Brixen, September 2009 Antidumping Protection hurts Exporters Jozef Konings (*) and Hylke Vandenbussche (**) (*)Catholic University of Leuven (**) Université

Brixen, September 2009

Antidumping Protection hurts Exporters

Jozef Konings(*) and Hylke Vandenbussche(**)

(*)Catholic University of Leuven

(**) Université Catholique de Louvain


Financial Crisis spurs protectionism


Antidumping protection on the rise

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But…not all firms want protection

Antidumping Case in 2007:

EU antidumping protection against imports of shoes from China and Vietnam was supported by small scale Italian shoe producers but opposed by large EU producers with international activity.

Why?

This paper tries to give explanation


What is Antidumping protection? Dumping is about international price-discrimination where a country

of origin sets a lower price in its export market than at home According to GATT art 6 this is considered “unfair” trade which

allows the importing country to take unilateral protection against the alleged dumper(s)

Domestic Industries file to the EU Commission to impose an antidumping tariff against foreign importers from alleged dumpers

Either the import-competing industry “wins” the case and gets “protected, or it “loses” and the case is terminated without protection

When it wins a case, AD protection stays in place for 5 years Note: AD is often used by governments to protect domestic firms

from “tough” rather than “unfair” import competition Reseach question: how effective is this protection for different types

of firms? Highly relevant in view of financial crisis.


Motivation We study are import-competing firms i.e. those that either produce

the protected product or a close substitute

Example: antidumping protection against Chinese bicycles, than we identify French producers of similar by bicyles

How does this affect the exports (intensive margin) of French firms in the same industry as the protected product?

How does that affect the number of exporters (extensive margin)?

How does that affect the productivity of exporters?

How does that affect the productivity of non-exporters? i.e. is there a different response of firms to trade protection depending on their initial export status?


Preview of Results Firm-level exports of protected firms fall during protection compared to

a control group

Exports of “global” firms falls more than of non-global

Protected firms: decrease in intensive margin (volume of exports) but small effect on extensive margin (number of exporters) during protection

Decrease in product-level exports predominantly in extra-EU exports

Productivity of exporters falls during protection relative to non-exporters

Domestic sales of exporters go down Domestic sales of non-exporters go up


Data French firm-level data 1995-2005 20 Antidumping cases 1997,1998 by product group In 12 cases the outcome was protection 8 cases were terminated without protection Duties range between 10 and 67% We identify 3,695 firms in same NACE 4 digit sector as the dumped

products for which we can estimate productivity We identify firms whose primary activity corresponds to the

protected product We consider firms’ exports in the primary activity given at the NACE

4 digit level One third of firms in our sample are exporters Average “export share in total sales” amongst exporters is 26% We verify our results at the product-level using trade data


Methodology Total Factor Productivity with Olley & Pakes estimation with coefficients at 4 digit

level

Revenue deflation with sector level PPIs

Capital deflation with country specific capital deflator

Difference-in-difference analysis

But Antidumping protection may not be “random”

To control for this potential endogeneity we use a control group that consists of “similar” firms

Similar firms are firms in Termination cases i.e. filed for protection in same period; they belong to the same sectors and have similar import competition

A control group with similar pre-treatment characteristics controls for potential endogeneity of AD protection (Konings and Vandenbussche, 2008; De Loecker, 2007)


Table 1: New Antidumping Cases Initiated by the EU between 1997-98 Year of AD Initiation

Product

# HS per case

NACE rev.1

Decision (Duty/ Undertak/Termination)

Year of AD Decision

Average Duty(a)

(%) Defendants

1997 Fax machines 1 3220 D 1998 43 China, Japan, S-Korea, Malaysia, Singapore, Taiwan, Thailand

Potassium permanganate 1 2413 D 1998 21 India, Ukraine

Polysulphide polymers 1 2417 D 1998 13 USA

Synthetic fibre ropes 4 1752 D 1998 82 India

Monosodium glutamate 1 2441 T 1998 0 Brazil, USA, Vietnam

Cotton fabrics 15 1720 T 1998 0 China, Egypt, India, Indonesia,

Pakistan, Turkey

Strips of iron or non-alloy steel 4 2732 T 1998 0 Russia

Synthetic fibre ropes 4 1752 T 1998 0 S-Korea

Unwrought magnesium 2 2745 D 1998 32 China

Stainless steel bright bars 4 2731 D 1998 25 India

Thiourea dioxide 2 2414 T 1998 0 China

Hardboard 10 2020 D/U 1999 16 Japan, Korea, Malaysia, China,

Taiwan

Bicycles 2 3542 D 1999 18 Brazil, Bulgaria, Estonia, Latvia,

Lithuania, Poland, Russia

Electrolytic alumin. Capacitators

3 3210 T 1999 0 Taiwan

Woven glass fibre 1 1720 T 1998 0 USA, Thailand

1998 Polypropylene binder 1 1752 D /U 1999 26 Japan

Steel stranded rope & cables 1 2873 D/U 1999 45 Poland, Czech. Republic, Hungary

Stainless steel wire 4 2734 D/U 1999 56 China, India, South Africa, Ukraine

Steel stranded rope & cables 1 2873 D/U 1999 44 India, Korea

Polyester filament yarn 4 2470 T 1999 0 Hungary, Mexico, Poland

Stainless steel heavy plates 1 2710 T 1999 0 Korea, India

Seamless pipes and tubes 2 2722 D /U 2000 31 Slovenia, South Africa


Table 2: Summary Statistics

Non-Initial Exporters Initial Exporters Operating revenue 000€

5860 (23171) 15516 (35705)

Employees In number of full-time equivalents

41 (108) 92 (177)

Labor productivity In 000€

52 (70) 57 (89)

Tangible fixed assets In 000€

876 (4690) 2892 (9450)

Foreign subsidiary dummy 0.02 (0.15) 0.094 (0.29)


Table 3: Antidumping Protection and the Intensive Margin of Exports

(1) EXPORT Turnover of Initial Exporters

(2) EXPORT Turnover of Global firms

(3) EXPORT Turnover of global firms with affiliates outside EU

(4) EXPORT Turnover of non-Global firms

AD-Effect -0.077*** (0.035)

-0.166** (0.09)

-0.248** (0.125)

-0.070** (0.037)

Year dummies Yes Yes Yes Yes Firm fixed eff. Yes Yes Yes Yes N° Obs. 7,053 546 305 6,347

1ln _ _it i it itExports AD EFFECT YEAR Dummies

Note: “Global firms” defined as French firms with affiliates abroad


Possible Explanations for fall in Exports

Import protection limits French exporters ability to price-discriminate abroad

Import protection limits domestic price competition and keeps

domestic prices high undermining competitiveness abroad

Import protection mainly affects outsourcers that manufacture products abroad for re-imports

Import protection by France triggers retaliation by target countries (Prusa, 2001)


Theoretical Framework Krugman (1984): “Export Promotion through Import Protection”.

Model with one representative firm and unilateral protection. Empirics do not support this model

Helpman, Melitz, Rubinstein (2008). Model with monopolistic competition and heterogeneous firms. Reduction in transport costs increase exports and increase number of exporters. In line with our findings

Melitz and Ottaviano (2008): predictions of reciprocal dumping model with heterogeneous firms. Unilateral trade protection results in a decrease in exports and an increase in the number of non-exporters are in line with our findings

Verhoogen (2008), Bustos (2007), Acharya and Keller (2008). Trade Liberalization is best for high productivity firms. Transposed to AD: trade protection is best for lowly productive firms. In line with our result on non-exporters.


Table 4: The Effect of AD protection on Domestic Sales

Initial_Exporters Non-Exporters (1)

All Initial Exporters

(2) Global firms

(3) Non-Global

(4) Non-exporters

(5) Global firms

(6) Non-Global

AD-Effect

-0.044*** (0.018)

-0.228*** (0.080)

-0.030** (0.018)

0.050*** (0.016)

0.08 (0.126)

0.049*** (0.164)

Year dummies Yes Yes Yes Yes Yes Yes Firm fixed effects Yes Yes Yes yes Yes Yes N° Obs. 6893 546 6,347 15,180 282 14,898

1ln _ _it i it itDomestic Sales AD Effect YEAR Dummies


Table 5: Antidumping Protection and the

Extensive Margin

(1) Start to export

(2) Start to export

(3) Quit to export

(4) Quit to export

AD-effect

0.030*** (0.006)

0.024** (0.013)

0.001 (0.004)

0.014** (0.007)

Ever_Protection -0.034*** (0.004)

-0.033*** (0.011)

-0.002 (0.004)

-0.008 (0.006)

Trend 0.008*** (0.0006)

0.0029** (0.0016)

-0.002*** (0.0007)

-0.001** (0.0008)

Initial productivity - 0.0006 (0.006)

- -0.005* (0.003)

Log likelihood -3045 -445 -1040 -489 # observations 15,188 2,577 8,237 4,728

1Pr ( _ ) _ Pr _ _ Prit i it it itob Start Exporting Ever otection AD Effect Trend Initial oductivity


Table 6: Antidumping Protection and Intra-

versus Extra EU Product level Exports

Intra-EU Exports Extra-EU Exports

Volume Prices Volume Prices

AD-EFFECT -0.284** (0.133)

-0.037 (0.087)

-0.369*** (0.1215)

0.003 (0.052)

AD-EFFECT x year1

-0.104 (0.253)

-0.017 (0.166)

-0.506*** (0.235)

0.021 (0.099)

AD-EFFECT x year 2

-0.282 (0.232)

-0.061 (0.152)

-0.344* (0.215)

-0.137* (0.092)

AD-Effect x year 3

-0.250 (0.238)

0.053 (0.156)

-0.298* (0.220)

-0.034 (0.094)

AD-EFFECT x year 4

-0.339 (0.237)

0.0147 (0.155)

-0.243 (0.211)

0.0006 (0.092)

AD-EFFECT x year 5

-0.325 (0.228)

0.018 (0.150)

-0.177 (0.211)

-0.064 (0.081)

Year Dummies Yes Yes Yes Yes Yes Yes Yes Yes Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes # observations 690 690 690 690 724 724 724 724

1ln _ _kt k kt ktExports AD EFFECT YEAR Dummies

Control group : products in Termination cases


Table 7: Antidumping Protection and Product level

Exports to and Imports from targeted countries

Exports to target countries Imports from target countries

Volumes Prices Volumes Prices

AD-effect

-0.66** (0.286)

0.13 (0.13)

-0.80*** (0.21)

0.046 (0.074)

AD-EFFECT x year1

- -1.0** (0.27)

- 0.26 (0.27)

- -0.74** (0.39)

-0.05 (0.13)

AD-EFFECT x year 2

- -0.47 (0.48)

- -0.15 (0.23)

- -0.70** (0.38)

- 0.06 (0.13)

AD-Effect x year 3

- -0.73* (0.45)

- 0.04 (0.21)

- -1.13** (0.36)

- 0.09 (0.12)

AD-EFFECT x year 4

- -0.41 (0.48)

- 0.39* (0.22)

- -1.26*** (0.39)

- 0.43** (0.13)

AD-EFFECT x year 5

- -0.65 (0.50)

- 0.10 (0.24)

- -0.54* (0.37)

- -0.16 (0.13)

Year Dummies Yes Yes Yes Yes Yes Yes Yes Yes Fixed Product Effects Yes Yes Yes Yes Yes Yes Yes Yes # observations 363 363 363 363 506 506 506 506


Table 8: Are Exporters more Productive?

(1) (2) Dependent variable Log of real Labor

productivity Log of real Labor productivity

Explanatory Variables: Capital Intensity ratio 0.14***

(0.0085) 0.075*** (0.006)

Exporter_status 0.072*** (0.015)

0.022** (0.12)

Year Dummies YES YES

Sector Fixed effects YES -

Firm fixed effects - YES

N° of Observations 12246 12246


Table 9: Antidumping Protection and the Productivity of Exporters

(1) (2) (3) (4) Dependent variable log labor

productivity log labor productivity

TFP_OLS TFP_OP

Capital intensity 0.074*** (0.006)

0.074*** (0.006)

- -

AD_EFFECT

0.021** (0.012)

0.061*** (0.017)

0.038*** (0.009)

0.039*** (0.009)

AD_EFFECT x Initial_Exporter

-

-0.072*** (0.021)

-0.064*** (0.012)

-0.066*** (0.012)

Year Dummies YES YES YES YES Firm Fixed Effects YES YES YES YES N° Observations 12246 12246 14664 14664

1 2ln _ _ _

_it i it

it

TFP AD EFFECT AD EFFECT x Initial Exporter

Year dummies


Possible Explanations for productivity results

Production factors adjust slower than output reducing measured productivity

Non-exporters gain productivity due to increase in market size (Lileeva & Trefler, 2007)

De Loecker (2007), Van Biesebroeck (2005): when exporters have reduced market access abroad this reduces learning through exporting, which may explain the reduction in productivity for exporters


Conclusion AD protection raises market share of domestic non-exporters by 5% AD protection lowers firm-level exports on average by 8% AD protection lowers exports of “global firms” with affiliates outside

the EU by 24% AD protection lowers product-level exports by 36% on average

across export destinations AD protection lowers product-level exports to target countries by

66% AD protection raises the productivity of non-exporters AD protection lowers productivity of exporters


Conclusion

Documents

Brixen, September 2009 Antidumping Protection hurts Exporters Jozef Konings (*) and Hylke Vandenbussche (**) (*)Catholic University of Leuven (**) Université