Brixen, September 2009 Antidumping Protection hurts Exporters Jozef Konings (*) and Hylke Vandenbussche (**) (*)Catholic University of Leuven (**) Université Catholique de Louvain

Brixen, September 2009 Financial Crisis spurs protectionism

Brixen, September 2009 Antidumping protection on the rise

Brixen, September 2009 But…not all firms want protection Antidumping Case in 2007: EU antidumping protection against imports of shoes from China and Vietnam was supported by small scale Italian shoe producers but opposed by large EU producers with international activity. Why? This paper tries to give explanation

Brixen, September 2009 What is Antidumping protection? Dumping is about international price-discrimination where a country of origin sets a lower price in its export market than at home According to GATT art 6 this is considered “unfair” trade which allows the importing country to take unilateral protection against the alleged dumper(s) Domestic Industries file to the EU Commission to impose an antidumping tariff against foreign importers from alleged dumpers Either the import-competing industry “wins” the case and gets “protected, or it “loses” and the case is terminated without protection When it wins a case, AD protection stays in place for 5 years Note: AD is often used by governments to protect domestic firms from “tough” rather than “unfair” import competition Reseach question: how effective is this protection for different types of firms? Highly relevant in view of financial crisis.

Brixen, September 2009 Motivation We study are import-competing firms i.e. those that either produce the protected product or a close substitute Example: antidumping protection against Chinese bicycles, than we identify French producers of similar by bicyles How does this affect the exports (intensive margin) of French firms in the same industry as the protected product? How does that affect the number of exporters (extensive margin)? How does that affect the productivity of exporters? How does that affect the productivity of non-exporters? i.e. is there a different response of firms to trade protection depending on their initial export status?

Brixen, September 2009 Preview of Results Firm-level exports of protected firms fall during protection compared to a control group Exports of “global” firms falls more than of non-global Protected firms: decrease in intensive margin (volume of exports) but small effect on extensive margin (number of exporters) during protection Decrease in product-level exports predominantly in extra-EU exports Productivity of exporters falls during protection relative to non- exporters Domestic sales of exporters go down Domestic sales of non-exporters go up

Brixen, September 2009 Data French firm-level data Antidumping cases 1997,1998 by product group In 12 cases the outcome was protection 8 cases were terminated without protection Duties range between 10 and 67% We identify 3,695 firms in same NACE 4 digit sector as the dumped products for which we can estimate productivity We identify firms whose primary activity corresponds to the protected product We consider firms’ exports in the primary activity given at the NACE 4 digit level One third of firms in our sample are exporters Average “export share in total sales” amongst exporters is 26% We verify our results at the product-level using trade data

Brixen, September 2009 Methodology Total Factor Productivity with Olley & Pakes estimation with coefficients at 4 digit level Revenue deflation with sector level PPIs Capital deflation with country specific capital deflator Difference-in-difference analysis But Antidumping protection may not be “random” To control for this potential endogeneity we use a control group that consists of “similar” firms Similar firms are firms in Termination cases i.e. filed for protection in same period; they belong to the same sectors and have similar import competition A control group with similar pre-treatment characteristics controls for potential endogeneity of AD protection (Konings and Vandenbussche, 2008; De Loecker, 2007)

Brixen, September 2009

Table 2: Summary Statistics

Brixen, September 2009 Table 3: Antidumping Protection and the Intensive Margin of Exports

Brixen, September 2009 Possible Explanations for fall in Exports Import protection limits French exporters ability to price-discriminate abroad Import protection limits domestic price competition and keeps domestic prices high undermining competitiveness abroad Import protection mainly affects outsourcers that manufacture products abroad for re-imports Import protection by France triggers retaliation by target countries (Prusa, 2001)

Brixen, September 2009 Theoretical Framework Krugman (1984): “Export Promotion through Import Protection”. Model with one representative firm and unilateral protection. Empirics do not support this model Helpman, Melitz, Rubinstein (2008). Model with monopolistic competition and heterogeneous firms. Reduction in transport costs increase exports and increase number of exporters. In line with our findings Melitz and Ottaviano (2008): predictions of reciprocal dumping model with heterogeneous firms. Unilateral trade protection results in a decrease in exports and an increase in the number of non- exporters are in line with our findings Verhoogen (2008), Bustos (2007), Acharya and Keller (2008). Trade Liberalization is best for high productivity firms. Transposed to AD: trade protection is best for lowly productive firms. In line with our result on non-exporters.

Brixen, September 2009 Table 4: The Effect of AD protection on Domestic Sales

Brixen, September 2009 Table 5: Antidumping Protection and the Extensive Margin

Brixen, September 2009 Table 6: Antidumping Protection and Intra- versus Extra EU Product level Exports

Brixen, September 2009 Table 7: Antidumping Protection and Product level Exports to and Imports from targeted countries

Brixen, September 2009 Table 8: Are Exporters more Productive?

Brixen, September 2009 Table 9: Antidumping Protection and the Productivity of Exporters

Brixen, September 2009 Possible Explanations for productivity results Production factors adjust slower than output reducing measured productivity Non-exporters gain productivity due to increase in market size (Lileeva & Trefler, 2007) De Loecker (2007), Van Biesebroeck (2005): when exporters have reduced market access abroad this reduces learning through exporting, which may explain the reduction in productivity for exporters

Brixen, September 2009 Conclusion AD protection raises market share of domestic non-exporters by 5% AD protection lowers firm-level exports on average by 8% AD protection lowers exports of “global firms” with affiliates outside the EU by 24% AD protection lowers product-level exports by 36% on average across export destinations AD protection lowers product-level exports to target countries by 66% AD protection raises the productivity of non-exporters AD protection lowers productivity of exporters

Brixen, September 2009 Conclusion