopting the methodology by Moore and Zanardi (2011), Aisbett and Pearson (2012) try to address this problem by using SPS measures notified to the WTO as a proxy for NTMs. However, their analysis reverts to the use of bound tariffs and suffers from the common shortcoming that notification information does not only include trade-restricting practices (WTO, 2012).…”