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Sanctuary markets and antidumping: an empirical analysis of U.S. exporters

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Abstract

Antidumping proponents in the United States often argue that foreign firms use profits obtained behind home market barriers to “subsidize” allegedly “unfair” pricing abroad. This paper examines this “sanctuary market” hypothesis for antidumping petitions filed against U.S. manufacturing exporters. Econometric results suggest that there is little evidence that the U.S. manufacturing firms facing antidumping actions abroad are beneficiaries of a home market sanctuary during the 1994–2007 time period. This evidence suggests that current WTO disciplines are inadequate to protect firms from antidumping investigations that do not benefit from sanctuary markets.

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Fig. 1

Notes

  1. For example, advocates for the U.S. steel industry have accused the Japanese government of turning a blind eye towards anti-competitive actions of domestic firms, which in turned allowed these firms to take market share away from U.S. companies (Howell et al. 1988). These arguments have been developed further in Mastel (1998).

  2. MFN is violated since tariffs vary across countries for the same product. National treatment is violated since pricing behavior acceptable by domestic firms (differential pricing across regions) is punished if undertaken by foreigners. Antidumping duties result in tariffs beyond those negotiated in multilateral trade negotiations so that bound tariff commitments are violated.

  3. See for example, Bown (2011), Francois and Niels (2006), Prusa and Skeath (2004), Blonigen and Bown (2003), Bown and Crowley (2007), Moore and Zanardi (2009), and Feinberg and Reynolds (2006).

  4. Pricing below marginal cost is not the standard in international trade agreements on dumping. Instead, pricing below production costs, typically below average total costs in practice, is considered dumping.

  5. This information is based on Bown (2014).

  6. The NAICS codes for individual cases were complied by the author by comparing each product name with the U.S. definitions of products on the U.S. Census Bureau website (http://www.census.gov/eos/www/naics). In addition, the Harmonized Tariff System code for each case, compiled by Bown (2014) provided further corroboration for the candidate NAICS code. In cases where the NAICS code was unclear, the petition is included in the “All Others” category.

  7. The sectors included in this category were plastics (NAICS 325211), organic chemicals (NAICS 325199), synthetic rubber (NAICS 325212), and inorganic chemicals (NAICS 325188).

  8. See http://www.usdoj.gov/atr/public/testimony/hhi.htm. Accessed on 3 September 2012.

  9. A small number of sectors have less than 50 firms in the 6-digit NAICS category; the HHI-50 for these sectors cannot be calculated. There are only four instances where such U.S. sectors have been targeted by foreign antidumping actions.

  10. These patterns are qualitatively identical if the HH index is calculated on the basis of firm shipments. In fact, there is even less evidence of important market concentration based on that measure.

  11. These figures do not reflect preferential trade agreement rates or unilateral preferences, so that these averages are an upper bound of the protection these sectors receive.

  12. There may be product level variation within these sectors that reflect more protection than evident from the broad sectoral averages. Bown (2014) reports the HS codes for all antidumping cases brought against the United States. The simple unweighted average applied tariff for these categories was 4.3 % as of March 2013, which is similar to the overall tariff average reported in Table 4. Source: U.S. International Trade Commission (2014a) (http://www.usitc.gov/tariff_affairs/tariff_databases.htm). Accessed March 2013.

  13. I choose to use initiations rather than final antidumping duties for two reasons. The first is that this is more common in the literature. Second, there are only 18 instances in the dataset where there is no dumping found by U.S exporters (out of 220 petitions).

  14. There may be important unobservable country and year variation not captured by the regressors. However, dichotomous models with fixed effects can cause problems associated with the “incidental variables problem”. Consequently, I estimate an alternative specification using a linear probability model that includes country and year fixed effects as a robustness check. The results are qualitatively similar to those reported below and are available on request.

  15. Note that the World Bank’s Trade and Production Database does not include U.S. tariffs data for 1994. Consequently, I use a simple average for 1993 and 1995 for the missing data.

  16. The euro-dollar exchange rate was used for all European Union members and the ecu-dollar rate for pre-1999.

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Acknowledgments

I would like to thank two anonymous referees for very useful comments. Thanks also to Anna Hershberger, Misato Sato, and Shan Li for invaluable research assistance and the GW-Center for International Business Education and Research for financial support. Chad Bown’s efforts to create an international database of antidumping actions were essential for this project as well.

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Correspondence to Michael Moore.

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Moore, M. Sanctuary markets and antidumping: an empirical analysis of U.S. exporters. Rev World Econ 151, 309–328 (2015). https://doi.org/10.1007/s10290-015-0211-3

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