Abstract not found

This is the first paper to empirically examine whether the United States ’ use of antidumping and safeguard tariffs, or “trade remedies, ” to restrict imports distorts foreign countries’ exports to third markets. We first develop a theoretical model of worldwide trade in which the imposition of a trade remedy by one country- an antidumping duty or a safeguard measure-causes significant distortions in world trade flows. We then empirically test this model by investigating the effect of US trade remedies on Japanese exports of roughly 5200 commodities into 37 countries between 1992 and 2001. Our estimation of a fixed-effects model of Japanese exports yields evidence that US remedies both deflect and depress Japanese export flows. Imposition of a US antidumping measure against Japan deflects trade: export growth to Japan’s non-US trading partners rises by approximately 12 percentage points. The imposition of a US antidumping measure against a third country depresses trade: Japanese export growth to the third country falls by approximately 30 percentage points.

Abstract: Recent work demonstrates the importance of developing high quality output in order to compete in export markets and other recent studies verify the prevalence of fixed and ongoing trade costs while participating in those markets. I consider the joint choice of quality and export promotion costs when trade relationships are subject to temporary disputes. When transparency is low and macroeconomic instability is high, disputes arrive more frequently and, therefore, firms may inefficiently choose lower levels of quality and export promotion. These, in turn, build shallower trading relationships with less trade volumes and higher tariffs, and generate greater trade reductions during the more common trade disputes. Several institutional features of the WTO dispute settlement mechanism that are generally lacking in preferential trade agreements such as improved transparency, dispute investigation, and the provision to recommend asymmetric continuation payoffs can ameliorate these inefficient quality choice outcomes. Hence, lower quality output and lower quality trading relationships may be more endemic to countries that depend on preferential trading areas as opposed to the WTO.

www.economics.hawaii.edu

This study employs four dimensional (firm-product-destination-year) export data of Brazilian firms to empirically examine the effect of past exporting relationships of firms, whose products are targeted by antidumping duties, on their export flows to alternative markets. We show that, on the intensive margin, firms increase their export volumes to alternative countries in which they were already exporting the duty imposed product when they suffer an AD duty in a particular country. On the extensive margin, our findings suggest that firms ’ probability of exporting a duty imposed product to a new market resulting from an AD duty in a different market increases only if they have already an established trading relationship in that market. In addition to making sense of existing puzzles in trade deflection, this paper makes an important contribution by demonstrating how much the fixed costs of developing an export destination matter in terms of trade deflection.

in ECONOMICS by Veysel Avsar 2011 ii To: Dean Kenneth Furton

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Bruce Blonigen, Will Martin, and conference participants at the NBER for useful comments on an earlier version. Matthew Niedzwiecki and Paul Deng provided outstanding research assistance. The World Bank provided financial support for the collection of data used in this project. All remaining errors are my own. The views expressed herein are those of the author(s) and do not necessarily reflect

The WTO has delivered policy outcomes that are very di¤erent from those likely to emerge out of the recent wave of preferential trade agreements (PTAs). Should economists see this as an e ¢ cient institutional hand-o¤, where the WTO has carried trade liberalization as far as it can manage, and is now passing the baton to PTAs to …nish the job? We survey a growing economics literature on international trade agreements and argue on this basis that the WTO is not passé. Rather, and subject to some caveats, our survey of research to date suggests that the WTO warrants strong support while a more cautious view of PTAs seems appropriate. Bagwell thanks the Center for Advanced Studies in the Behavioral Sciences for support and hospitality. Bown acknowledges nancial support from the World Banks Multi-Donor Trust Fund for Trade and Development. We thank Steven Durlauf, Douglas Irwin, Nuno Limão, Daniel Treer and six anonymous referees for very useful and detailed comments on an earlier draft. Semira Ahdiyyih provided outstanding research assistance. 1

Antidumping and related trade remedies are the most popular policy instruments that many of the largest importing countries in the World Trade Organization system use to restrict international trade. While such trade remedies are also frequent targets of dispute settlement activity under the WTO, given that Panel and Appellate Body rulings have almost invariably found that some aspect of each reviewed remedy was inconsistent with WTO obligations, an open research question is why aren’t more remedies targeted by dispute settlement? This paper provides a first empirical investigation of the trade remedy and WTO dispute settlement interaction by focusing on determinants of WTO members ’ decisions of whether to formally challenge U.S. trade remedies imposed between 1992 and 2003. We provide evidence that it is not only the size of the economic market at stake and the capacity to retaliate under potential Dispute Settlement Understanding-authorized sanctions that influence the litigation decision of whether to formally challenge a measure at the WTO. We also find that if the negatively affected foreign industry has the capacity to directly retaliate through a reciprocal antidumping investigation and measure of its own, its government is less likely to pursue the case on its behalf at the WTO. This is consistent with the theory that potential complainants may be avoiding WTO litigation in favor of pursuing reciprocal antidumping and hence “vigilante justice.”