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The Effectiveness of Antidumping Measures under the Byrd Amendment Some Empirical Evidence for Catfish Auburn University Nguyen Minh Duc and Henry W. Kinnucan.

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Presentation on theme: "The Effectiveness of Antidumping Measures under the Byrd Amendment Some Empirical Evidence for Catfish Auburn University Nguyen Minh Duc and Henry W. Kinnucan."— Presentation transcript:

1 The Effectiveness of Antidumping Measures under the Byrd Amendment Some Empirical Evidence for Catfish Auburn University Nguyen Minh Duc and Henry W. Kinnucan

2 INTRODUCTION Tariff barriers have decreased worldwide, but antidumping measures have surged to play a crucial role as the most important non-tariff barrier (Zanardi, 2004). Antidumping duty (AD) is recently used more frequently, by more countries, and against more products (Prusa, 2005) As processed and differentiated agricultural products are increasingly traded cross national borders (Reimer and Stiegert, 2006) more of them are facing antidumping measurements conducted by importing countries Aquatic products trade has the same problem

3 Global AD activity for agricultural and fisheries products Source: modifies from Kinnucan and Myrland (2006) with data searched from Bown (2006) ProductYearFiling countryTarget countries Apples1994CanadaUS 1998CanadaUS 1997MexicoUS Beef1991PolandEU Bovine meat1993MexicoEU 1994MexicoUS 1998MexicoUS Canned ham1990Australia Denmark, Ireland and the Neitherlands Canned Mushrooms1982USChina Chicken1999ArgentinaBrazil Crawfish tail meat1996USChina Dried Salted Codfish1984USCanada Fishmeal1994MexicoChile

4 Global AD activity for agricultural and fisheries products ProductYearFiling countryTarget countries Fresh Atlantic Salmon1990USNorway 1997USChile 1996EUNorway 1998MexicoUS 2002CanadaChile 2004EUChile, Faroe Islands and Norway Fresh Round White Potatoes1983USCanada Fresh-Cut Roses1983USColumbia 1986US Canada, Columbia, Costa Rica, Ecuador, Mexico and Peru 1994USColumbia and Ecuador Source: modifies from Kinnucan and Myrland (2006) with data searched from Bown (2006)

5 Global AD activity for agricultural and fisheries products ProductYearFiling countryTarget countries Frozen Beef1993MexicoEU Frozen catfish fillets2002USVietnam Frozen Orange Juice1986USBrazil 1991AustraliaBrazil Garlic1994USChina 1996CanadaChina 2000South AfricaChina 2001CanadaChina and Vietnam Honey1994USChina Kiwi fruit1991USNew Zealand Large Rainbow Trout2003EUNorway, Faeroe Islands Lettuce1992CanadaUS Live catle1998USCanada and Mexico Live Swine2004USCanada Non-Frozen Apple Juice Concentrate1999USChina Peaches1997MexicoGreece Source: modifies from Kinnucan and Myrland (2006) with data searched from Bown (2006)

6 ProductYearFiling countryTarget countries Pineapple1994USThailand Pork1993AustraliaCanada Poultry meat1999South AfricaUS Shrimp2003USBrazil, China, Ecuador, India, Thailand and Vietnam Slaughter hogs1998MexicoUS Sour cherries1991AustraliaFrance and Italy Sour cherries1998CanadaUS 1995CanadaUS, Denmark, Germany, Neitherlands and UK Sugar1998PanamaColumbia and Mexico Tart cherry juice1991USGermany and Yugoslavia Turkey1999Yugoslavia/SloveniaHungary Vegetable Oil2001PeruArgentina Whole potato1985CanadaUS Yellow Onion1986CanadaUS Source: modifies from Kinnucan and Myrland (2006) with data searched from Bown (2006) Global AD activity for agricultural and fisheries products

7 What does “dumping” mean? There are two criteria in WTO regulations (Knetter and Prusa, 2000): - First, there must be evidence that the domestic industry has materially injured (e.g., a loss or decline in profitability) by foreign imports - Second, the foreign suppliers must be found to be selling their products at dumping prices A dumping price is a price “less than fair value” (LTFV), charged in the domestic market is below an estimate of cost plus a normal return LITERATURE REVIEW Antidumping measurement – definition and investigation process

8 In US, the Department of Commerce (DOC) and the International Trade Commission (ITC) administrate the antidumping laws. Each has distinct roles in the antidumping investigation process. Blonigen and Haynes (2002): Exporters react to avoid or reduce the duty by raising their price prior to and during the long process of investigation Time line of standard US Antidumping Investigation (Source: Blonigen and Heynes, 2002) LITERATURE REVIEW Antidumping measurement – definition and investigation process

9 The Continued Dumping and Subsidy Offset Act of 2000, commonly the "Byrd Amendment", permits plaintiffs to be disbursed from collected antidumping and/or countervailing duty revenues. The disbursement is only available to "affected domestic producers” who –was a petitioner or interested party in support of a petition –remains in operation. LITERATURE REVIEW The Byrd Amendment

10 Jung and Lee, 2003: the Byrd Amendment –provides an incentive for domestic industries to file antidumping petitions –distorted competition between the firms who are beneficiaries and those who did not have enough resource or information to support the petitions –disappoints the legitimate expectation from exporting countries –violate WTO trade remedy rules and imposes costly distortions on the U.S. economy The Byrd Amendment was at last repealed October LITERATURE REVIEW The Byrd Amendment

11 HYPOTHESES Catfish anti-dumping tend to be ineffective (Kinnucan, 2003). The Byrd Amendment has the paradoxical effect of increasing the value and total volume of imports (Evenett, 2006) and undermines the original intent of the duty because –an incentive for the domestic firm to increase its price for an increase in the sales of the foreign firm, –increases the domestic firm’s revenue from the tariff.

12 THE CASE OF CATFISH  Catfish production is one of the biggest aquaculture industries in the US  Frozen catfish fillets is the most important product of the US catfish processing industry (Harvey, 2005).  The anti-dumping duties are large (ranging from 45% to 64%) affected all of the fisheries processing companies in Vietnam that export to the US and were implemented in 2003, two years after the Byrd Amendment went into force.  Disbursement paid to processors of $9.2 million in two fiscal years of , or 3% of their 2005 sales revenue of frozen catfish fillet.  The case attracted substantial media attention with articles in the New York Times and Wall Street Journal focusing the ethical and policy dilemmas raised by the action

13 F.fillets imports from VN (mil. lb.) US frozen fillets production (mil.lb.) US farm production (mil. lb.) f.o.b Vietnam price ($/lb) US frozen fillets price ($/lb) Farm price (cent/lb.) Tariff rate (cent/lb.) Imports, Production and Prices of US Catfish Industry

14 Prices of frozen catfish fillets

15 Assume: US and VN catfish fillets are substitute goods in US market Incidence of a tariff in a perfect competition DuDu SuSu PuPu Q P Q DvDv P SvSv Pv*Pv* QuQu US catfish filletsCatfish fillets import from Vietnam THEORETICAL FRAMEWORK

16 An antidumping tariff T imposed on VN catfish fillets raises home price and output US catfish fillets Q DvDv P SvSv Pv*Pv* T S’ v PvdPvd PvsPvs Catfish fillets import from Vietnam DuDu SuSu PuPu Q P QuQu D’ u P’ u Q’uQ’u Incidence of a tariff in a perfect competition THEORETICAL FRAMEWORK

17 Byrd effect can offset the tariff effect on home price in perfect competition DuDu SuSu PuPu Q P QuQu D’ u P’ u Q’uQ’u S’ u Q” u Tariff effect Byrd effect US catfish Incidence of a tariff in a perfect competition THEORETICAL FRAMEWORK

18 Incidence of a tariff in a price-setting (Bertrand) competition Best reaction functions of domestic and import catfish from Vietnam P1P1 R’ 1 P2P2 R’ 2 R2R2 R1R1 T Byrd P* 2 P*’ 2 - t P*’ 2 P*’’ 2 P* 1 P*’ 1 P*’’ 1 Tariff effect Byrd effect THEORETICAL FRAMEWORK

19 EMPIRICAL FRAMEWORK Assumption  There are two firms, domestic catfish process industry and Vietnamese catfish exporters competing to supply frozen catfish fillets to US market  Catfish fillets produced by US and Vietnamese processors are differentiated (under “labeling” law and biological species differences)  Both firms use price-setting duopoly (Bertrand competition) in US market

20 US home priceVN priceUS DemandUS farm price PRELIM FINAL 0.006*** *0.006 US domestic price 5.087***-2.958***1.148*** Vietnamese f.o.b price to US 0.017** 0.126** Non-US market price 0.05 Salmon price ** Poultry price US per capita income * Manufacture wage Energy index Freight index from Pacific Real exchange rate VND-USD US farmed fish demand (lag 5) *** Lag of dependent variable 0.320***-0.460***-0.547***0.208** R2R DW-h

21 CONCLUSION The domestic price of frozen catfish fillet increased after the ITC imposed an antidumping tariff on Vietnamese frozen catfish fillets import. The tariff incidence on home price is very small (0.5 – 0.6%) Antidumping duty is a weak tool to protect domestic catfish industry. Supportive measurements other rather than tariff should be implemented to enhance competition capacity of domestic catfish industry

22 THANK YOU!


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