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US Safeguards on Steel and the Markups of European Producers

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Abstract

This paper is among the first to explore the microeconomic impacts of a trade policy on foreign firms. We empirically investigate the effects of the US safeguard protection of steel imports in 2002 on the markups of EU steel firms. Using a large panel of affected EU steel firms between 1995 and 2005, we find that the protection they faced abroad significantly reduced their markups. Our results indicate smaller adverse effects on multi-product EU firms. Our study has wider implications as it quantifies the cost that trade protection imposes on trading partners, an externality currently not considered in any trade regulation. The US safeguard protection also resulted in some diversion of EU steel especially towards China, aggravating the situation on the Chinese steel market and ultimately resulting in the Chinese trade protection of steel imports.

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Authors and Affiliations

  1. Department of Economics, Catholic University of Leuven, Place Montesquieu 3, 1348, Louvain-la-Neuve, Belgium

    Hylke Vandenbussche & Ziga Zarnic

  2. CEPR, London, UK

    Hylke Vandenbussche

  3. LICOS, AFI-KUL, Leuven, Belgium

    Hylke Vandenbussche

  4. LICOS-KUL, Leuven, Belgium

    Ziga Zarnic

Authors
  1. Hylke Vandenbussche
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  2. Ziga Zarnic
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JEL no.

F13, L13, L61

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Vandenbussche, H., Zarnic, Z. US Safeguards on Steel and the Markups of European Producers. Rev World Econ 144, 458–490 (2008). https://doi.org/10.1007/s10290-008-0156-x

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  • DOI: https://doi.org/10.1007/s10290-008-0156-x

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