The following summary appeared in the January 2005 issue of the NBER Digest. Digest

Antidumping in Historical Perspective

"While...antidumping claims are now a more prominent feature of American trade policy, the number of products targeted in complaints has actually fallen since the mid-1980s."

Over the last 20 years it has become much easier for American firms to successfully block certain imports from other countries by claiming that they are being sold or "dumped" in the United States at artificially low prices and thus should be subjected to high import duties. But while these so-called "antidumping" claims are now a more prominent feature of American trade policy, the number of products targeted in complaints has actually fallen since the mid-1980s.

In The Rise of U.S. Antidumping Action in Historical Perspective, (NBER Working Paper No. 10582), NBER Research Associate Douglas Irwin looks back at the evolution of the arcane but politically popular world of antidumping actions which, in this era of trade liberalization, have become one of the few legal ways for countries to protect domestic firms from foreign competition.

Irwin notes that the current interest in antidumping laws -- best known of late for their use in slowing imports of cheap steel -- is largely uninformed by an historical view of their application. He suggests that there has been insufficient appreciation of the political and economic variables that have made antidumping claims today's import-fighting weapon of choice.

A key finding of Irwin's study is that throughout much of the 20th century American firms have routinely tried to slow imports of a wide variety of products by claiming that they were being sold to U.S. customers at a price that was either below production costs or less than their fair market value. Contrary to the conventional wisdom that there were not many antidumping cases prior to 1980, Irwin shows that the number of antidumping investigations in the 1930s, 1950s, and 1960s was roughly equivalent to the current rate.

Irwin identifies two major differences between pre- and post-1980 antidumping policy. In the past, most antidumping complains did not result in the imposition of import duties. Today's antidumping cases are much more likely to be successful. Irwin attributes the high success rate of today's cases not to an increase in dumping but to "legal changes and bureaucratic incentives." For example, legislation was enacted in 1980 stripping the authority to review antidumping cases from the Treasury Department, which many in Congress considered unsympathetic to domestic industry concerns, and giving the authority to what was widely seen as the more business-friendly Commerce Department.

The other difference is that contemporary cases usually charge that the dumping involved imports from several countries simultaneously. Indeed, the rise of multiple petitions that accuse several countries of dumping the same product accounts for much of the post-1980 increase in antidumping actions. But if measured by the number of products subjected to complaints, antidumping complaints peaked around 1985 and declined since then.

This is also attributable to legislative changes. In 1984, the International Trade Commission, which reviews complaints after the Commerce Department, was directed to add up the total value of the imports involved when calculating whether a domestic industry had suffered any harm. This shift motivated companies to file antidumping complaints that focused on many countries. An antidumping complaint that includes petitions targeting imports from more than one nation boosts the total value of what's being labeled as suspect, thus increasing the chances of gaining a favorable decision. "This gave import-competing firms an incentive to file more antidumping petitions against other countries for a given product," Irwin states.

The combination of a particularly favorable venue and the shift to multi-country complaints appears to have dramatically altered the dynamic in favor of domestic industries alleging harm. Irwin finds that prior to 1980, most cases alleging dumping were rejected at an early stage; of those given a full review, only about one quarter -- or five percent of all cases -- were decided in favor of the domestic industry. But he notes that since the mid-1980s, almost every antidumping complaint has gotten a full review. And, in roughly half of the complaints the government determined that dumping had in fact occurred and that punitive duties should be imposed.

Irwin reports that other variables can make antidumping complaints more likely in a given year. These include a rise in the value of the dollar, which makes imports cheaper, and a rise in the unemployment rate. Irwin also points out, not surprisingly, that the attractiveness of antidumping complaints also is influenced by international trade agreements, which are producing ever-lower tariffs. According to Irwin, "this decline in trade barriers exposed many industries to foreign competition and may have pushed them toward using antidumping duties to protect themselves."

-- Matthew Davis

The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.

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