Agad diversion

Antidumping Duties in the
Agriculture Sector:
Trade Restricting or Trade
Deflecting?
Nisha Malhotra and Shinan Kassam
WE would like to thank TARGET (UBC) for funding the
above project. www.econ.ubc.ca/ine

Motivation
 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.

Importance
 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.

Literature
Summing over all commodities
 Prusa (1997) : trade effects of US antidumping
actions
 antidumping duties restrict trade named countries.
 Trade diversion to the ‘non-named’ countries
 Vandenbussche et all (1999): case of European
Union.
 antidumping duties restrict trade ‘named’ countries
 No trade diversion to the ‘non-named’ countries
 Niels (2003) shows
 that for Mexico there isn’t significant trade diversion
after AD duty is imposed on the named countries.

Importance
Formal empirical research on the use or the effect
of the AD law in agriculture is quite scarce.
Concentrating upon agriculture in exclusion of
industrial goods might yield different results due
to the different nature of commodities in the two
sectors
-aspects of seasonality, perish ability, identification
by genetic code and an outlet for surplus product.
-Since over 80% of the cases are in the
manufacturing sector in the US study
Out of which - over 50% cases are in the steel sector
for the US study – results might be driven by them.

Antidumping Cases Initiated
(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 Countries
Rest of the World: 26 cases
cc

US – Significant and the largest
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 Countries
Rest of the World: 26 cases
cc

Question
 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?
 These questions are also relevant from a
policy point of view
• Trade Restriction: AD duties like any other
tariff translate into higher prices. These higher
prices penalize industries that use these
protected goods and also hurt final consumers
• Trade Diversion: Beneficiary of AD duties is not
the domestic industry (or only), but exporters
to whom trade is diverted

DATA
• 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
• 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
1991-2002
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 (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)
LogImports(Mean)*
Named (restricted) Non-Named (restricted)

Trade Diversion (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)
LogImports(Mean)*
Named (not-restricted) Named (restricted)

Empirical Specification
 lnm: Log Imports
 a: affirmative
 n: negative
 u: Undertaking
 t(1-3): Years after AD
is filed; t1: one year
after petition is filed
 Interaction terms
 Include year
dummies
Models:
 Ordinary Least
Square
Regressions
 Fixed Effect Models

Results
 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.

Next Step
Dependent 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 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?
Conclusion

Agad diversion

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (19)

Similar to Agad diversion

Similar to Agad diversion (20)

Recently uploaded

Recently uploaded (20)

Agad diversion