The Globalization of ADThe Globalization of AD

Thomas J. PrusaThomas J. Prusa

March 2004March 2004

OutlineOutline

Why AD?Why AD? Globalization of ADGlobalization of AD Emergence of new usersEmergence of new users Who’s whoWho’s who ConsequencesConsequences Prospects for reform… Prospects for reform…

• Where will we be in another Where will we be in another hundredhundred years?years?

tenten

Why AD?

Major trade lawsMajor trade laws• AntidumpingAntidumping• Countervailing dutyCountervailing duty• Intellectual propertyIntellectual property• SafeguardSafeguard

Until early-1970s not many trade Until early-1970s not many trade disputes under any statutedisputes under any statute• ““About 10 AD disputes per year”About 10 AD disputes per year” (J. Schott, (J. Schott,

1994)1994)

Antidumping – King of the HillAntidumping – King of the Hill

61 115

1441

0

500

1000

1500

Total Cases Filed, 1995-2000

Safeguard CVD AD

Source: Rowe & May (2001)

Since 1980, more AD disputes than all other trade laws combined!

AD – Devil in the DetailsAD – Devil in the Details Allegation against foreign firm (not Allegation against foreign firm (not

gov’t)gov’t) Weak injury standardWeak injury standard

• ““Material” injury (AD) vs. “Significant” injury Material” injury (AD) vs. “Significant” injury (safeguard)(safeguard)

LTFV calculation (almost always positive)LTFV calculation (almost always positive)• Economically meaninglessEconomically meaningless• Sufficiently complicated that all but experts Sufficiently complicated that all but experts

quickly become lost in minutiaquickly become lost in minutia• Average margin: prohibitiveAverage margin: prohibitive

AD – Devil in the DetailsAD – Devil in the Details Agencies have more discretion and are Agencies have more discretion and are

subject to far more political pressure subject to far more political pressure than F-H-N (1982) assertedthan F-H-N (1982) asserted

Rhetoric unbeatableRhetoric unbeatable• Has a candidate ever won with a platform Has a candidate ever won with a platform

that states he/she is for unfair trade?that states he/she is for unfair trade? Bottom-line: AD is WTO-consistent Bottom-line: AD is WTO-consistent

exceptionexception• Mike Finger: “protectionism with good PR”Mike Finger: “protectionism with good PR”

AD – The New ProtectionismAD – The New Protectionism

Could have this trend been Could have this trend been anticipated?anticipated?• Yes.Yes.• Ethier (1982) warned that antidumping Ethier (1982) warned that antidumping

would be would be “the principal battleground for “the principal battleground for the ‘new protectionism’ as concerns the ‘new protectionism’ as concerns trade in manufactures among the trade in manufactures among the developed economies.”developed economies.”

The Globalization of AD

Spread of AD (by decade)

2 24

0 0

14

10

2

11

46

0

5

10

15

20

25

30

35

40

45

50

1904-1909

1910-1919

1920-1929

1930-1939

1940-1949

1950-1959

1960-1969

1970-1979

1980-1989

1990-present

Time

No

. C

ou

ntr

ies

wit

h A

D S

tatu

te

CanadaAustralia

JapanFranceNew ZealandUnited Kingdom

South AfricaUnited States

Cumulative Number of Member Countries

0

20

40

60

80

100

120

140

160

1940-1949 1950-1959 1960-1969 1970-1979 1980-1989 1990-presentTime

Nu

mb

er o

f C

ou

ntr

ies

GATT/WTO Club

AD Club

95

148

GATT/WTO and GATT/WTO and the Globalization of ADthe Globalization of AD

SuccessSuccess• GATT/WTO Rounds have significantly GATT/WTO Rounds have significantly

reduced applied and bound tariff ratesreduced applied and bound tariff rates• Offered AD as a means to diffuse Offered AD as a means to diffuse

political pressure for protectionpolitical pressure for protection• Uruguay Round brought AD into the Uruguay Round brought AD into the

agreement (previously part of annexes)agreement (previously part of annexes)

GATT/WTO and GATT/WTO and the Globalization of ADthe Globalization of AD

FailureFailure• GATT negotiators looked the other way GATT negotiators looked the other way

when it came to AD [EU/US insistence]when it came to AD [EU/US insistence]• AD was really only a significant trade AD was really only a significant trade

impediment for a handful of countriesimpediment for a handful of countries• Most countries either did not have an AD Most countries either did not have an AD

statute or chose not to use the lawstatute or chose not to use the law

No. of Countries Using AD

8

3836

65

0

10

20

30

40

50

60

70

1980-84 1995-6.2002

Using Affected

97%+ of cases from 4 countries

The Emergence of New Users

AD Activity - Worldwide

0

200

400

600

800

1000

1200

1400

1600

1980-84 1985-89 1990-94 1995-99 2000-04 (est.)

Nu

mb

er o

f C

ases

AD Activity - Worldwide

0

200

400

600

800

1000

1200

1400

1600

1980-84 1985-89 1990-94 1995-99 2000-04 (est.)

Nu

mb

er o

f C

ases

Long-Run Steady Growth in AD Activity…

AD Activity - Traditional Users

0

100

200

300

400

500

600

700

800

1980-84 1985-89 1990-94 1995-99 2000-04 (est.)

Nu

mb

er o

f C

ases

… or not?

AD Activity - New Users

0

100

200

300

400

500

600

700

800

900

1980-84 1985-89 1990-94 1995-99 2000-04 (est.)

Nu

mb

er o

f C

ases

Striking increase in AD use by new users

AD Activity

0

50

100

150

200

250

300

350

400

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

Nu

mb

er

of

Ca

se

s

0%

10%

20%

30%

40%

50%

60%

70%

80%

Fra

cti

on

Ca

se

s -

Ne

w U

se

rs

Top AD Users - 1980Top AD Users - 1980

CountryCountry NumberNumber

CanadaCanada 2525

USUS 2121

EUEU 1313

AustraliaAustralia 88

Top AD Users - 2002Top AD Users - 2002

CountryCountry NumberNumber

IndiaIndia 8080

USUS 3535

ThailandThailand 2121

EUEU 2020

AustraliaAustralia 1616

ArgentinaArgentina 1414

PeruPeru 1313

PR-ChinaPR-China 1111

Who’s Who of AD

A word about the dataA word about the data GATT/WTO members required to GATT/WTO members required to

submit semi-annual reportssubmit semi-annual reports Database of 4600+ AD disputes since Database of 4600+ AD disputes since

1980 (change in rules)1980 (change in rules)• Adjust for cases against EU (4200 cases) Adjust for cases against EU (4200 cases)

Significant LimitationsSignificant Limitations• No info on AD use by non-WTO countriesNo info on AD use by non-WTO countries• Settled/withdrawn cases not always Settled/withdrawn cases not always

reportedreported• WTO provides little info on either the WTO provides little info on either the

products or level of protectionproducts or level of protection

Who has used AD?Who has used AD?

Who’s Who of AD

Number of AD cases, reporting countries

"Top 10 Users"

Reporting country 1980 - 2002 1980-84 1985-89 1990-94 1995-99 2000-02

United States 812 133 200 228 125 126

Australia 760 228 164 237 90 41

European Community 698 146 116 181 186 69

Canada 424 143 106 80 46 49

India 275 0 0 15 120 140

Argentina 229 0 0 58 91 80

Mexico 228 0 34 138 37 19

Brazil 153 0 2 61 62 28

South Africa 148 0 0 14 110 24

New Zealand 72 0 8 30 24 10

The intensity of AD useThe intensity of AD use More trade over past two decades, logical for More trade over past two decades, logical for

more trade disputesmore trade disputes

Filing IntensityFiling Intensityctct = (#AD Disputes Filed = (#AD Disputes Filedctct)/Imports)/Importsctct

Named IntensityNamed Intensityctct = (#AD Named = (#AD Namedctct)/Exports)/Exportsctct

Normalize so Normalize so

Filing Intensity for US =100 (1980)Filing Intensity for US =100 (1980)Named Intensity for Japan =100 (1980)Named Intensity for Japan =100 (1980)

Filing Intensity1, reporting countries

"Top 10 Users"

Reporting country 1980 - 2002 1980-84 1985-89 1990-94 1995-99 2000-02

United States 155 185 224 225 51 91

Australia 2,173 3,970 2,678 3,255 529 434

European Community 131 179 144 176 93 62

Canada 396 883 511 341 86 159

India 1,861 - - 1,046 1,413 3,123

Argentina 1,823 - - 2,616 1,152 1,701

Mexico 674 - 1,165 1,287 132 113

Brazil 514 - 137 1,299 347 272

South Africa 1,505 - - 2,136 1,676 703

New Zealand 1,205 - 1,295 2,200 662 662

Note: 1USA 1980=100.

Number (intensity) of AD cases , reporting countries

Reporting Country's Income Level

1980

- 20

02

1980

-84

1985

-89

1990

-94

1995

-99

2000

-02

High Income OECD 2,806 658 616 764 471 297

(230) (361) (303) (298) (91) (95)

High Income Non-OECD 32 0 0 5 16 11

(147) - - (106) (262) (73)

Middle Income Upper 926 0 42 294 409 181

(497) - (436) (954) (316) (281)

Middle Income Lower 217 0 0 54 97 66

(459) - - (916) (254) (207)

Low Income 320 0 0 15 154 151

(1,062) - - (1,046) (795) (1,346)

Note: 1USA 1980=100.

Who has been hit by AD actions?Who has been hit by AD actions?

Who’s Who of AD

Number of AD cases, affected countries

"Top 10 Affected Countries"

Affected country

1980

- 0

6.20

02

1980

-84

1985

-89

1990

-94

1995

-99

2000

-06.

2002

European Community 529 127 79 117 138 68

China 468 24 24 143 164 113

USA 354 80 64 105 77 28

South Korea 310 43 49 73 98 47

Japan 301 72 84 63 58 24

Taiwan 220 25 43 52 61 39

Brazil 198 27 39 65 42 25

Thailand 120 2 8 37 42 31

India 118 3 3 35 47 30

Indonesia 107 0 1 23 48 35

Subject Intensity1, affected countries

"Top 10 Affected Countries"

Affected country

1980

- 0

6.20

02

1980

-84

1985

-89

1990

-94

1995

-99

2000

-06.

2002

European Union 155 264 152 181 94 83

China 787 683 521 1523 553 653

USA 139 214 168 208 65 42

South Korea 786 1418 785 864 458 405

Japan 176 296 270 171 80 61

Taiwan 511 787 645 541 271 311

Brazil 884 899 980 1592 462 485

Thailand 709 930 585 1034 432 566

India 818 570 464 1541 721 795

Indonesia 495 - 172 614 523 673

Note: 1Japan 1980=100.

Number (Intensity) of AD cases, affected countries

Affected Country's Income Level

1980

- 0

6.20

02

1980

-84

1985

-89

1990

-94

1995

-99

2000

-06.

2002

High Income OECD 1464 400 283 343 299 139

(161) (286) (190) (186) (77) (65)

Middle Income Upper 1026 149 194 261 263 159

(624) (943) (771) (815) (291) (301)

High Income Non-OECD 368 42 77 93 88 68

(315) (530) (450) (300) (127) (165)

Low Income 258 3 5 72 105 73

(674) (570) (396) (1,081) (599) (727)Middle Income Lower 860 64 99 240 265 192

(760) (680) (635) (1,360) (517) (608)

Note: 1Japan 1980=100.

AD Balance SheetAD Balance Sheet

Who’s Who of AD

Drop Steel Industry

Consequences of Proliferation

Trade EffectsTrade Effects

Econometric estimates indicate large Econometric estimates indicate large impact of imposition of dutiesimpact of imposition of duties• Investigation effects (Staiger/Wolak)Investigation effects (Staiger/Wolak)• Direct impact on subject country (Prusa)Direct impact on subject country (Prusa)• 33rdrd party effects party effects

Negative: Subject country diverts to other Negative: Subject country diverts to other markets (Bown/Crowley)markets (Bown/Crowley)

Positive: 3Positive: 3rdrd parties fill the void (Prusa, B/C) parties fill the void (Prusa, B/C)

Trade Impact - Investigation effectTrade Impact - Investigation effect Preliminary duties imposed 60-120 Preliminary duties imposed 60-120

days after petition fileddays after petition filed Almost always affirmative (80% of Almost always affirmative (80% of

cases)cases) Duties based on petitioner Duties based on petitioner

submissionsubmission About half of trade restraint occurs About half of trade restraint occurs

during the investigationduring the investigation

Trade Impact – 3Trade Impact – 3rdrd countries countries Imposing duties has consequences in Imposing duties has consequences in

other marketsother markets• Subject country exports to other Subject country exports to other

markets increases (Bown/Crowley)markets increases (Bown/Crowley)

Trade Impact - DutiesTrade Impact - Duties Subject CountriesSubject Countries

• Value falls by 50-60%Value falls by 50-60%• Quantity falls by 66%Quantity falls by 66%

Non-Subject CountriesNon-Subject Countries• Lots of diversion; varies greatly from Lots of diversion; varies greatly from

case to casecase to case• On average, about ½ to ¾ of subject On average, about ½ to ¾ of subject

country supply divertedcountry supply diverted

Prospects for Reform

Prospects for reformProspects for reform

AD reform only when EU/US change AD reform only when EU/US change their positiontheir position

Is the “Tipping Point” imminent?Is the “Tipping Point” imminent?• Not likelyNot likely• EU/US are EU/US are stronglystrongly opposed to AD reform opposed to AD reform• US SenateUS Senate

sought to separate fast-track authority for AD sought to separate fast-track authority for AD from rest of agreementfrom rest of agreement

Prospects for reformProspects for reform

Even modest reforms a challengeEven modest reforms a challenge Mandatory sunsetMandatory sunset Lesser dutyLesser duty ZeroingZeroing Facts availableFacts available CausalityCausality

If there exists an opportunity for If there exists an opportunity for change change regional agreements regional agreements• Australia-New Zealand pactAustralia-New Zealand pact