1. The Globalization of AD Thomas J. Prusa March 2004

2. Outline Why AD? Why AD? Globalization of AD Globalization of AD Emergence of new users Emergence of new users Who’s who Who’s who Consequences Consequences Prospects for reform… Prospects for reform… Where will we be in another hundred years?Where will we be in another hundred years? ten

3. Why AD?

4. Major trade laws Major trade laws AntidumpingAntidumping Countervailing dutyCountervailing duty Intellectual propertyIntellectual property SafeguardSafeguard Until early-1970s not many trade disputes under any statute Until early-1970s not many trade disputes under any statute “About 10 AD disputes per year” (J. Schott, 1994)“About 10 AD disputes per year” (J. Schott, 1994)

5. Antidumping – King of the Hill Source: Rowe & May (2001) Since 1980, more AD disputes than all other trade laws combined!

6. AD – Devil in the Details Allegation against foreign firm (not gov’t) Allegation against foreign firm (not gov’t) Weak injury standard Weak injury standard “Material” injury (AD) vs. “Significant” injury (safeguard) “Material” injury (AD) vs. “Significant” injury (safeguard) LTFV calculation (almost always positive) LTFV calculation (almost always positive) Economically meaningless Economically meaningless Sufficiently complicated that all but experts quickly become lost in minutia Sufficiently complicated that all but experts quickly become lost in minutia Average margin: prohibitive Average margin: prohibitive

7. AD – Devil in the Details Agencies have more discretion and are subject to far more political pressure than F-H-N (1982) asserted Agencies have more discretion and are subject to far more political pressure than F-H-N (1982) asserted Rhetoric unbeatable Rhetoric unbeatable Has a candidate ever won with a platform that states he/she is for unfair trade? Has a candidate ever won with a platform that states he/she is for unfair trade? Bottom-line: AD is WTO-consistent exception Bottom-line: AD is WTO-consistent exception Mike Finger: “protectionism with good PR” Mike Finger: “protectionism with good PR”

8. AD – The New Protectionism Could have this trend been anticipated? Could have this trend been anticipated? Yes. Yes. Ethier (1982) warned that antidumping would be “the principal battleground for the ‘new protectionism’ as concerns trade in manufactures among the developed economies.” Ethier (1982) warned that antidumping would be “the principal battleground for the ‘new protectionism’ as concerns trade in manufactures among the developed economies.”

9. The Globalization of AD

12. GATT/WTO and the Globalization of AD Success Success GATT/WTO Rounds have significantly reduced applied and bound tariff rates GATT/WTO Rounds have significantly reduced applied and bound tariff rates Offered AD as a means to diffuse political pressure for protection Offered AD as a means to diffuse political pressure for protection Uruguay Round brought AD into the agreement (previously part of annexes) Uruguay Round brought AD into the agreement (previously part of annexes)

13. GATT/WTO and the Globalization of AD Failure Failure GATT negotiators looked the other way when it came to AD [EU/US insistence] GATT negotiators looked the other way when it came to AD [EU/US insistence] AD was really only a significant trade impediment for a handful of countries AD was really only a significant trade impediment for a handful of countries Most countries either did not have an AD statute or chose not to use the law Most countries either did not have an AD statute or chose not to use the law

14. No. of Countries Using AD 97%+ of cases from 4 countries

15. The Emergence of New Users

17. Long-Run Steady Growth in AD Activity…

18. … or not?

19. Striking increase in AD use by new users

21. Top AD Users - 1980 CountryNumber Canada25 US21 EU13 Australia8

22. Top AD Users - 2002 CountryNumber India80 US35 Thailand21 EU20 Australia16 Argentina14 Peru13 PR-China11

25. Who’s Who of AD

26. A word about the data GATT/WTO members required to submit semi-annual reports GATT/WTO members required to submit semi-annual reports Database of 4600+ AD disputes since 1980 (change in rules) Database of 4600+ AD disputes since 1980 (change in rules) Adjust for cases against EU (4200 cases)Adjust for cases against EU (4200 cases) Significant Limitations Significant Limitations No info on AD use by non-WTO countriesNo info on AD use by non-WTO countries Settled/withdrawn cases not always reportedSettled/withdrawn cases not always reported WTO provides little info on either the products or level of protectionWTO provides little info on either the products or level of protection

27. Who has used AD? Who’s Who of AD

29. The intensity of AD use More trade over past two decades, logical for more trade disputes More trade over past two decades, logical for more trade disputes Filing Intensity ct = (#AD Disputes Filed ct )/Imports ct Named Intensity ct = (#AD Named ct )/Exports ct Normalize so Filing Intensity for US =100 (1980) Named Intensity for Japan =100 (1980) Normalize so Filing Intensity for US =100 (1980) Named Intensity for Japan =100 (1980)

32. Who has been hit by AD actions? Who’s Who of AD

36. AD Balance Sheet Who’s Who of AD

39. Drop Steel Industry

40. Consequences of Proliferation

41. Trade Effects Econometric estimates indicate large impact of imposition of duties Econometric estimates indicate large impact of imposition of duties Investigation effects (Staiger/Wolak)Investigation effects (Staiger/Wolak) Direct impact on subject country (Prusa)Direct impact on subject country (Prusa) 3 rd party effects3 rd party effects Negative: Subject country diverts to other markets (Bown/Crowley) Negative: Subject country diverts to other markets (Bown/Crowley) Positive: 3 rd parties fill the void (Prusa, B/C) Positive: 3 rd parties fill the void (Prusa, B/C)

42. Trade Impact - Investigation effect Preliminary duties imposed 60-120 days after petition filed Preliminary duties imposed 60-120 days after petition filed Almost always affirmative (80% of cases) Almost always affirmative (80% of cases) Duties based on petitioner submission Duties based on petitioner submission About half of trade restraint occurs during the investigation About half of trade restraint occurs during the investigation

43. Trade Impact – 3 rd countries Imposing duties has consequences in other markets Imposing duties has consequences in other markets Subject country exports to other markets increases (Bown/Crowley)Subject country exports to other markets increases (Bown/Crowley)

44. Trade Impact - Duties Subject Countries Subject Countries Value falls by 50-60%Value falls by 50-60% Quantity falls by 66%Quantity falls by 66% Non-Subject Countries Non-Subject Countries Lots of diversion; varies greatly from case to caseLots of diversion; varies greatly from case to case On average, about ½ to ¾ of subject country supply divertedOn average, about ½ to ¾ of subject country supply diverted

45. Prospects for Reform

46. Prospects for reform AD reform only when EU/US change their position AD reform only when EU/US change their position Is the “Tipping Point” imminent? Is the “Tipping Point” imminent? Not likelyNot likely EU/US are strongly opposed to AD reformEU/US are strongly opposed to AD reform US SenateUS Senate sought to separate fast-track authority for AD from rest of agreement sought to separate fast-track authority for AD from rest of agreement

47. Prospects for reform Even modest reforms a challenge Even modest reforms a challenge Mandatory sunset Mandatory sunset Lesser duty Lesser duty Zeroing Zeroing Facts available Facts available Causality Causality If there exists an opportunity for change  regional agreements If there exists an opportunity for change  regional agreements Australia-New Zealand pactAustralia-New Zealand pact