The Worldwide Spread of Antidumping Protection
Crowley, Meredith, Chicago Fed Letter
In recent years, the use of antidumping duties has been growing around the world. What caused the explosion in the use of a once-obscure trade remedy?
Beginning in 1980, the use of antidumping duties-special import tariffs that are used to raise the price of "dumped" goods-came to be a common practice in conducting trade policy among the U.S., the European Union (EU), Canada, and Australia. While only a handful of antidumping cases were initiated worldwide in the 1950s, 1960s, and 1970s, more than 1,600 cases were filed during the 1980s. Of these, the vast majority were filed by the traditional users-the U.S., the EU, Canada, and Australia. However, prior to the advent of the World Trade Organization (WTO) in 1995, the use of antidumping protection began to spread to developing countries, most notably India, Mexico, Brazil, and South Africa. The worldwide explosion in the use of antidumping duties has been widely documented (see figure 1; also Prusa and Blonigen, 2003; Miranda, Torres, and Ruiz, 1998; and Messerlin, 1989, among others).1 Over the five-year period from 1987 to 1991, 733 antidumping investigations were conducted worldwide. Between 1992 and 1997, the number increased to 1,463. Most recently, between 1998 and 2002, 1,581 antidumping investigations were filed. What caused this explosion in the use of a once-obscure trade remedy? Why are countries increasingly trying to restrict their imports through the use of antidumping duties, while at the same time engaging in broad programs of trade liberalization? What effect does this shift in trade policy have on consumers and producers both here and abroad? This Chicago Fed Letter reviews some of the newer explanations that have been offered to explain the antidumping phenomenon. Changes in international trade laws, probably the most important factor in the rise of antidumping protection, fostered an environment in which many countries increased their use of antidumping protection without any specific regard for the trade policies of their trading partners. More recent research, which I discuss here, examines if there are linkages across countries in the increased use of antidumping duties.
Put simply, for countries that belong to the WTO, dumping is selling an exported product in a foreign market at a price that is lower than the product's price in its home market, a third market, or below its average cost of production.2 Dumping is often called unfair because many confuse its definition with the economically harmful practice of predatory pricing. Although dumping is not necessarily harmful and, in fact, benefits consumers through lower prices in most cases, the WTO allows the use of antidumping duties to raise the price of dumped products. Under WTO rules, an importing country can impose an antidumping duty if there is proof that dumping is occurring and that it is causing injury to the domestic firms that compete with the dumped goods.
Figure 2 presents the total number of antidumping investigations by the U.S., EU, Canada, and Australia over the last 15 years. Among traditional users, the number of antidumping investigations fluctuates considerably from year to year with no clear trend over time. However, in figure 3, which plots the total number of antidumping investigations by all other GATT-WTO members, we see that there has been a steady increase in the number of antidumping investigations over this period.
There are many potential explanations for the rise in antidumping protection and I discuss only a few. Ultimately, the rise of antidumping protection can be traced back to changes in the rules-based trading regime of the WTO and its predecessor, the General Agreement on Tariffs and Trade (GATT). The first major increase in the use of antidumping duties began after rule changes introduced during the Tokyo Round of trade negotiations in 1979. The first surge in the use of antidumping duties was concentrated among the U.S., EU, Canada, and Australia, all GATT members. …