Three essays on antidumping

Date of Completion

January 2011

Keywords

Economics, General|Political Science, International Relations

Degree

Ph.D.

Abstract

This dissertation consists of three essays on the topic of antidumping (AD) which is currently the most intensively-used worldwide temporary trade measure. As detailed in the next paragraphs, the three essays explore the link between the AD activity and political lobbying, R&D investment, and the Byrd Amendment, a US law passed in 2001 and repealed in 2006.^ In the first chapter, I examine to what extent three groups of non-economic and economic variables impact the AD investigations. The economic variables reflect the state of a domestic industry (unemployment, productivity, sales, imports). The strategic variables contain characteristics of the targeted country in the inquiry (big exporter, developed/developing, retaliation measures). Political variables are related to the pressure that industries wield on decision makers (industry size, petitioners' organization, lobby activity). A variable of interest is the "lobby effect," constructed from a dataset available on the US Senate website. The results show that lobbying industries have a 22% higher probability of obtaining trade relief than their non-lobbying counterparts. Additionally, the estimation suggests that both strategic and economic factors have considerably influenced the final outcome of an AD case. ^ In the second chapter, I set up a theoretical framework which investigates whether national AD laws constitute an "incentive" for domestic firms to underinvest. The building block of the model is a 3-stage game in which the domestic firm first chooses whether to apply for AD protection, then it chooses the optimal investment level and finally, it competes in output with a foreign competitor. The first part of this paper endogenizes a firm's decision to file AD complaints. The immediate result derived is that, for small tariffs, the firm does not file for trade relief. Another result is that there exists a tariff range in which the domestic firm decides to file and under-invests compared to the investment level of a non-petitioning firm. The second part of the paper endogenizes the AD authority's decision to set the AD tariff. Two results follow, the first one proves that the agency never sets a tariff to make filing and over-investment profitable. The next result shows that, depending on the size of the AD and investment costs, the tariff is set low enough such that the domestic firm does not file, or high enough such that the domestic firm files and under-invests. ^ In the third chapter, I investigate the domestic welfare effects of the Byrd Amendment (which mandates that the tariff revenues from AD or countervailing (CV) cases be directly distributed to the American firms which initiated or supported the case). Following a complaint filed with the WTO, the WTO demanded that the law be repealed and allowed the complainants to impose retaliatory tariffs against the US exports. An important result indicates that the Byrd Amendment reduces the AD/CV tariff compared to the case when there is no Byrd Amendment. An explanation is that the domestic petitioners are maximizing not only the profits from selling their output, but also the AD/CV tariff revenues. Another result shows that the greater the weight attached to the domestic firm's welfare in the welfare function, the greater the AD/CV tariff. However, foreign retaliation reduces the domestic firm's profitability, the bigger the retaliation size, the smaller the domestic profits. ^

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