Antidumping duties ; General Agreement on Tariffs and Trade (Organization) ; World Trade Organization

Meredith Crowley

English

Research Papers in Economics

Chicago Fed Letter
The worldwide spread of antidumping protection
by Meredith Crowley, economist
In recent years, the use of antidumping duties has been growing around the world.
What caused the explosion in the use of a once-obscure trade remedy?
ESSAYS ON ISSUES THE FEDERAL RESERVE BANK JANUARY 2004
OF CHICAGO NUMBER 198
1.  Worldwide AD investigations: 1987–2002
SOURCE: Data for 1987–94, Miranda, Torres, and Ruiz (1998); data for
1995–2002, the World Trade Organization website at <www.wto.org/
english/tratop_e/adp_e/adp_e.htm>.
0
100
200
300
400
1987 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02
number of investigations
Beginning in 1980, the use of antidump-
ing duties—special import tariffs that
are used to raise the price of “dumped”
goods—came to be a common prac-
tice in conducting trade policy among
the U.S., the European Union (EU),
Canada, and Austra-
lia. While only a
handful of antidump-
ing cases were initi-
ated worldwide in
the 1950s, 1960s, and
1970s, more than
1,600 cases were
filed during the
1980s. Of these, the
vast majority were
filed by the tradition-
al users—the U.S.,
the EU, Canada,
and Australia. How-
ever, prior to the
advent of the World
Trade Organization
(WTO) in 1995, the
use of antidumping
protection began to spread to develop-
ing countries, most notably India,
Mexico, Brazil, and South Africa.
The worldwide explosion in the use of
antidumping duties has been widely
documented (see figure 1; also Prusa
and Blonigen, 2003; Miranda, Torres,
and Ruiz, 1998; and Messerlin, 1989,
among others).1 Over the five-year pe-
riod from 1987 to 1991, 733 antidump-
ing investigations were conducted
worldwide. Between 1992 and 1997,
the number increased to 1,463. Most
recently, between 1998 and 2002, 1,581
antidumping investigations were filed.
What caused this explosion in the use
of a once-obscure trade remedy? Why
are countries increasingly trying to re-
strict their imports through the use of
antidumping duties, while at the same
time engaging in broad programs of
trade liberalization? What effect does
this shift in trade policy have on con-
sumers and producers both here and
abroad? This Chicago Fed Letter reviews
some of the newer explanations that
have been offered to explain the anti-
dumping phenomenon. Changes in
international trade laws, probably the
most important factor in the rise of
antidumping protection, fostered an
environment in which many countries
increased their use of antidumping
protection without any specific regard
for the trade policies of their trading
partners. More recent research, which
I discuss here, examines if there are
linkages across countries in the increased
use of antidumping duties.
Put simply, for countries that belong
to the WTO, dumping is selling an ex-
ported product in a foreign market at
a price that is lower than the product’s
price in its home market, a third market,
or below its average cost of production.2
Dumping is often called unfair because
many confuse its definition with the
economically harmful practice of
predatory pricing. Although dumping2.  AD investigations by traditional users: 1987–2002
number of investigations
3.  AD investigations by new users: 1987–2002
SOURCE: Data for 1987–94, Miranda, Torres, and Ruiz (1998); data for
1995–2002, the World Trade Organization website at <www.wto.org/
english/tratop_e/adp_e/adp_e.htm>.
number of investigations
0
50
100
150
200
250
300
1987 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02
0
50
100
150
200
250
1987 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02
SOURCE: Data for 1987–94, Miranda, Torres, and Ruiz (1998); data for
1995–2002, the World Trade Organization website at <www.wto.org/
english/tratop_e/adp_e/adp_e.htm>.
is not necessarily harmful and, in fact,
benefits consumers through lower prices
in most cases, the WTO allows the use
of antidumping duties to raise the price
of dumped products. Under WTO rules,
an importing country can impose an
antidumping duty if there is proof
that dumping is occurring and that it
is causing injury to the domestic firms
that compete with the dumped goods.
Figure 2 presents the total number of
antidumping investigations by the U.S.,
EU, Canada, and Australia over the last
15 years. Among traditional users, the
number of antidumping investigations
fluctuates considerably from year to year
with no clear trend over time. However,
in figure 3, which plots the total num-
ber of antidumping investigations by
all other GATT–WTO members, we see
that there has been a steady increase
in the number of antidumping investi-
gations over this period.
There are many potential explanations
for the rise in antidumping protection
and I discuss only a few. Ultimately, the
rise of antidumping protection can be
traced back to changes in the rules-
based trading regime of the WTO and
its predecessor, the General Agreement
on Tariffs and Trade (GATT). The first
major increase in the use of antidump-
ing duties began after rule changes in-
troduced during the Tokyo Round of
trade negotiations in 1979. The first
surge in the use of antidumping duties
was concentrated
among the U.S.,
EU, Canada, and
Australia, all GATT
members. The sec-
ond major increase
began in the early
1990s as numerous
developing coun-
tries joined the
GATT and, later,
the WTO. In sign-
ing on to the rules-
based trading
regime, countries
agreed to restrict
their use of import
tariffs and other
barriers to trade.
It appears that in some cases, facing
competitive pressure from lower-priced
imports, countries whose firms com-
pete with imports turned to one of the
few loopholes in the WTO rules, the
use of antidumping duties.
In addition to this important explana-
tion, linkages among countries may have
affected the frequency of antidumping
activity. As the use of antidumping du-
ties has spread, researchers have begun
to examine if the use of these policies
in different countries is linked, either
directly through the strategic behavior
of governments or indirectly through
the use of antidumping policies to
control import surges caused by other
countries’ antidumping duties.
One factor behind
the rise of anti-
dumping protec-
tion could be that
countries are en-
gaging in retaliato-
ry mini-trade wars.
If one country im-
poses an antidump-
ing duty against
another, the second
country will retali-
ate by imposing its
own antidumping
duty against the
first. A 2002 paper
by Tom Prusa and
Susan Skeath3
examines whether the increasing use
of antidumping duties is due to eco-
nomic factors, like a rise in dumping,
or strategic factors, like retaliation. They
study antidumping cases filed by GATT–
WTO members between 1980 and 1988
and find evidence for a strategic motive
in the initiation of antidumping cases.
Specifically, they find that a country is
more likely to begin an antidumping
case against its trading partner if the
trading partner used an antidumping
duty against it in the past. Prusa and
Skeath argue that their results “help to
reject the notion that the rise in anti-
dumping activity can be solely explained
by an increase in unfair trade.”
While Prusa and Skeath find a signifi-
cant retaliatory motive behind the pro-
liferation of antidumping duties, a study
by Blonigen and Bown (2003)4 suggests
that the threat of a retaliatory antidump-
ing duty could eventually have a “cold
war” effect that dampens antidumping
activity if antidumping laws become
more widespread. They argue that a
country that is contemplating an anti-
dumping duty against an important
trading partner may actually refrain
from imposing the measure if there is
a threat of retaliation. In their exami-
nation of U.S. antidumping activity from
1980 to 1998, Blonigen and Bown find
that if a country is a significant export
market for U.S. producers, and thus
has the ability to adversely affect U.S.
exporters through its own retaliatoryMichael H. Moskow, President; Charles L. Evans,
Senior Vice President and Director of Research;  Douglas
Evanoff, Vice President, financial studies; David
Marshall, team leader, macroeconomic policy research;
Daniel Sullivan, Vice President, microeconomic policy
research;  William Testa, Vice President, regional
programs and Economics Editor; Helen O’D. Koshy,
Editor; Kathryn Moran, Associate Editor.
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ISSN 0895-0164
4.  Japanese export growth by trading partner
SOURCE: Bown and Crowley (2003), using the UNCTAD-TRAINS data.
mean growth rate, commodity exports
t-2 t-1 t
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
US
EU
non-EU third country
year of US AD investigation
antidumping duty, the U.S. is less like-
ly to impose an antidumping duty in
the first place. An interesting implica-
tion of this is that such a cold war effect
may not materialize and instead the
use of antidumping protection may be
biased against small and developing
countries if such countries continue to
have little ability to retaliate effectively
against an antidumping duty imposed
by a major trading partner.
Taken together, what do these two pa-
pers tell us about the role of retaliation
in the spread of antidumping protec-
tion? It may be that credible threats of
retaliation can lead to a dampening of
antidumping activity, but that non-eco-
nomic, strategic motives are an impor-
tant factor in the rise of antidumping
protection.
A 2003 paper by Bown and Crowley5
postulates that some of the increase in
the use of antidumping duties may be
related to the problem of trade deflec-
tion. Bown and Crowley examine what
happens to the exports of a country,
specifically Japan, when it faces U.S.
antidumping duties. Using highly de-
tailed data on flows of Japanese exports
to almost all the countries in the world,
Bown and Crowley try to determine if
the imposition of U.S. antidumping
duties on Japanese products leads to an
increase in Japanese exports to other
countries, i.e., trade deflection. After
controlling for a variety of other factors,
like changes in
gross domestic
product growth, in-
dustry productivity,
and movements in
the exchange rate,
Bown and Crowley
find that Japanese
export growth to
countries other
than the U.S. in-
creases by roughly
10 to 20 percentage
points when the
U.S. imposes an an-
tidumping duty on
Japanese products.
Figure 4 illustrates
Bown and Crowley’s main finding of
trade deflection. This figure graphs
the average growth rates of Japanese
commodity exports by their destina-
tion—the U.S., the EU, and non-EU
third countries—if the exports were
subject to a new U.S. antidumping
duty between 1992 and 2001. It plots
the average growth rates of Japanese
exports in the year in which the anti-
dumping case was initiated (time t)
and in the two years prior to the initia-
tion of the antidumping investigation.6
The blue line designates exports to
the U.S. that are subject to a new U.S.
antidumping duty. As one might ex-
pect, in the year before a successful
antidumping case is initiated, growth
of the products that eventually face an
antidumping duty is very high, slightly
below 30%. In the year in which an an-
tidumping case is initiated in the U.S.,
the growth of Japanese exports falls to
–10%. By way of comparison, the aver-
age growth rate of all commodities ex-
ported from Japan to the U.S. between
1992 and 2001 was roughly 0%.
More interestingly, the black line plots
the average growth of Japanese exports
to the EU in the year in which a success-
ful U.S. antidumping investigation be-
gins and in the two years prior. Although
there is little change in the growth of
these Japanese commodity exports to
the EU in the two years prior to the
U.S. antidumping investigation, in the
year in which a U.S. antidumping
investigation is initiated, Japanese ex-
ports to the EU surge to over 25%. Bown
and Crowley interpret this as “trade
deflection.” They hypothesize that the
commodities that the Japanese had
planned to sell in the U.S. market are
redirected to the EU in response to the
adverse change in U.S. trade policy.
We see a similar pattern of trade deflec-
tion in Japanese exports to other, non-
EU countries. While export growth of
the specific commodities is close to zero
in the periods before the initiation of
a U.S. antidumping duty, it jumps up
to about 3.5% when the U.S. initiates a
successful antidumping investigation.
The EU may be a preferred destination
for deflected trade because it is a large
market with demand for many of the
same goods that Japanese firms sell in
the U.S. and because many Japanese
firms have a presence in the EU, mak-
ing it relatively easy to shift sales there.
How does this finding of trade deflec-
tion relate back to the question of the
explosion in the worldwide use of anti-
dumping duties? Bown and Crowley
speculate that trade deflection may be
one of the pathways through which anti-
dumping duties are multiplying. For ex-
ample, if a U.S. antidumping duty against
Japan leads to a surge of Japanese im-
ports into the EU, the EU may then
respond with its own antidumping duty
against Japanese exports. The EU anti-
dumping duty may then induce furthertrade deflection and antidumping
duties in other countries. As Japanese
exports chase the remaining open mar-
kets, antidumping duties rise.
Conclusion
This Chicago Fed Letter has summarized
some of the explanations for the dramat-
ic increase in the use of antidumping
protection over the last 20 years. In addi-
tion to changes in international trade
laws, linkages across countries may also
have affected the use of antidumping
protection. The idea that trade deflec-
tion could be behind the increased use
of antidumping duties is especially
troubling, because it suggests that world-
wide trade in some products may col-
lapse to highly inefficient levels as more
1 Thomas J. Prusa and Bruce Blonigen,
2003, “Antidumping,” in Handbook of
International Trade, E. Kwan Choi and
James Harrigan (eds.), Oxford, UK and
Cambridge, MA: Blackwell Publishers;
Jorge Miranda, Raul A. Torres, and
Mario Ruiz, 1998, “The international use
of antidumping: 1987–1999,” Journal of
World Trade, Vol. 32, pp. 5–71; and Patrick
A. Messerlin, 1989, “The EC antidumping
regulations: A first economic appraisal,
and more countries turn to antidump-
ing protection in the face of deflected
import surges. Further research utiliz-
ing data on the timing of antidumping
investigations for specific products on
a worldwide basis could help to clarify
whether trade deflection or retaliation
is behind the spread of this newly im-
portant form of protectionism.
1980–85,” Weltwirtschaftliches Archiv, Vol.
125, pp. 563–587.
2 See M. Crowley, 2003, “An introduction
to the WTO and GATT,” Economic Perspec-
tives, Federal Reserve Bank of Chicago,
Fourth Quarter, pp. 42–57.
3 Thomas J. Prusa and Susan Skeath, 2002,
“The economic and strategic motives for
antidumping filings,” Weltwirtschaftliches
Archiv, Vol. 138, pp. 389–413.
4 Bruce Blonigen and Chad Bown, 2003,
“Antidumping and retaliation threats,”
Journal of International Economics, Vol. 60,
pp. 249–273.
5 Chad Bown and Meredith Crowley, 2003,
“Trade deflection and trade depression,”
Federal Reserve Bank of Chicago, mimeo.
6 In most cases, antidumping cases are ini-
tiated and duties are imposed in the same
year. In some cases, duties are imposed in
the following year.

The worldwide spread of antidumping protection

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The worldwide spread of antidumping protection

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