How Different are Safeguards from Antidumping?

Evidence from US Trade Policies Toward Steel

Chad P. Bown†,‡

Department of Economics andInternational Business School

Brandeis UniversityJuly 2004

Abstract

How do the trade impacts of a safeguard measure - which is statutorily designed tofollow the most-favored-nation (MFN) principle of equal treatment - compare to explicitlydiscriminatory measures such as antidumping? We address this question empirically by ex-amining the trade effects of the 2002 US safeguard on steel imports and comparing this withthe impact of other US trade remedies on steel imports in the 1990s. We first estimate afixed-effects model on a dynamic panel of product-level US steel imports over 1989-2003 andexamine the potential discriminatory impact on foreign-produced steel of the 2002 “MFN”safeguard that used relatively new tools from the policymakers’ arsenal: country and prod-uct exclusions. A unique data set on the excluded products allows us to document thesizable impact on trade of both forms of preferential treatment. We also exploit higher-frequency (i.e., quarterly) data to examine potential differences in the timing of the foreignexport response to policies of differential treatment. With respect to safeguard exclusions,we find that while developed country exporters have a quicker response to an exclusion,the developing-country export response is more persistent. Finally, relative to antidumpingmeasures, country and product exclusions from a safeguard allow the protection-imposingcountry to target preferential treatment more effectively toward specific foreign countries,much like a preferential trade agreement, or even more narrowly toward a specific foreignfirm. Thus costly trade diversion could be an even greater concern with a safeguard thanwith explicitly discriminatory protection such as antidumping.

JEL No. F13Keywords: MFN, Product Exclusions, Country Exclusions, Safeguards, Antidumping, TradeDiversion

† correspondence: Department of Economics, MS 021, Brandeis University, Waltham, MA02454-9110 USA tel: 781-736-4823, fax: 781-736-2269, email: cbown@brandeis.edu,web: http://www.brandeis.edu/̃ cbown/

‡ I gratefully acknowledge financial support from a Brandeis University Perlmutter Fellow-ship and Mazer Award. Thanks to Tom Prusa, Robert Staiger, Pravin Krishna, MichaelMoore, Rachel McCulloch, Meredith Crowley, James Durling, Jeff Campbell and seminarparticipants at Brandeis, Brown, the Federal Reserve Bank of Chicago, LSE, Rutgers andthe 2004 NASMES for helpful comments. Gloria Sheu, Teresa Power and Renee Bowenprovided outstanding research assistance. All remaining errors are my own.

1 Introduction

In March 2002, the United States government implemented a politically controversial “safeguard” policy

under Section 201 of the US trade law. The policy of import tariffs and quotas was designed to shield

the domestic steel industry from injurious foreign-produced steel. Conservative estimates presented in

table 1 put the aggregate trade impact as a 13.5% reduction in the value of US steel imports in the

year following the safeguard in the product categories targeted by the policy, eliminating close to $683

million worth of trade relative to the previous year.

While the aggregate trade impact of the massive 2002 steel safeguard is impressive in its own right,

the actual impact on imports within the affected categories is perhaps masked by the perception that a

safeguard (SG) policy is automatically applied so as to follow the GATT/WTO’s most-favored-nation

(MFN) principle. One important way through which the SG policy tool is statutorily distinct and per-

haps economically preferable from other trade remedies - the antidumping (AD) or countervailing duty

(CVD) laws that are historically more popular with domestic petitioners seeking import protection -

is that these “unfair trade” laws apply protection to imports from only one country per petition, thus

allowing for the substantial differential and discriminatory treatment across trading partners. On the

other hand, the safeguard law is supposed to result in protection being applied through nondiscrimina-

tory tariffs on imports, irrespective of the source country.1 From a second-best perspective that takes

the implementation of some import protection as given, this is one reason why economists frequently

argue that an MFN safeguard may be preferable. The alternative use of AD and CVD measures allows

for discrimination across export sources which can lead to trade diversion, or to importers switching to

the sourcing of products to higher cost (but non-targeted) foreign producers, thus inducing the welfare

losses to the domestic economy initially identified by Viner (1950).

Nevertheless, while the US’s Section 201 safeguard statute has the economic appeal of requiring less

discrimination than these other forms of import protection, how nondiscriminatory was the implemen-

tation of the actual safeguard in the 2002 steel case? Anecdotally, the 2002 application of tariffs and

quotas appears to have allowed for substantial discrimination. First, the US exempted steel imports

from several important exporting countries from the safeguard altogether. Second, the US exempted

over a thousand firm-specific products from the safeguard after soliciting requests for such product ex-

clusions from domestic steel-consuming industries and foreign exporting firms. Therefore, while overall

imports of steel products in affected categories decreased by 13.5% in the twelve months following the

safeguard, the magnitude of the import reduction was likely to be far from uniform across export sources

and product categories. Indeed, as table 1 indicates, foreign steel exempted in the March 2002 steel

safeguard announcement deriving from excluded preferential trade agreement (PTA) countries such as

1This is not the only distinction between SG and AD/CVD. In addition to issue of “fair” versus “unfair” trade, the

AD/CVD process is bureaucratic while safeguards allow for Presidential discretion, the injury threshold is higher for

SG cases, the duration of safeguards is shorter than AD/CVD, and the use of SG can require compensation to affected

countries while AD/CVD does not. For a discussion, see Bown (2002).

1

Canada and Mexico ($16 million), from excluded developing countries ($424 million) or from excluded

firm-specific product exemptions ($77 million) actually saw the value of their exports to the US increase

in the aftermath of the safeguard, as they continued to face low rates of import protection and now

less fierce competition from other foreign rivals.2 One implication is that foreign sources that were

not exempted and thus which faced the tariffs and quotas of the March 2002 safeguard saw a much

larger reduction in exports than would be expected from looking at the aggregated data. As table 1

confirms, US imports of safeguarded products from producers that did not receive exclusions fell by

30%, or roughly $1.2 billion, from the level of imports received from those same producers in the twelve

months prior to the safeguard. In the aftermath of the safeguard, these foreign sources not only faced

a competitive disadvantage relative to US steel producers but also relative to other foreign producers

that received implicit preferential treatment through exclusions.

This paper is the first to econometrically investigate the size and nature of discriminatory treatment

across export sources both within and across the steel product categories affected and unaffected by the

2002 safeguard. We use a panel of product-level US steel import data from 1989-2003 to investigate

whether the implementation of the safeguard had a discriminatory impact, i.e., whether the suggestive

evidence provided in table 1 holds up to a formal econometric analysis. We combine the trade data with

detailed information on the products affected by the safeguard, as well as the country exclusions and

a unique data set of excluded products derived directly from firm-specific petitions filed with the US

Department of Commerce. We then compare the pattern of discrimination across countries and products

associated with the 2002 safeguard to the explicitly discriminatory earlier acts of protection that the

US steel industry received in the 1990s through its appeal to ADDs, CVDs, suspension agreements, and

other trade restricting measures. One goal is to investigate whether the 2002 use of an “MFN” trade

policy was any more or less discriminatory than these earlier acts of import protection.

This research also contributes to the literature on discrimination versus nondiscrimination in trade

policy, initiated by the pioneering work of Viner (1950). More recently, a substantial theoretical literature

(including Bagwell and Staiger, 1997, 1999, 2004; Levy, 1997; and Ethier, 2004) examines the role of

preferential policy exceptions in multilateral trade agreements.3 On the other hand, empirical papers

such as Prusa (1997, 2001) and Konings, Vandenbussche and Springael (2001) examine related questions

of discriminatory treatment by investigating the trade effects and potential trade diversion of earlier use

of antidumping in the US and EU, respectively. Furthermore, Bown and Crowley (2004) propose and

examine an alternative way through which antidumping and safeguards may have a differential trade

impact by considering the effects of examples of such US trade policies on Japanese export flows to third

country markets, a phenomenon they term “trade deflection.” None of these papers, however, examines2The data in table 1 underestimates the total differential impact across countries as it does not account for the hundreds

of product exclusions granted by the USTR after March 2002 (see table 3 and our discussion below). We will estimate the

impact of these exclusions in our formal econometric analysis below.3For a survey of other recent papers focusing on different theoretical elements of the interaction between preferential

and multilateral agreements, see Krishna (forthcoming).

2

the potential discriminatory impact of safeguard policies on the policy-imposing country’s imports nor

compares the impact to explicitly discriminatory policies such as antidumping.4

The questions under investigation in this paper regarding the potential differential trade impact

of these various forms of trade remedies are important for many policy reasons. As has been well

documented (Miranda et al, 1998; Prusa, 2001; Crowley, 2004), the adoption and use of antidumping law

has proliferated worldwide, across developed and developing countries alike. There is anecdotal evidence

of a similar trend for the use of safeguards. Between 2000 and 2003, 45 definitive safeguard measures

were imposed worldwide by WTO Member countries. While this number pales in comparison to the

hundreds of antidumping measures imposed over the same time period, it is a substantial increase from

the 15 such definitive safeguard measures implemented between 1995 and 1999 (WTO, various issues).5

Finally, with respect to the form of safeguard protection, a normative policy question under debate is

the appropriate form of its use - whether it ought to be applied on an MFN versus a discriminatory

basis. This paper can help inform the extent to which even the safeguard policy tool, in this particularly

expansive application, has been implemented on a nondiscriminatory basis.

We find that the imposition of the 2002 steel safeguard policy had quite a discriminatory impact on

the pattern of US imports that in many ways resembled the pattern of protection the US steel industry

received under ADDs and CVDs at earlier points in the 1990s. Furthermore, we exploit higher frequency

(i.e., quarterly) data which allows us to investigate potential differences in the timing of the impact of

the 2002 differential treatment on exporter response. We find that while developed country exporters

respond more quickly when granted an exclusion, the developing-country exporters’ response is more

persistent. Furthermore, we also use the quarterly data for the first time to examine the trade impact

of antidumping and countervailing duty cases, and we find support for the Staiger and Wolak (1994)

results on the differential impact of AD/CVD investigations that conclude in different outcomes. In

particular, we document evidence on the length of the “investigation effect” of AD/CVD petitions; i.e.,

that exporters that are investigated but which do not even face preliminary duties also see a two quarter

reduction in exports before returning to their pre-investigation level. Furthermore, exporters that face

preliminary duties but which do not face final duties see a four quarter reduction in exports before4Bown and McCulloch (2003; forthcoming) investigate a related question of whether earlier (1995-2000) safeguard

actions undertaken by the US and other WTO members have a discriminatory impact across export sources. The focus of

these papers, however, is whether safeguard-applying countries have used specific, codified legal exceptions to the principle

of nondiscrimination written into the WTO Agreement on Safeguards to apply safeguard protection in a discriminatory

way. The approach here is different in both its econometric approach, its comparison to antidumping, and its additional

focus on product exclusions, which were neither a feature of the earlier safeguard actions, nor a recognized WTO-consistent

exception to the nondiscrimination rule.5This simple comparison also fails to control for different global economic conditions between the 1995-1999 and 2000-

2003 time periods. Nevertheless, it should be noted that 31 (between 1975-1978) is the most safeguard actions taken over

any prior four year period since the GATT’s establishment in 1947 (Bown and Crowley, forthcoming, table 2). Furthermore,

a simple comparison of the number of safeguard and antidumping measures imposed does not provide an accurate reflection

of the relative sizes of the importance of the measures, as each individual safeguard action may negatively affect the exports

of dozens of countries while each antidumping action will only be targeted toward exports from one country.

3

returning to their pre-investigation level. We contrast this with the expected result from a safeguard

investigation, where there is no evidence of a statistically robust negative investigation effect.

Finally, while we find the full effect of the 2002 safeguard policy with country and product exclusions

to be quite discriminatory, our results also highlight an important similarity between safeguards and

PTAs. Relative to antidumping measures, country and product exclusions from a safeguard allow the

protection-imposing country to target preferential treatment more effectively toward specific foreign

countries, much like a PTA, or even more narrowly toward a specific foreign firm. Thus costly trade

diversion could be an even greater concern with such features of a safeguard, if they were to become

codified standard procedure in the application of the policy, relative to even explicitly discriminatory

protection such as antidumping.

The rest of this paper proceeds as follows. Section 2 discusses the basic institutional background

and theory, and section 3 presents the econometric model and a discussion of data. Section 4 describes

our estimation results, and section 5 concludes.

2 Institutional Background and Theory

2.1 The GATT, WTO and US Rules on Safeguards, Antidumping, and

Countervailing Duties

The use of safeguards, antidumping and countervailing duties is authorized under the rules of the General

Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), as well as the laws

of the United States.6 Under the GATT 1947, safeguards were authorized under Article XIX, while

antidumping and countervailing duties were authorized under Article VI. With the establishment of

the WTO in 1995, these simple Articles laying out the framework for AD, CVD and SG have been

expanded into formal agreements: the Agreement on Safeguards, the Agreement on Antidumping, and

the Agreement on Subsidies and Countervailing Measures. In the United States, the trade remedy

statutes now authorized under the WTO are currently implemented under Section 201 (for safeguards),

Section 731 (for antidumping) and Section 701 (for countervailing duties) of the US trade law.

2.2 The US Steel Industry’s use of Antidumping, Countervailing Duties and

Safeguard Measures over 1989-2003

The US steel industry has sought government intervention to shield it from imports almost continuously

since the 1960s (Rosegrant, 2002), and it has been the most frequent user of the US’s trade remedy

laws since the early 1980s. Over the 1989-2003 period of our sample, the US industry and unions filed

hundreds of petitions against firms from dozens of exporting countries over thousands of steel products6Blonigen and Prusa (2004) provide a survey of the economics research literature on antidumping as well as a description

of the US AD process, while Bown and Crowley (forthcoming) survey the literature on safeguards.

4

alleging that foreign steel was dumped into the US, subsidized by the foreign government or otherwise

a threat to injure the domestic industry. Table 2 illustrates how dozens of investigations resulted in the

imposition of duties over hundreds of different 10-digit Harmonized Tariff Schedule (HTS) steel product

categories during the time period. For a comparison of the frequency of these actions, as we describe

below, we have a panel of 1471 unique 10-digit HTS steel product codes from chapters 72 and 73 that

are represented in the US trade data over the same 1989-2003 period. The first row of this table, for

example, suggests that rougly 1 in 6 of these 10-digit steel products were hit with a SG measure during

this time period, 1 in 5 were hit with a CVD, and 1 in 4 products were hit with an ADD.7

In addition to the 2002 steel safeguard (described below) that affected some 272 unique 10-digit

HTS categories, in 2000 the US also imposed much smaller tariff-rate quota safeguard on five different

10-digit HTS product categories of steel wire rod and circular welded pipe.8

2.3 The 2002 Steel Safeguard

Table 3 illustrates the essentials of the process for the events surrounding the imposition of safeguard

protection by the US in 2002.9 In July 2001, the US Trade Representative (USTR) requested the US

International Trade Commission (ITC) commence a formal “safeguard” investigation under Section 201

of the US trade law. The USTR requested specifically that the ITC determine whether steel imports

under 612 different 10-digit HTS product categories were a substantial cause of serious injury to the

domestic steel industry. In October 2001, the ITC made its announcement that it had found that imports

in a substantial number of product categories had caused injury to the domestic steel industry, and in

December 2001, the ITC announced its non-binding recommendation for safeguard tariffs and quotas.

During this time, the USTR was also requesting that US steel-consuming industries and foreign exporters

begin submitting petitions to have their products excluded from any upcoming steel safeguard. They

could be allocated such an exclusion provided that they could illustrate to the USTR’s satisfaction that

domestic US production of that particular variety of steel was insufficient to meet domestic demand.10

7After 1998, only 1035 unique 10-digit HTS categories from chapter 72 or 73 are in our sample of trade data, which

suggests that the ratio for the 3 safeguard cases (all implemented since 1998) is even higher if we factor into account

administrative changes in the HTS schedule over time.8Note that while Canada and Mexico were also excluded from these particular safeguards, no developing countries were

excluded. Furthermore, Korea filed a formal WTO trade dispute over the US safeguard on circular welded pipe and as

part of the settlement, the US granted Korea additional access to the quota in September 2002.9See also Hufbauer and Goodrich (2003).

10Specifically, the USTR announced that it would use the following criteria in making its decisions of which product

exclusion requests to accept:

“We will grant only those exclusions that do not undermine the objectives of the safeguard measures. In

analyzing the requests, we will consider whether it is currently being produced in the United States, whether

substitution of the product is possible, whether qualification requirements affect the requestor’s ability to

use domestic products, inventories, whether the requested product is under development by a U.S. producer

who will imminently be able to produce it in marketable quantities, and any other relevant factors. Where

necessary, we will meet with parties to discuss the information that was submitted and/or to gain addi-

5

In March 2002, a US Presidential Proclamation ordered the application of safeguard tariffs and quotas

on 272 different 10-digit HTS product categories.11 All exporters of a product within a particularly

affected 10-digit category would face the same tariff rate assigned to that category unless their country

or product were subject to an exclusion from the policy, in which case it would not face any SG

restrictions at all. The US safeguard policy then excluded three different categories of imports from the

safeguard - two categories based on country definitions, and one in the form of discretionary product

exclusions administered by the USTR.

2.3.1 Developing country exclusions from the 2002 safeguard

The first example of countries excluded from the steel safeguard includes a list of 100 developing coun-

tries. These developing country exclusions are mandated by the rules of the WTO, where Article 9.1

of the Agreement on Safeguards requires that a safeguard-imposing country exclude developing country

suppliers who have less than a 3% share of the affected import market, provided they collectively also

have a less than 9% market share.12 To comply with this element of the law, the US excluded potential

imports from 100 developing countries from the safeguard tariffs and quotas.13

2.3.2 Preferential trade agreement country exclusions from the 2002 safeguard

The second way through which the US excluded imports from the safeguard tariffs and quotas was by

exempting steel products deriving from members of its preferential trade agreements (PTAs) - Canada,

Mexico, Israel and Jordan. The WTO-legality of such PTA-country exemptions is doubtful and has

been questioned in a number of formal trade disputes litigated under the WTO, without a conclusive

answer as to its legitimacy.14 Nevertheless, the PTA-country exemptions by the US in this case were

not unprecedented; the US had exempted PTA members in at least five earlier safeguard actions since

1995 (brooms, wheat gluten, lamb meat, steel wire rod, and circular welded pipe) as had Argentina and

Brazil in safeguard actions of their own.

2.3.3 Product exclusions from the 2002 Safeguard

The third way through which the US excluded imports from being subject to the safeguard was through

firm-specific product exclusions. These product exclusions were solicited by the USTR, which requested

tional information.” (USTR website, http://www.ustr.gov/sectors/industry/steel201/203update.htm , last

accessed on 28 March 2004.

11There were also a handful of products in chapter 84 of the US HTS which we omit, as our focus is only trade policies

affecting products in HTS chapters 72 or 73.12There is a similar de minimus requirement under the WTO’s Agreement on Antidumping that duties should not be

imposed on small suppliers. The question of whether that provision is followed in practice is not under investigation here.13A subset of steel imported from seven of these developing countries (Brazil, India, Turkey, Moldova, Romania, Thailand

and Venezuela) were exempted from the country exclusions and thus faced the safeguard protection.14See the discussion in Bown and McCulloch (2003), including the issue of “parallelism,” or of including imports from

PTA members in the domestic industry’s injury calculation but not including the PTA members in the remedy application.

6

domestic steel consuming industries and/or foreign steel exporters submit petitions requesting the ex-

clusions, and they were asked to demonstrate that their particular product request was otherwise in

“short-supply” in the US market.15 The USTR received over 2000 such petition requests and granted

over 1000 of these requests at various announcements made between March 2002 and March 2003.

Interestingly, while exclusion product requests were made by exporting firms from dozens of foreign

countries, over 90% of the exclusions granted in the various ‘rounds’ announced by the USTR went

to firms from Japan or the EU.16 Finally, note that the granting of a product exclusion was not then

typically extended on an MFN-like basis to close substitutes from competing firms in the same foreign

country, let alone competitor firms from other countries who could also produce substitutes. In contrast,

a typical exclusion might be so narrowly defined so as to be a trademarked product that, by definition,

could only be produced by a particular foreign firm.17

Thus, many of the foreign products initially subject to higher levels of tariff protection implied

by the original March 2002 safeguard application were no longer subject to higher duties or more

stringent quantitative restrictions. While this may appear to be a positive development for liberal

trade and those concerned with the negative impact of trade remedies, the full implication of these

product exclusions may not be so innocuous if the result is preferential treatment granted toward higher

cost foreign producers and thus potentially trade diversion. The likelihood of this outcome is as yet

unknown but of potential concern given that the wholesale solicitation and granting of product exclusions

was unprecedented and without statutory guidance or oversight, allowing the USTR the possibility of

exerting tremendous discretion in its decision-making.

2.4 Theory

Our discussion of the application of the US trade laws for antidumping, countervailing duties and safe-

guard measures suggests that there are a variety of ways that exporters can face differential treatment.

Through antidumping and countervailing duties, some exporters may not be named in investigations

at all, some may be investigated but found innocent of illegal dumping or subsidies and thus not be

subject to duties, or even if they are subject to duties, the discriminatory treatment may come through

the differential tariffs that they face on their exported products. On the other hand, in practice under15US steel producers had the ability to file objections to these petition requests where they could claim that they could

produce the products seeking exemption.16During this time period, a number of countries including Japan and the members of the EU were challenging the

legality of the US safeguard at the WTO, with threats to retaliate with higher tariffs on US exports. One explanation is

that some product exclusions were granted in part to informally compensate such aggrieved parties.17For example, see product exclusion N454.01 granted to the UK firm Somers Forge, Ltd. on 11 June 2002, “Forged

alloy steel die blocks of round or rectangular cross section. US Trademark No. 1213781, commonly known as ‘VMC’

or ‘HYTUF’,” or exclusion N408.10 granted to the Japanese firm Daido Steel on 22 August 2002, “A specialized, high

grade tool steel, known as Daido’s proprietary grade NAK 55, that is used for the construction of plastic molds.” See the

USTR’s website, “President Bush Takes Action on Steel,” http://www.ustr.gov/sectors/industry/steel.shtml, last access

date of 29 February 2004.

7

the 2002 steel safeguard, the discriminatory treatment arose through a country or exporter receiving an

exemption from the policy - either through a PTA or developing country exclusion, or through a specific

product exclusion granted by the USTR.

The discriminatory application of a trade policy would lead to a decrease in the imports from

countries subject to the increased protection and an increase in imports from countries that have been

exempted from the increased protection. As Viner (1950) originally noted, the welfare implications of

the discriminatory application of trade policies are theoretically ambiguous.

The welfare implications of the US application of discriminatory and nondiscriminatory trade reme-

dies are illustrated in figure 1. Suppose for simplicity the US is a small importer of a homogenous good

that is produced under conditions of perfect competition by exporters in two foreign countries labeled

i = {1, 2}. Assume that the starting point is that the US has applied an MFN tariff on imports of the

product from all sources, and this allows it to consume imports from the low cost foreign supplier, which

in this case is country 1, thus resulting in the pre-remedy price P. Without loss of generality suppose

this initial MFN tariff is zero so that we begin with free trade.

We will compare the welfare implications of two different US trade remedy policies: (i) an MFN

tariff of size τ on imports from all sources, and (ii) a tariff of size τ on imports from country 1 only,

thus excluding imports from country 2 from the remedy. Starting from free trade, the imposition of an

MFN tariff of size τ generates the standard loss to consumer surplus and increase in producer surplus

and US tariff revenue, resulting in the deadweight loss associated with the inefficiency given by areas

B + D + F + H. On the other hand, a discriminatory tariff of size τ on country 1 alone leads to

smaller reductions in consumer surplus and increases in producer surplus that leads to a deadweight loss

associated with the inefficiency given by areas F + G + H. Comparing the two policies, if G > B + D,

a discriminatory trade remedy would be welfare-inferior relative to an MFN trade remedy of the same

size. The potential welfare cost of the discriminatory policy (relative to the nondiscriminatory policy)

arises from the fact that the exclusion is granted to higher cost exporters in country 2, as US importers

now source their product from less efficient foreign producers.

Furthermore, note that a discriminatory policy in the form of a trade remedy imposed on the high

cost country 2 only (i.e., excluding country 1) would have no effect on welfare or trade flows, as the US

would continue to import at the free trade price from the low cost foreign producer.

3 Data and Estimation

3.1 Basic empirical model

To investigate the questions of interest regarding the differential trade impact of the discriminatory

application of safeguards and other trade remedies, we develop the following reduced-form specification

for the quantity of US imports from country i of product h at time t

8

ln(miht) = αi + αh + αi,t + β′1Iihln(1 + τht) + β′

2ln(miht−1) + εiht, (1)

where ln(miht) denotes the natural logarithm of the quantity of imports of product h from exporters

in country i at time t, ln(1 + τht) is one plus the ad valorem US trade remedy against imports of h at

time t, where the ad valorem rate is equal to zero if no remedy is applied. Furthermore, Iih denotes a

vector of zero/one indicators that country i was or was not exempt from a particular US trade remedy

against imports of h - either because it was an excluded country or was exporting an excluded product

in the case of the 2002 safeguard, or because it was not-named in an AD or CVD petition that resulted

in duties, etc. Finally, αi and αh are country i and product h fixed effects, respectively, while αi,t is

a country-specific effect that may vary over time, and which we use to control for exporting country-

specific covariates (e.g., exchange rates, productivity, domestic subsidies) that may also be affecting

the level of US imports. Absent from this estimation equation are any industry-level control variables,

which we omit given our concentration on only steel products in our estimation exercise.

3.2 Estimation strategy

There are two problems to address in estimating equation (1). First, the autocorrelation of ln(miht)

implies that least squares estimation of (1) yields biased estimates. Second, in a short panel, the number

of parameters to be estimated (αi and γh) increases with the number of countries and commodities, so

that αi and γh cannot be consistently estimated.

To we address both of these problems we follow Arellano and Bond (1991) and estimate the first

difference of (1) and instrument for the lagged change in imports with the second lag of the log level of

imports. Taking the first lag of (1) and subtracting this from (1) yields:

∆ln(miht) = ∆αi,t + β′1Iih∆(1 + τht) + β′

2∆ln(miht−1) + ∆εiht. (2)

After first differencing, direct estimation of (2) yields biased coefficients because the lagged difference in

the log of imports [ln(miht−1)−ln(miht−2)] is correlated with the error term (εiht−εiht−1). We therefore

take an instrumental variables approach to address this problem by instrumenting for ∆ln(miht−1) with

ln(miht−2). Thus, our final estimation equation is given by18

∆ln(miht) = ∆αi,t + β′1Iih∆(1 + τht) + β′

2ln(miht−2) + ∆εiht. (3)

3.2.1 Instrumental Variable Tests

Because of the dynamic panel structure of our data, there are two potential problems with the IV

estimator used in equation (3): bias associated with the use of a weak instrument and bias associated18Because αi,t is time-varying, it will also pick up changes in the level of US steel imports over time that may be due to

changes in US aggregate demand that are common across product categories. In unreported results we have used separate

country and time dummies in the estimation, and the qualitative pattern of results in unchanged from that reported below.

9

with correlation in measurement error. To address each of these concerns, we perform two separate tests

for each of the specifications reported in tables 5 through 8 below. To conserve space, we do not report

the coefficient estimates associated with the instrument tests described below, but they are available

from the author upon request.

The first concern is that ln(miht−2) is a weak instrument for ∆ln(miht−1), and we address this by

estimating a first-stage model of the form

∆ln(miht−1) = ∆αi,t + β′1Iih∆(1 + τht) + β′

2ln(miht−2) + ∆εiht. (4)

We then compare these estimates with the estimation of a restricted regression of equation (4) under

the assumption that β2 is constrained to be zero. The F-statistic associated with this test in all cases

easily surpasses the 99% critical threshold for χ2(1) = 6.63, and the statistic is frequently calculated to

be larger than 1000. Similar results obtain if we instrument for ∆ln(miht−1) with ln(miht−3), but since

use of ln(miht−3) further shortens an already relatively short panel, we report results using ln(miht−2)

as our instrument.

The second potential concern with our use of instruments may be caused by measurement error.

If there is measurement error in our series of miht, then our IV estimator may be biased as measure-

ment error in the regressor [∆ln(miht−1)] will be correlated with measurement error in the instrument

[ln(miht−2)]. Thus we can again use the third lag of the log level of imports [ln(miht−3)] as a com-

parison, as it has the advantage of not having measurement error correlated with measurement error

in ∆ln(miht−1). While we do not report them here to conserve space, a comparison of specifications

using ln(miht−3) versus ln(miht−2) as our instrument suggests that the parameter estimates of interest

are not substantially different, so that we conclude that measurement error in miht is not a significant

problem. Since our estimates are robust to a choice of these two instruments, we again choose to use

ln(miht−2) as it allows us to estimate the model over a slightly longer panel of data.

3.2.2 Comparison to the Literature

With a number of important caveats, this estimation approach has similarities to the basic approach

undertaken by Prusa (1997, 2001), which studies the yearly trade effects of US antidumping measures

implemented between 1980-1994.19 First, Prusa focuses only on AD cases for the 1980-1994 time period

but does examine all (i.e., steel and non-steel) products targeted in those cases. In contrast, our focus is

on steel products only, so that our lack of US industry-level covariates that would be needed to control

for product-level import variation across industries is less of a concern. Furthermore, our sample covers

the 1989-2003 time period for which we have a consistent time series of 10-digit HTS import data; and

we also consider the impact of the imposition of suspension agreements, SG and CVD cases in addition

to AD, as well as the removal of such policies on product-level imports.19See also Konings, Vandenbussche and Springael (2001) that apply Prusa’s approach to AD cases in the European

Union.

10

A second important contribution made by our approach is that we have constructed a dynamic panel

of all steel products imported by the US over the time period - regardless of whether a particular product

was targeted by a trade remedy. On the other hand, Prusa’s estimation sample considers only US imports

in product categories that were hit with an AD measure, and he uses separate samples to examine the

impact of trade remedies on targeted products exported by targeted and non-targeted suppliers. Our

approach goes one step further. By using a dynamic panel of all US steel imports, this allows us to

take advantage of the substantial variation in the trade data of the products that were targeted and

not-targeted by US trade remedies in addition to the exporters that were targeted and not-targeted by

US trade remedies within categories of targeted products. Lastly, in a final estimation exercise, we will

also present evidence from a specification on a sample of higher frequency (i.e., quarterly) data of US,

product-level steel imports to better investigate the question of the timing of the impact of a trade

remedy on trade flows.

3.3 Data

3.3.1 Trade Data

To estimate the model, we use product-level data on US imports of steel at the 10-digit Harmonized

Tariff Schedule (HTS) level, where most steel products are allocated to chapters 72 or 73. Import

data for the US at the 10-digit HTS level is available from the US International Trade Commission’s

DataWeb data base for the years 1989-2003.20 Given the need to instrument with ln(miht−2), this allows

us to estimate equation (3) on a dynamic panel of yearly, bilateral, product-level US import data from

1991-2003. As stated earlier, we have an unbalanced panel of 1471 different 10-digit HTS products in

chapters 72 or 73 over the life of the sample.

Our initial investigation will estimate the model on yearly data for product-level US steel imports.

Nevertheless, below we will also utilize higher-frequency, quarterly data (also available from DataWeb)

in some specifications for the full 1989-2003 period in order to examine the timing of the export response

to the imposition of trade remedies as well as the duration of the persistence that the imposition of a

remedy has within a given year.

3.3.2 Policy Data

This paper investigates the potentially differential effects of various instruments of protection affecting

steel imports into the US during the 1989-2003 period. We have collected detailed product-level changes

in trade policies associated with antidumping and countervailing duty investigations, the removal of AD

and CVD orders after revocation orders or sunset reviews, the imposition of suspension agreements and

the imposition and removal of acts of safeguard protection.

The information regarding the implementation and removal of AD or CVD measures or suspension20See http://dataweb.usitc.gov/, last access date of 30 January 2004.

11

agreements is available from the US Federal Register, as well as public documents made available at

either the USITC or the Department of Commerce’s official websites. We have collected data on the

dates of preliminary dumping or subsidy and injury determinations, final dumping or subsidy and injury

determinations, the size of the duties imposed in either preliminary or final affirmative decisions, the

10-digit HTS products investigated and being subject to preliminary and/or final duties, the dates of

and HTS 10-digit products subject to revocation orders where imposed duties were removed, and the

foreign countries whose exports were directly affected by all of these policy changes.

Much of the data for the safeguard cases is also publicly available from either the Federal Register

or the ITC’s official website. The US President imposed safeguard protection over various 10-digit HTS

products in the steel industry on three occasions during the 1989-2003 period: circular welded pipe and

steel wire rod in 2000 (five different 10-digit HTS products), as well as the 272 different HTS-products

targeted by the March 2002 broad-based policy that we refer to as the ‘2002 Steel Safeguard.’ In each

case, the 10-digit HTS products as well as any excluded countries are made publicly available in the

Presidential Proclamation announcing the safeguard policy.

The one important piece of policy information that is not readily available from electronic sources

for the 2002 steel safeguard is the 10-digit HTS categories of the product exclusions granted by the

USTR. Descriptions of the physical characteristics of the products excluded from the safeguard are

publicly available from the USTR’s website; however, this information is not useful when trying to

systematically match excluded products to the 10-digit HTS coded import data used in the estimation

of our model. Information on the 10-digit HTS codes of the excluded products is available in the actual

surveys that petitioners had to fill out to request that their product be excluded. Such petitions are

publicly available, though the data had to be transcribed by hand from hard copy surveys available

in the International Trade Administration’s ‘Central Records and Subsidy Library’ in the Department

of Commerce in Washington, DC. There were over 2000 petitions from firms requesting to have their

products excluded from the safeguard.21 Finally, we also note that a product exclusion was typically

granted to a product from a single exporting firm which would be even more narrowly defined than a

10-digit HTS product category. Thus, not all products within a 10-digit product category would be

excluded.

Table 4 provides summary statistics for the yearly data used in the estimation of specifications

reported in the next section. To conserve space, we do not present summary statistics for the tariffs

associated with the 2002 safeguard, which we use to estimate specifications presented in table 6 below.

For the 267 10-digit HTS codes which faced a tariff in the first year after the safeguard, 185 (69%)

received a 30% tariff, 60 (22%) received a 15% tariff, 15 (6%) received a 13% tariff and 7 (3%) received

an 8% tariff in the first year. In March 2003, the tariffs for each of the categories were stepped-down to

24%, 12%, 10% and 7%, respectively.21There is some measurement error with the survey data as petitioners sometimes left the entry for 10-digit HTS code

blank, or instead entered an incorrect product code that was not subject to the safeguard.

12

4 Empirical Results

4.1 Results for the 2002 steel safeguard

Table 5a presents results for our first estimation of equation (3) where we use indicators for our trade

remedy policy variables. Consider first specification (1) in which the dependent variable is the yearly

growth rate of the quantity of imports of product h from country i. The top rows of explanatory

variables contain estimates for the first set of variables of interest, i.e. those related to the March

2002 steel safeguard. The effect of the imposition of the safeguard is negative, as expected, with the

safeguard leading to a 19.9 percentage point reduction in export growth for 10-digit products that were

hit, relative to investigated products that were not hit. As we have also included a 2002 indicator for

the HTS products that were merely investigated as ordered by the USTR and the export growth of these

products in 2002 fell by 10.1 percentage points, the combination of these estimates is evidence that,

relative to an imported steel product that was not under investigation in the Section 201 case, a steel

product hit with the safeguard saw export growth fall by 30.0 (= 19.9 + 10.1) percentage points.

It is useful to have as a benchmark other steel imports h that were investigated but which were

not part of the safeguard order, as there is some concern that steel imports of all investigated products

surged in the latter half of 2001 and first quarter of 2002, in the attempt to get the imports into the

US market before any safeguard went into effect.22 While the positive and significant estimate (0.111)

for the 2001 indicator for investigated products reported in specification (1) would seem to provide

evidence to support this concern; nevertheless, we will see below that this result is not robust to the

use of alternative specifications which allow for entering/exiting exporters, import values instead of

quantities, and/or resorting to higher frequency data.

The estimates of the next three rows present evidence of the differential impact that country and

product exclusions had on imports of products exempted from the safeguard. For example, relative to

the safeguarded products, import growth from US PTA members that were excluded (Canada, Mexico,

Israel and Jordan) increased by 61.4 percentage points. Furthermore, a developing country whose 10-

digit product was excluded saw its exports increase by 53.9 percentage points in 2002 relative to a

safeguarded product that was not excluded. Finally the specific HTS-10 product exclusions that were

announced on a product-by-product basis from specific foreign firms led to an increase in imports of

25.8 percentage points in 2002 relative to the non-excluded, but safeguarded products.

The estimates of these impacts in specification (1) are evidence that not only was there a significant

differential effect of the safeguard on excluded versus non-excluded products, but compared to other

investigated products h that were not subject to the March 2002 safeguard order, the net trade impact of

the safeguard on excluded products for each of the three categories was positive. Products excluded from

the safeguard because of PTAs saw exports increase by 41.5 percentage points (0.614 - 0.199), products

22Unlike AD/CVD investigations, there are no preliminary duties imposable at the beginning of the investigation and

there are also no retroactive duties imposed in a SG investigation.

13

excluded from the safeguard deriving from developing countries saw exports increase by 34.0 percentage

points (0.539 - 0.199), and products excluded from the safeguard because of USTR announcements as to

firm-specific exclusions saw exports increase by 5.9 percentage points (0.258 - 0.199). Again, the positive

net impact for the USTR-granted product exclusions is somewhat of a surprise given that there may be

many exported products within a 10-digit product category that were not exempted from the safeguard,

and that many of the excluded products were granted in June, July and August of 2002 and thus would

only have an impact on the last six months worth of trade data for 2002. Finally, even when compared

to steel product imports not subject to the safeguard investigation, imported products excluded from

the safeguard because of PTAs increased by 30.4 percentage points (0.614 - 0.199 - 0.101) and products

excluded from the safeguard deriving from developing countries increased by 22.9 percentage points

(0.539 - 0.199 - 0.101).

The second set of estimates in the next four rows of specification (1) in table 5a illustrates the 2003

impact of the products affected by the 2002 (t − 1) steel safeguard. Even though the safeguard tariffs

were reduced in March 2003 from their March 2002 level across all affected products, as is mandated by

the statute and was unannounced in the March 2002 Presidential Proclamation, the 2002 safeguard is

again associated with a substantial negative impact on import growth from the prior year. Products

targeted by the 2002 steel safeguard are associated with an additional 47.4 percentage point decrease in

imports in 2003 from even the 2002 level. On the other hand, the developing country exclusions (0.505)

and product exclusions (0.233) had a significantly different and positive impact on imports relative to

the non-excluded products. This is not true for the products from the US’s PTA partners, as there was

not a significantly differential impact between these products and the non-excluded products in 2003.

The middle rows of table 5a report estimates for the impact of the smaller, year 2000 imposition of

safeguards on the five 10-digit HTS product categories of steel wire rod and circular welded pipe, as well

as the Canada/Mexico country exclusions announced with those safeguards, and the 2002 exemption that

Korea received as a settlement after a WTO trade dispute concerning the SG. These two safeguards

are not associated with any statistically significant impact on US imports until two years after the

safeguard went into effect, when the 2002 expansion of the tariff rate quota led to a substantial increase

in safeguarded products from the prior year. Furthermore, Korea’s exemption in 2002 is associated with

a large increase in imports of safeguarded products from Korea as well.

4.2 Results for AD/CVD policies imposed and removed over 1989-2003

Table 5b presents expanded results from this same estimation equation that could not all fit into table 5a;

in particular, describing the impact of the imposition and removal of US AD/CVD policies on steel

taken over 1989-2003. First note that we use the following 6 categories to characterize the different

circumstances facing exporters from country i of a 10-digit HTS product h under investigation in a

US AD/CVD case: (a) AD/CVD investigation of i terminated with the imposition of preliminary and

final duties, (b) AD/CVD investigation of i terminated with the imposition of a suspension agreement,

14

(c) AD/CVD investigation of i terminated with the imposition of final duties after failing to impose

preliminary duties, (d) AD/CVD investigation of i terminated with the no imposition of final duties

after imposition of preliminary duties, (e) AD/CVD investigation of i terminated with the no imposition

of preliminary or final duties, and (f) exporters in i of h were not named in any AD/CVD petitions.

In estimating the equation, we omit category (a) so that the estimates reported for the “AD/CVD

investigationht” variable are interpreted as the effect of the missing category; the impact on imports of

h from i of an AD/CVD investigation of i terminated with the imposition of preliminary and final duties.

The estimates for categories (b) through (f) reported in the table are thus the estimated differential

impact of one of these five other outcomes, when compared to that baseline of a country that faces

preliminary and final duties.

Consider first the estimates from specification (1). Compared to a non-investigated product h, the

impact of an AD/CVD imposed on i in year t on a 10-digit product is an export reduction of 71.7

percentage points in year t. Interestingly, this is larger than the estimate for the within-year impact of

the 2002 safeguard, presented in table 5a, which we described above as being on the order of magnitude

of 30.0 percentage points. This is likely because ADDs/CVDs are both frequently targeted toward a

smaller number of suppliers and typically applied at higher rates which are frequently prohibitive. On

the other hand, the 2002 safeguard tariffs were all applied at an ad valorem rate of 30% or less.

The next set of variables in the top rows of table 5b presents estimates of the differential impact

on imports of AD/CVD investigated products h from a country that faced an alternative outcome to

the investigation. First, investigated products that were hit with suspension agreements faced an even

larger reduction in exports, an additional 89.8 percentage points, indicative of a response to tremendous

product-level growth in the prior period. The suspension agreement with Russian steel producers in July

1999 is likely to be responsible for the tremendous size of this particular estimate. On the other hand,

the outcome in which an exporter does not face preliminary duties but does face final duties (0.333) is

not statistically different from the impact of cases that result in both preliminary and final duties (the

baseline estimate).

There is, however, a significantly different and positive impact of the next two outcomes to the

AD/CVD investigation, when compared with the baseline. Exporters that face preliminary duties that

are then removed see exports increase by 19.3 percentage points, relative to the baseline category, so

that on net they only experience a 52.3 percentage point drop in export growth in year t. Investigated

exporters that never face any duties see exports increase by 55.5 percentage points, relative to the

baseline category, so that on net they only experience a 16.2 percentage point drop in export growth

in year t. Nevertheless, this net negative effect on export growth of 16.2 percentage points for an

investigated country that does not face even preliminary duties is evidence consistent with the Staiger

and Wolak (1994) findings that there is a negative “investigation effect” associated with simply filing

AD/CVD petitions in order to harass foreign firms.

Finally, to make a direct comparison of the impact of discriminatory treatment in AD/CVD cases

15

with that found in the 2002 safeguard, consider the last estimate from the top set of variables. The

estimate of 0.721 is the differential impact on exporters in i that were not named in any AD/CVD

investigations, even though they export a product h to the US that was named in an investigation.

While the differential impact is large, positive and statistically significant, the net effect (-0.004 =

0.717 - 0.721) is evidence that the impact of an AD/CVD investigation on the non-named firms’ export

growth to the US is virtually zero in year t. Thus unlike the safeguard results presented in table 5a,

the within-year effect of implied preferential access given by an AD/CVD measure being imposed on

another country is zero. We will explore the implications and potential explanations of this result of

virtually zero trade diversion in year t more detail below.

Notice, however, that one year later, there is a small and positive trade diversionary impact of

the implied preferential access through an AD/CVD measure on other countries. Estimates presented

in the middle rows of table 5b indicate that while a country faced with preliminary and final duties

after an AD/CVD investigation sees exports fall by an additional 34.4 percentage points the year after

the safeguard, non-named exporters see exports increase by 44.0 percentage points relative to that

baseline, or by 9.6 percentage points on net, relative to exports of products not-targeted by an AD/CVD

investigation. Note however, that the effect in the third year after the imposition of the AD/CVD is

not significantly different from zero for either targeted or non-targeted exporters of targeted products.

Thus we find the 2002 safeguard policy with country and product exclusions to be perhaps even

more discriminatory than the imposition of AD/CVDs, in the sense that non-targeted exporters receiv-

ing implicit preferential treatment experience more export growth under the safeguard than has been

the case under ADDs/CVDs, and this export growth occurs more quickly under the SG than under

the ADDs/CVDs, where it shows up only after one year. This result highlights an important similarity

between safeguards and preferential trade agreements (PTAs). Relative to antidumping and counter-

vailing duty measures, country and product exclusions from a safeguard allow the protection-imposing

country to target preferential treatment more effectively toward specific foreign countries, much like a

PTA, or even more narrowly toward a specific foreign firm. Thus costly trade diversion could be an even

greater concern with a safeguard than with explicitly discriminatory protection such as antidumping.23

Note as well that in these specifications we also include variables to control for product-level import

changes that may be driven by the removal of US trade remedies on steel. The estimates are that a

removal of an AD/CVD measure on imports of h from some other exporting country is associated with

virtually no change in export growth to the US until two years after its removal.23On the other hand, there are other differences between safeguards and AD/CVD that may cause trade diversion

under a SG to be less likely. One such difference is the duration of the policies. While ADDs/CVDs can last indefinitely,

safeguards typically last only three or four years, which reduces the long-run benefits to a domestic consumer switching

to a higher-cost, but preferentially-treated foreign producer vis-a-vis the search costs necessary to find such a producer.

16

4.3 Robustness: Import values and addressing the problem of entering and

exiting exporters

In specification (2) of tables 5a and b, we substitute a data series of the US value (vmiht) of imports

for import quantities. The qualitative pattern of results are largely similar, with the already noted

exception that there is no longer a statistically significant surge of investigated steel products in 2001,

the year that the USTR initiated the Section 201 safeguard investigation. As we will also see using the

quarterly data below, this earlier result is not robust to many alternative specifications.

Next, one of the concerns in estimating the impact of the safeguard using the approach detailed

thus far is partially revealed by the statistical significance of the impact of the exclusion of developing

countries on import flows. Since these developing countries are, by definition, small suppliers of the

product (under 3% of the import market in the years prior to the imposition of the SG), our estimation

of the impact on product-level import growth by using the log growth rate measure may mis-estimate

the impact if there are a substantial number of observations with zero imports in either year t− 1 or t,

which will cause the log growth rate measure to be undefined.

To address this potential issue, we adopt the Davis and Haltiwanger (1992) approach and re-define

our import growth rate measure as

∆miht ≡mih,t −mih,t−1

1/2(mih,t + mih,t−1), (5)

where mih,t (mih,t−1) is the quantity of 10-digit imports of product h from exporters in country i in

year t (t−1). This measure of import growth is symmetric around zero, and it lies in the closed interval

[-2,2] with trade flows that end (start) at zero corresponding to the left (right) end point.24

Therefore, in specifications (3) and (4) of tables 5a and b, we thus use the Davis and Halti-

wanger (1992) approach for defining the import growth rate of quantities and values, respectively,

allowing us to include data on a significant number of entering and exiting exporters in the sample.25

The estimation results are fairly robust to these alternative specifications, where we are able to include

many additional observations from the baseline sample. This suggests that the zero values associated

with entering or exiting exporters are not affecting the qualitative nature of our results.

4.4 Robustness: results using duty rates for safeguard policy actions

In table 6 we interact each of the safeguard policy indicator variables in the last section with either

the level of applied duties (to control for the heterogeneity in the applied rates of protection across

24Davis and Haltiwanger also note that this measure of the growth rate is monotonically related to the conventional

growth rate measure, with the two measures being approximately equal for small rates of growth.25Note that we do not include exporters that appear to be entering or exiting because of the addition or subtraction of

a particular 10-digit HTS code from the tariff schedule of the US.

17

products), or a quota indicator if the safeguarded product was one of the five 10-digit HTS products hit

with a quantitative restriction.

Results from column (5) of table 6 shows that such interaction greatly sharpens the estimated impact

of the policies. A 1% tariff under the 2002 safeguard is associated with 0.984 percentage point reduction

in imports in 2002, relative to another investigated product h that did not face safeguard protection.

PTA members excluded from a 1% tariff under the safeguard would see their exports increase by 3.0

percentage points relative to the non-excluded products, excluded developing countries saw their exports

increase by 2.7 percentage points relative to non-excluded products, and specific excluded products were

associated with a 1.4 percentage point increase in exports relative to the non-excluded products. As the

duty rate in the safeguard was in most cases 30%, these are sizable effects.

On the other hand, the trade impact of the safeguard quota on non-excluded and excluded products

was not significantly different from zero. One likely explanation is that there were very few (only five

different 10-digit HTS products) subject to the safeguard, leading to imprecise estimates.

Finally, the impact of the 2002 safeguard and its exclusions on the import growth in 2003 is similar

to that described with respect to table 5a. In table 6 where we interact the safeguard indicators with

the applied tariff rates, the impact on 2003 trade is again negative for non-excluded products, while

developing country and product exclusions are associated with a significantly different, positive impact

on product-level imports. On net, the excluded products in 2003 also saw exports fall as a 1% tariff

was associated with a 1.39 percentage point (= 1.27 - 2.66) reduction, but this is much smaller than the

nearly 3 percentage point reduction facing non-excluded products associated with a 1% tariff.

4.5 Results comparing the 2002 safeguard with the set of 1992-1993 AD and

CVD actions

Table 7 presents the same basic specification as we described in column (1) of tables 5a and 5b, with the

addition of interacting the AD/CVD variables with time period indicators. The question of interest here

is whether there is a similarity between the 2002 steel safeguard and the set of ADDs/CVDs imposed by

the steel industry in 1992-1993, during a major ‘wave’ of AD/CVD use by steel. The 1992-1993 period

is of interest because the US steel industry requested duties be applied against many foreign countries

simultaneously, perhaps with the intention of replicating a more MFN-type policy such as a safeguard.

First, the 2002 safeguard is associated with an 18.9 percentage point fall in imports, relative to other

investigated, but non-targeted imports, and a 28.2 (-0.189 - 0.093) percentage point fall relative to non-

investigated steel products. In comparison, the ‘nearly MFN’ 1992-1993 ADDs/CVDs are associated

with a 45.3 percentage point decrease in import growth for products that faced preliminary and final

duties, relative to non-investigated products. On the other hand, imports from exempted producers

of targeted products, relative to these baselines, increased by 26.5 to 60.6 percentage points (for the

safeguard) or by 55.7 percentage points (for the AD/CVDs). The implication is that differential impact

of the effects on trade for producers of these targeted products in countries hit and not hit with these

18

two sets of policies are strikingly similar. The 2002 safeguard led to a net estimated increase in targeted

exports from either excluded countries or of excluded products of 7.6 to 41.7 percentage points. The

1992-1993 wave of ADDs/CVDs led to a net estimated increase in targeted exports from countries not-

named in the investigations by 10.4 percentage points in t. Note finally that this last result is quite

different from the ADDs/CVDs differential in other years, as the results in table 7 show there is a

virtually zero (0.798 - 0.812) net impact on import growth in t. This is evidence that the discriminatory

effects of the 2002 steel safeguard and the wave of ADDs/CVDs applied in 1992-1993 are quite similar

- both in their timing and in their magnitude.

4.6 Results examining the timing in the export response to discriminatory

policies using quarterly data

In table 8 we substitute quarterly data for the yearly data to investigate more precisely the timing of

the export response to the differential treatment associated with the safeguard and AD/CVD policies.

Note that table 8 (and figures 2 and 3) presents results from only one regression, with the columns now

representing the impact of the explanatory variable’s policy on that particular quarter’s (e.g., t, t + 1,

t + 2, ...) growth of product level exports of h from country i.

4.6.1 The 2002 steel safeguard

The estimates from the quarterly data in table 8 is evidence that the impact of the 2002 safeguard and

the product exclusions is almost immediate, affecting the next quarter’s growth of exports to the US

dramatically - with a differential response of export growth of 39.0 percentage points for the exclusions

announced in March 2002, and 11.2 percentage points for the exclusions announced in the summer of

2002 or later. For the case of product exclusions, this may be due to a quick supply chain response, as

the vast majority of such exclusions derived from developed countries, with over 90% of the exclusions

going to the EU and Japan alone.

On the other hand, the impact of the announcement of the developing country exclusions is slightly

slower, as their export growth (0.391) to the US in affected product categories is not felt until 2 quarters

after the announcement was made. One explanation is that the announcement was unexpected, which

is possible given that the US had not excluded developing countries from the two prior circular welded

pipe and steel wire rod safeguard announcements. However, this would not explain why there was

not a similar lagged response for the product exclusion announcements, which were arguably more of a

surprise and uncertain, given their lack of precedence. Another explanation is that developing countries

are waiting and then responding to the sort of trade deflection identified by Bown and Crowley (2004).

For example, once exports of steel from Japan originally destined for the US market are deflected to

the developing country’s market because of the 2002 US safeguard, developing country-produced steel

originally intended for domestic consumption can instead be exported to the more lucrative US market

19

under the new preferential access afforded by the WTO’s Article 9.1 safeguard exclusion. Finally, in

contrast to our earlier estimation on yearly data, estimates using the quarterly data suggest the PTA-

member country exclusions had virtually zero impact on import growth.

Figure 2 plots the implications of the estimates for the impact of the safeguard presented in table 8,

taking the quarter prior to the USTR-initiated investigation (Q1, 2001) as the baseline period for our

export index. Steel imports of investigated and non-investigated products are falling through 2001. With

the March (Q1) 2002 Presidential Proclamation announcing the imposed safeguard measure and first

set of country and product exclusions, imports of non-investigated and investigated but non-targeted

products begin to increase. Products targeted by the safeguard fall dramatically, and it is not until one

quarter later that the differential impact offered by the country and product exclusions is felt. By the end

of the first year that the safeguard is in place (Q1, 2003) imports under developing country exclusions

or under the March 2002 product exclusions are either above or at the pre-safeguard (Q1, 2002) level,

while products targeted by the safeguard are at roughly 50% of their pre-SG level. Interestingly, the

largest sustained positive response to the differential treatment is experienced by the exporters receiving

the developing country exclusions under the Article 9.1 rule in the WTO’s Agreement on Safeguards.

4.6.2 Responses to different outcomes of AD/CVD investigations

We can also use the quarterly data to compare the within-year impacts of different outcomes of AD/CVD

investigations to examine on new data whether there is evidence of the Staiger and Wolak (1994) “inves-

tigation effect.” Just as we described in section 4.2, the excluded category and thus the interpretation

for the estimate of the baseline “AD/CVD investigationht” outcome is the AD/CVD petitions that

result in the imposition of preliminary and final duties.

The estimates for the quarterly data provide evidence consistent with the Staiger and Wolak results

that used a different model on an earlier sample of yearly data.26 We find that while, when compared

to the baseline, there is a differential impact of an AD/CVD investigation that does not result in the

imposition of even preliminary duties, the net effect of -0.170 (= 0.411 - 0.581) is still a sizable reduction

of imports from investigated countries.

Figure 3 plots the implications of the estimates for the impact of various elements of the AD/CVD

investigation process associated with the results presented in table 8. Let t denote the quarter of

the preliminary AD/CVD duty determination made by the International Trade Administration. First,

AD/CVD investigations that result in suspension agreements or preliminary and final duties are asso-

ciated with a sudden reduction in imports that only returns to 50%-70% of its initial level by quarter

t + 5. Second, AD/CVD investigations that do not terminate with final duties but with either pre-

liminary duties or no duties at all are associated with an initial decline in imports, before recovering

to their initial export level by either t + 3 (investigation, but no duties) or t + 5 (preliminary duties

26Staiger and Wolak (1994) also looked at the US domestic producer’s output response, which we ignore here, as we are

only focusing on the trade effects of the AD/CVD investigations.

20

that are withdrawn without imposition of final duties). Finally, exporters of affected products that are

not-named in these petitions experience no decline at all and see a small and slow increase in imports

above the pre-investigation level.

5 Conclusion

This paper is the first to examine the discriminatory trade impacts of the United States’ massive 2002

“MFN” safeguard measure on steel. We find that country and product exclusions led to substantial

differential treatment across export sources, a result at odds with the nondiscriminatory nature of

the policy instrument, and we confirm that these effects have a striking similarity to the explicitly

discriminatory antidumping measures that the industry received as import protection in the 1990s. Our

estimates from a fixed-effects model on a dynamic panel of product-level US steel imports over the

1989-2003 period takes advantage of a unique data set on the excluded products as well as information

on country exclusions, allowing us to document the sizable impact on trade of both forms of preferential

treatment. Finally, our exploitation of higher-frequency data allows us to examine differences in the

timing of the foreign export response to policies of differential treatment, where we find that while

developed country exporters respond more quickly when granted an exclusion, the developing-country

exporters’ response is more persistent.

While we find the full effect of the 2002 safeguard policy with country and product exclusions to

be quite discriminatory, our results also highlight an important similarity between safeguards and pref-

erential trade agreements (PTAs). Relative to antidumping measures, country and product exclusions

from a safeguard allow the protection-imposing country to target preferential treatment more effectively

toward specific foreign countries, much like a PTA, or even more narrowly toward a specific foreign firm.

If such country and product exclusions were to become codified, standard practice in the application

of acceptable safeguard measures under WTO rules, costly trade diversion could be an even greater

concern with safeguards than with antidumping protection.

A question that this paper does not attempt to address is the political-economic determinants of the

USTR’s decision-making process over which product exclusion requests to grant, once the March 2002

safeguard had been put in place. This is an important question for future research.

A final caveat is that our estimates for the impact of the policy of country and product exclusions are

driven from only one SG action, while the estimates for the impact of ADDs and CVDs were driven by

hundreds of policy actions. Nevertheless, the 2002 steel safeguard and the exclusions did affect hundreds

of 10-digit HTS products on imports from dozens of exporting countries, as well as potentially acting

to set new precedents for nondiscriminatory application of an “MFN” instrument of trade policy.

21

References

[1] Arellano, Manuel and Stephen Bond (1991) “Some Tests of Specification for Panel Data: Monte Carlo

Evidence and an Application to Employment Equations,” Review of Economic Studies, 58(2): 277-297.

[2] Bagwell, Kyle and Robert W. Staiger (1997) “Multilateral Tariff Cooperation during the Formation of Free

Trade Areas,” International Economic Review, 38(2): 291-319.

[3] Bagwell, Kyle and Robert W. Staiger (1999) “An Economic Theory of GATT,” American Economic Review,

89(1): 215-248.

[4] Bagwell, Kyle and Robert W. Staiger (2004) “Multilateral Trade Negotiations, Bilateral Opportunism and

the Rules of GATT/WTO.” Journal of International Economics, 63(1): 1-29.

[5] Blonigen, Bruce A. and Thomas J. Prusa (2004) “Antidumping,” in Handbook of International Trade, James

Harrigan and E. Kwan Choi (eds.), Cambridge, MA: Blackwell Publishers.

[6] Bown, Chad P. (2002) “Why are Safeguards under the WTO so Unpopular?” World Trade Review, 1(1):

47-62.

[7] Bown, Chad P. and Rachel McCulloch (2003) “Nondiscrimination and the WTO Agreement on Safeguards,”

World Trade Review, 2(3): 327-348.

[8] Bown, Chad P. and Rachel McCulloch (forthcoming) “The WTO Agreement on Safeguards: An Empirical

Analysis of Discriminatory Impact,” in Empirical Methods in International Economics: Essays in Honor

of Mordechai Kreinin, Michael Plummer (ed.) London: Edward Elgar.

[9] Bown, Chad P. and Meredith A. Crowley (2004) “Trade Deflection and Trade Depression,” Chicago Fed

Working Paper No. 2003-26, February.

[10] Bown, Chad P. and Meredith A. Crowley (forthcoming) “Safeguards in the World Trade Organization,” in

The World Trade Organization: Legal, Economic and Political Analysis, A. Appleton, P. Macrory and M.

Plummer (eds.), Springer.

[11] Crowley, Meredith A. (2004) “The Worldwide Spread of Antidumping Protection,” Chicago Fed Letter, No.

198, January.

[12] Davis, Steven J. and John Haltiwanger (1992) “Gross Job Creation, Gross Job Destruction, and Employ-

ment Reallocation,” Quarterly Journal of Economics 107(3): 819-863.

[13] Ethier, Wilfred J. (2004) “Political Externalities, Nondiscrimination, and a Multilateral World,” Review of

International Economics, 12(3): 303-320.

[14] Hufbauer, Gary Clyde and Ben Goodrich (2003) “Next Move in Steel: Revocation or Retaliation?” Interna-

tional Economics Policy Briefs, Number PB03-10. Washington, DC: Institute for International Economics,

October.

[15] Konings, Jozef, Hylke Vandenbussche and Linda Springael (2001) “Import Diversion under European An-

tidumping Policy,” Journal of Industry, Competition and Trade 1, 283-299.

[16] Krishna, Pravin (forthcoming) “The Economics of Preferential Trade Agreements.” in James Hartigan, ed.,

Handbook of International Trade: Economic and Legal Analysis of Laws and Institutions.

22

[17] Levy, Philip (1997) “A Political-Economic Analysis of Free-Trade Agreements,” American Economic Re-

view, 87(4): 506-519.

[18] Miranda, Jorge, Raul A. Torres, and Mario Ruiz (1998) “The International Use of Antidumping: 1987-

1997,” Journal of World Trade, 32(5): 5-71.

[19] Prusa, Thomas J. (1997) “The Trade Effects of US Antidumping Actions,” in Robert C. Feenstra, ed. The

Effects of US Trade Protection and Promotion Policies, Chicago: University of Chicago Press.

[20] Prusa, Thomas J. (2001) “On the Spread and Impact of Anti-Dumping,” Canadian Journal of Economics

34(3), 591-611.

[21] Rosegrant, Susan (2002) “Standing up for Steel: The US Government Response to Steel Industry and

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Harvard University.

[22] Staiger, Robert W. And Frank A. Wolak (1994) “Measuring Industry-Specific Protection: Antidumping in

the United States,” Brookings Papers on Economic Activity: Microeconomics 51-118.

[23] Viner, Jacob (1950) The Customs Union Issue, New York: Carnegie Endowment for International Peace.

[24] WTO (various issues) “Report of the Committee on Safeguards to the Council for Trade in Goods.” available

on-line at http://www.wto.org/, document numbers G/L/409 (year 2000); G/L/494 (year 2001); G/L/583

(year 2002); G/L/651 (year 2003).

23

Table 1: US Steel Imports in the 12 Months Prior to and After the March 2002 Safeguard

Category of Product

Value of Imports in 12 months prior to

the March 2002 Safeguard

(1)

Value of Imports in 12 months after the

March 2002 Safeguard

(2)

Difference between

(2) and (1)

% Change

Total for 272 10-digit HTS* products in the March 2002 safeguard categories $5,506,800,000 $4,813,900,000 -$682,900,000 -13.5%

Products hit with safeguard from producers not given a March 2002 exemption** $4,670,000,000 $3,460,000,000 -$1,200,000,000 -30.0%

Products given March 2002 product exclusions $333,000,000 $410,000,000 $77,000,000 20.8%

Products given March 2002 PTA-member exclusions $22,800,000 $38,900,000 $16,100,000 53.4%

Products given March 2002 developing country exclusions $481,000,000 $905,000,000 $424,000,000 63.2%

Total for 772 10-digit HTS steel products in the non-safeguarded categories in Chapters 72 and 73 $11,740,000,000 $12,990,000,000 $1,250,000,000 10.1%

Products also investigated under the USTR�s June 2001 request, but which did not face the safeguard

$3,320,000,000 $3,200,000,000 -$120,000,000 -3.7%

Products not investigated under the USTR�s June 2001 request $8,420,000,000 $9,790,000,000 $1,370,000,000 15.1%

Source: author�s calculations based on a comparison of US import data for April 2001 through March 2002 and April 2002 through

March 2003 for steel products in US Harmonized Tariff Schedule (HTS*) of Chapters 72 and 73 available from the ITC�s DataWeb database. Categorization of products and source for data on country and product exclusions is as defined in the text. **Thus includes some imports in products that were ultimately exempted from the safeguard ex post (i.e., after March 2002), in the USTR�s second through ninth rounds (June, July and August of 2002) of product exclusion announcements.

24

Table 2: The US Steel Industry’s use of Antidumping, Countervailing Duty and Safeguard Laws, 1989-2003

Antidumping (Section 731)

Countervailing Duties

(Section 701)

Safeguards

(Section 201)

Investigations resulting in imposition of final duties

[total number of unique affected 10-digit HTS codes]

162

[421]

46

[345]

3

[277]

Investigations failing to result in imposition of final duties or other trade restricting measures

[total number of unique affected 10-digit HTS codes]

160

[405]

36

[314]

0

Investigations resulting in suspension agreements [total number of unique affected 10-digit HTS codes]

8 [367]

1 [54]

0

Investigations removing final duties after revocation orders or sunset reviews**

[total number of unique affected 10-digit HTS codes]

39 [197]

38 [204]

3 [277]

Number of unique 10-digit HTS codes in chapter 72 or 73 of the HTS, 1989-2003

1471

* Involving imported products classified under chapters 72 or 73 of the US Harmonized Tariff Schedule (HTS). ** Also includes trade remedy investigations that resulted in the imposition of final duties before 1989 and thus countervailing duty

investigations under section 303 or 753 of the US trade law. Source: Data compiled by the author from the Federal Register, the ITC�s The Year in Trade (various years), and the

ITC�s DataWeb.

25

Table 3: The Timing of Events around the 2002 US Safeguard Application

Date

Event Related to the 2002 US Steel Safeguard

June 2001 US Trade Representative (USTR) requests the US International Trade Commission (ITC)

initiate a “comprehensive steel investigation” under Section 201 of the US trade law, the “safeguards” law

• Request identifies 612 different 10-digit Harmonized Tariff Schedule (HTS) import product codes to investigate as a source of serious injury to the US steel industry

October 2001 ITC finds the US domestic industry is seriously injured in 8 out of 12 categories of steel under

investigation and that imports are a substantial cause of the injury; ITC vote is split on the other 4 categories

December 2001 ITC announcement of steel tariff/quantitative restriction remedy recommendations

• Affirmative: 261 different 10-digit HTS codes • Tied: 48 different 10-digit HTS codes • Negative: 303 different 10-digit HTS codes

March 2002 US Presidential Proclamation announces final applied safeguard tariff rates and quantitative

restrictions on imports of steel under Section 201 of US trade law

• Tariff: 267 different 10-digit HTS codes affected • Quantitative restrictions: 5 different 10-digit HTS codes affected

Proclamation announces that steel imports from Canada, Mexico, Jordan, Israel and 100 other small developing countries* not satisfying the WTO’s de minimus standards would be excluded from the safeguard; USTR announces first round of excluded products

June 2002 USTR announces second, third, fourth and fifth rounds of excluded products

July 2002 USTR announces sixth and seventh rounds of excluded products

August 2002 USTR announces eighth and ninth rounds of excluded products

March 2003 USTR announces tenth round of excluded products

March 2003 Scheduled reduction of safeguard tariffs and expansion of quantitative restrictions goes into effect on the one year anniversary of the March 2002 safeguard application

December 2003 US Presidential Proclamation terminates safeguard tariffs and quantitative restrictions

Source: USTR website, “President Bush Takes Action on Steel,” available at http://www.ustr.gov/sectors/industry/steel.shtml ,

last accessed on 19 February 2004.

* A subset of steel imported from seven of these developing countries (Brazil, India, Turkey, Moldova, Romania, Thailand and Venezuela) were exempted from the country exclusions and thus faced the safeguard protection.

26

Table 4: Summary Statistics for Variables used to Estimate Policy Indicator Specifications

Variable Observations Mean Value

Standard Deviation Minimum Maximum

Dependent Variables

Import Quantity Growth Rate: )ln( ihtm∆ 88891 0.0126 1.8839 -15.2569 16.1777

Import Value Growth Rate: )ln( ihtvm∆ 93793 0.0145 1.4074 -9.4696 8.4933

Zeros-Corrected Import Quantity Growth Rate: ihtm∆ 134940 -0.1979 1.4339 -2 2

Zeros-Corrected Import Value Growth Rate: ihtvm∆ 141773 -0.1917 1.3811 -2 2

Explanatory Variables

2002 SG Policy Imposed ht 141773 0.0239 0.1528 0 1

PTA Country Exclusion from 2002 SG iht 141773 0.0017 0.0418 0 1

Developing Country Exclusion from 2002 SG iht 141773 0.0044 0.0660 0 1

Product Exclusion from 2002 SG iht 141773 0.0045 0.0668 0 1

2001 Indicator for a 10-digit HTS product under the June 2001 USTR SG Investigation Order

141773 0.0532 0.2245 0 1

2000 SG Policy Imposed ht 141773 0.0007 0.0267 0 1

Canada/Mexico Country Exclusion from 2000 SG iht 141773 0.0000 0.0053 0 1

Korea’s 2002 Circular Welded Pipe Exemption from 2000 SG iht-2

141773 0.0000 0.0027 0 1

AD/CVD investigation ht 141773 0.0937 0.2914 0 1

AD/CVD investigation iht terminated with imposition of suspension agreement

141773 0.0012 0.0349 0 1

AD/CVD investigation iht resulting in final duties after a negative preliminary duty determination

141773 0.0007 0.0268 0 1

AD/CVD investigation iht resulting in preliminary duties but terminated/ withdrawn before imposition of final duties

141773

0.0068

0.0820

0

1

AD/CVD investigation iht terminated/withdrawn without any duties

141773 0.0027 0.0522 0 1

Exporters in i not named in AD/CVD investigation ht 141773 0.0719 0.2584 0 1

AD/CVD removal of dutiesht after revocation order and/or sunset review

141773 0.0251 0.1564 0 1

Exporters in i have AD/CVD removal of dutiesht 141773 0.0017 0.0409 0 1

ln (m iht-2 ) 136718 7.2868 5.8227 0 21.4516

ln (vm iht-2 ) 141773 8.1936 5.8991 0 19.8142

27

Table 5: a. Yearly Estimates for Safeguards with Indicators for Policy Variables

Dependent Variable: Import Growth Rate iht

Dependent Variable:

Zeros-Corrected Import Growth Rate iht

Explanatory Variables

Quantity: )ln( ihtm∆

(1)

Value: )ln( ihtvm∆

(2)

Quantity: ihtm∆

(3)

Value: ihtvm∆

(4)

2002 Steel SG Policy Variables

2002 SG Policy Imposed ht -0.199 a (0.064)

-0.191 a (0.053)

-0.175 a (0.041)

-0.174 a (0.040)

PTA Country Exclusion from 2002 SG iht 0.614 a (0.201)

0.426 b (0.176)

0.304 b (0.126)

0.247 b (0.123)

Developing Country Exclusion from 2002 SG iht 0.539 a (0.130)

0.585 a (0.111)

0.365 a (0.082)

0.388 a (0.080)

Product Exclusion from 2002 SG iht 0.258 a (0.075)

0.170 b (0.067)

0.197 a (0.054)

0.156 a (0.053)

2002 SG Policy Imposed ht-1 -0.474 a (0.068)

-0.439 a (0.055)

-0.517 a (0.039)

-0.510 a (0.038)

PTA Country Exclusion from 2002 SG iht-1 0.017 (0.219)

-0.016 (0.188)

0.164 (0.127)

0.166 (0.124)

Developing Country Exclusion from 2002 SG iht-1 0.505 a (0.125)

0.547 a (0.103)

0.488 a (0.079)

0.535 a (0.077)

Product Exclusion from 2002 SG iht-1 0.233 b (0.100)

0.128 (0.088)

0.244 a (0.068)

0.214 a (0.067)

2001 Indicator for a 10-digit HTS product under the June 2001 USTR SG Investigation Order

0.111 b (0.045)

0.038 (0.031)

0.012 (0.027)

0.008 (0.025)

2002 Indicator for a 10-digit HTS product under the June 2001 USTR SG Investigation Order

-0.101 b (0.049)

-0.123 a (0.035)

-0.091 a (0.031)

-0.090 a (0.029)

2000 Steel Wire Rod and Circular Welded Pipe SGs

2000 SG Policy Imposed ht -0.087 (0.185)

-0.219 (0.149)

-0.043 (0.143)

-0.072 (0.137)

Canada/Mexico Country Exclusion from 2000 SG iht 0.164 (0.251)

0.026 (0.246)

0.589 (0.431)

0.434 (0.476)

2000 SG Policy Imposed ht-1 0.101 (0.219)

0.072 (0.186)

0.146 (0.133)

0.127 (0.131)

Canada/Mexico Country Exclusion from 2000 SG iht-1 -0.123 (0.380)

0.192 (0.339)

-0.652 (0.472)

-0.398 (0.523)

2000 SG Policy Imposed ht-2 0.665 a (0.255)

0.462 b (0.199)

0.349 b (0.144)

0.315 b (0.139)

Canada/Mexico Country Exclusion from 2000 SG iht-2 0.495 (0.396)

0.502 (0.409)

0.944 b (0.415)

0.938 b (0.422)

Korea�s 2002 Circular Welded Pipe Exemption from 2000 SG iht-2 1.131 a (0.268)

1.138 a (0.209)

0.914 a (0.155)

0.878 a (0.149)

Other Variables

AD/CVD policy variables (see Table 5b for estimates) Yes Yes Yes Yes

Instrument* for )ln( 1−∆ ihtm 0.196 a (0.007)

-- -0.049 a (0.004)

--

Instrument* for )ln( 1−∆ ihtvm -- 0.153 a (0.005)

-- -0.063 a (0.004)

∆α i,t : Country and Time Fixed Effects [number of fixed effects]

Yes [1052]

Yes [1095]

Yes [1513]

Yes [1562]

Observations

88891

93793

134940

141773

R2

0.04

0.05

0.05

0.05

Notes: Subscript i is an exporting country, h is an HTS 10-digit product in Chapter 72 or 73, and t is a year. In parentheses are White�s

heteroskedasticity-consistent standard errors. Superscripts a, b and c denote variables statistically different from zero at the 1, 5 and 10 percent levels, respectively. * Estimates suppressed and available from the author upon request.

28

Table 5: b. Yearly Estimates for AD/CVD Investigations and Policy Removals

Dependent Variable: Import Growth Rate iht

Dependent Variable:

Zeros-Corrected Import Growth Rate iht

Explanatory Variables (cont. from Table 5a)

Quantity: )ln( ihtm∆

(1)

Value: )ln( ihtvm∆

(2)

Quantity: ihtm∆

(3)

Value: ihtvm∆

(4)

Imposition of AD/CVD Policies on Steel, 1989-2003

AD/CVD investigation ht -0.717 a (0.065)

-0.734 a (0.055)

-0.535 a (0.035)

-0.545 a (0.035)

AD/CVD investigation iht terminated with imposition of suspension agreement

-0.898 a (0.291)

-1.018 a (0.285)

-0.565 a (0.145)

-0.580 a (0.143)

AD/CVD investigation iht resulting in final duties after a negative preliminary duty determination

0.333 (0.310)

0.509 c (0.292)

0.435 a (0.157)

0.434 a (0.154)

AD/CVD investigation iht resulting in preliminary duties but terminated/ withdrawn before imposition of final duties

0.193 b (0.094)

0.214 a (0.080)

0.086 (0.056)

0.114 b (0.055)

AD/CVD investigation iht terminated/withdrawn without any duties

0.555 a (0.127)

0.483 a (0.104)

0.269 a (0.080)

0.270 a (0.079)

Exporters in i not named in AD/CVD investigation ht 0.721 a (0.069)

0.669 a (0.059)

0.446 a (0.038)

0.438 a (0.037)

AD/CVD investigation ht-1 -0.344 a (0.075)

-0.282 a (0.063)

-0.362 a (0.042)

-0.336 a (0.041)

AD/CVD investigation iht-1 terminated with imposition of suspension agreement

0.813 b (0.319)

0.766 b (0.305)

0.511 a (0.189)

0.580 a (0.188)

AD/CVD investigation iht-1 resulting in final duties after a negative preliminary duty determination

0.136 (0.341)

-0.134 (0.305)

-0.232 (0.190)

-0.281 (0.188)

AD/CVD investigation iht-1 resulting in preliminary duties but terminated/ withdrawn before imposition of final duties

0.439 a (0.111)

0.391 a (0.098)

0.389 a (0.065)

0.377 a (0.064)

AD/CVD investigation iht-1 terminated/withdrawn without any duties

0.279 b (0.154)

0.236 c (0.128)

0.264 a (0.087)

0.239 a (0.086)

Exporters in i not named in AD/CVD investigation ht-1 0.440 a (0.078)

0.404 a (0.066)

0.403 a (0.044)

0.400 a (0.043)

AD/CVD investigation ht-2 -0.022 (0.073)

-0.096 (0.059)

-0.102 b (0.044)

-0.107 b (0.044)

AD/CVD investigation iht-2 terminated with imposition of suspension agreement

-0.860 a (0.321)

-0.737 b (0.301)

-0.980 a (0.144)

-0.957 a (0.142)

AD/CVD investigation iht-2 resulting in final duties after a negative preliminary duty determination

0.215 (0.325)

0.280 (0.310)

0.495 a (0.181)

0.519 a (0.178)

AD/CVD investigation iht-2 resulting in preliminary duties but terminated/ withdrawn before imposition of final duties

0.144 (0.117)

0.145 (0.097)

0.208 a (0.070)

0.193 a (0.069)

AD/CVD investigation iht-2 terminated/withdrawn without any duties

0.389 b (0.165)

0.349 b (0.139)

0.436 a (0.102)

0.415 a (0.100)

Exporters in i not named in AD/CVD investigation ht-2 -0.038 (0.077)

0.016 (0.062)

0.035 (0.047)

0.045 (0.046)

Removal of AD/CVD Policies on Steel, 1989-2003

AD/CVD removal of dutiesht after revocation order and/or sunset review

-0.017 (0.042)

-0.035 (0.034)

-0.011 (0.026)

-0.010 (0.026)

Exporters in i have AD/CVD removal of dutiesht 0.010 (0.118)

-0.007 (0.107)

0.060 (0.093)

0.047 (0.092)

AD/CVD removal of dutiesht-1 after revocation order and/or sunset review

-0.012 (0.048)

-0.051 (0.036)

0.027 (0.029)

0.012 (0.028)

Exporters in i have AD/CVD removal of dutiesht-1 0.015 (0.147)

0.061 (0.124)

0.114 (0.096)

0.107 (0.094)

AD/CVD removal of dutiesht-2 after revocation order and/or sunset review

-0.034 (0.042)

-0.020 (0.032)

0.071 a (0.027)

0.071 a (0.026)

Exporters in i have AD/CVD removal of dutiesht-2 0.349 b (0.138)

0.277 b (0.118)

0.179 b (0.095)

0.178 c (0.094)

Notes: Subscript i is an exporting country, h is an HTS 10-digit product in Chapter 72 or 73, and t is a year. In parentheses are White�s

heteroskedasticity-consistent standard errors. Superscripts a, b and c denote variables statistically different from zero at the 1, 5 and 10 percent levels, respectively.

29

Table 6: Yearly Estimates with Tariff Rates for Safeguard Policy Variables

Dependent Variable: Import Growth Rate iht

Dependent Variable:

Zeros-Corrected Import Growth Rate iht

Explanatory Variables

Quantity: )ln( ihtm∆

(5)

Value: )ln( ihtvm∆

(6)

Quantity: ihtm∆

(7)

Value: ihtvm∆

(8)

2002 Steel SG Policy Variables

2002 SG Tariff Imposed ht -0.984 a (0.290)

-1.110 a (0.254)

-0.976 a (0.182)

-1.001 a (0.179)

PTA Country Exclusion from 2002 SG iht x Tariff rate ht 3.010 a (0.904)

2.229 a (0.764)

1.551 a (0.564)

1.316 a (0.546)

Developing Country Exclusion from 2002 SG iht x Tariff rate ht 2.653 a (0.599)

3.005 a (0.530)

1.824 a (0.368)

1.960 a (0.361)

Product Exclusion from 2002 SG iht x Tariff rate ht 1.417 a (0.351)

1.059 a (0.317)

1.098 a (0.257)

0.922 a (0.251)

2002 SG Quota Imposed ht 0.300 (0.419)

0.409 (0.339)

0.204 (0.241)

0.281 (0.237)

Country or Product Exclusion from 2002 SG Quota iht -0.004 (0.516)

-0.025 (0.461)

-0.766 (0.576)

-0.766 (0.569)

2002 SG Tariff Imposed ht-1 -2.663 a (0.402)

-2.582 a (0.342)

-2.702 a (0.224)

-2.677 a (0.220)

PTA Country Exclusion from 2002 SG iht-1 x Tariff rate ht-1 0.254 (1.162)

0.170 (1.015)

0.577 (0.690)

0.569 (0.676)

Developing Country Exclusion from 2002 SG iht-1 x Tariff rate ht-1 2.549 a (0.686)

2.743 a (0.585)

2.193 a (0.434)

2.456 a (0.426)

Product Exclusion from 2002 SG iht-1 x Tariff rate ht-1 1.273 b (0.550)

0.738 (0.499)

0.954 b (0.377)

0.824 b (0.371)

2002 SG Quota Imposed ht-1 -0.861 a (0.269)

-0.800 a (0.248)

-1.072 a (0.182)

-1.027 a (0.183)

Country or Product Exclusion from 2002 SG Quota iht-1 0.105 (0.289)

0.162 (0.267)

1.771 a (0.540)

1.814 a (0.516)

2001 Indicator for a 10-digit HTS product under the June 2001 USTR SG Investigation Order

0.110 b (0.045)

0.037 (0.031)

0.011 (0.027)

0.007 (0.025)

2002 Indicator for a 10-digit HTS product under the June 2001 USTR SG Investigation Order

-0.107 b (0.048)

-0.120 a (0.034)

-0.086 a (0.031)

-0.083 a (0.029)

Other US Trade Policy Variables on Steel, 1989-2003

Controls for AD/CVD investigations, not named exporters, AD/CVD petitions initiated only, AD/CVD petitions resulting in preliminary duties only, AD/CVD petitions resulting in suspension agreements, Imposition of 2000 Circular Welded Pipe SG or 2000 Steel Wire Rod SG (and country exclusions), Removal of AD/CVD tariffs after revocation orders or sunset reviews*

Yes Yes Yes Yes

Other Control Variables

Instrument* for )ln( 1−∆ ihtm 0.196 a (0.007)

-- -0.049 a (0.004)

--

Instrument* for )ln( 1−∆ ihtvm -- 0.153 a (0.005)

-- -0.063 a (0.004)

∆α i,t : Country and Time Fixed Effects [number of fixed effects]

Yes [1052]

Yes [1095]

Yes [1513]

Yes [1562]

Observations

88891

93793

134940

141773

R2

0.04

0.05

0.05

0.05

Notes: Subscript i is an exporting country, h is an HTS 10-digit product in Chapter 72 or 73, and t is a year. In parentheses are White�s

heteroskedasticity-consistent standard errors. Superscripts a, b and c denote variables statistically different from zero at the 1, 5 and 10 percent levels, respectively. * Estimates suppressed and available from the author upon request.

30

Table 7: Comparing the 2002 Safeguard with the Imposition of ADDs and CVDs in 1992-1993

Dependent Variable: Quantity Import Growth Rate iht , )ln( ihtm∆

Explanatory Variables

2002 Steel SG Policy Variables

1992-1993 Imposition of AD/CVD Policies on Steel

2002 SG Policy Imposed ht -0.189 a (0.064)

AD/CVD investigation ht x Indicator for t = 1992 or 1993

-0.453 a (0.092)

PTA Country Exclusion from 2002 SG ht 0.606 c (0.201)

Exporters in i not named in AD/CVD investigation ht x Indicator for t = 1992 or 1993

0.557 a (0.105)

Developing Country Exclusion from 2002 SG ht 0.533 a (0.130)

AD/CVD investigation ht-1 x Indicator for t = 1992 or 1993

-0.416 b (0.114)

Product Exclusion from 2002 SG ht 0.265 a (0.075)

Exporters in i not named in AD/CVD investigation ht-1 x Indicator for t = 1992 or 1993

0.499 a (0.121)

2002 SG Policy Imposed ht-1 -0.467 a (0.069)

AD/CVD investigation ht-2 x Indicator for t = 1992 or 1993

0.049 (0.111)

PTA Country Exclusion from 2002 SG ht-1 -0.015 (0.219)

Exporters in i not named in AD/CVD investigation ht-2 x Indicator for t = 1992 or 1993

-0.003 (0.120)

Developing Country Exclusion from 2002 SG ht-1 0.507 a (0.125) Non-1992-1993 Imposition of AD/CVD Policies on Steel

Product Exclusion from 2002 SG ht-1 0.239 b (0.100)

AD/CVD investigation ht x Indicator for t ≠ 1992 or 1993

-0.812 a (0.072)

2001 Indicator for a 10-digit HTS product under the June 2001 USTR SG Investigation Order

0.126 a (0.045)

Exporters in i not named in AD/CVD investigation ht x Indicator for t ≠ 1992 or 1993

0.798 a (0.076)

2002 Indicator for a 10-digit HTS product under the June 2001 USTR SG Investigation Order

-0.093 c (0.049)

AD/CVD investigation ht-1 x Indicator for t ≠ 1992 or 1993

-0.359 a (0.081)

Other Steel Policy Variables Exporters in i not named in AD/CVD

investigation ht-1 x Indicator for t ≠ 1992 or 1993 0.440 a (0.080)

AD/CVD investigation ht-2 x Indicator for t ≠ 1992 or 1993

-0.048 (0.080)

Exporters in i not named in AD/CVD investigation ht-2 x Indicator for t ≠ 1992 or 1993

-0.037 (0.084)

Controls for AD/CVD petitions initiated only, AD/CVD petitions resulting in preliminary duties only, AD/CVD petitions resulting in suspension agreements, Imposition of 2000 Circular Welded Pipe SG or 2000 Steel Wire Rod SG (and country exclusions), Removal of AD/CVD tariffs after revocation orders or sunset reviews*

Yes

Other Control Variables

Instrument* for )ln( 1−∆ ihtm 0.196 a (0.003)

∆α i,t : Country and Time Fixed Effects [number of fixed effects]

Yes [1052]

Observations

88891

R2

0.04

Notes: Subscript i is an exporting country, h is an HTS 10-digit product in Chapter 72 or 73, and t is a year. In parentheses are White�s

heteroskedasticity-consistent standard errors. Superscripts a, b and c denote variables statistically different from zero at the 1, 5 and 10 percent levels, respectively. * Estimates suppressed and available from the author upon request.

31

Table 8: Quarterly Estimates to Investigate the Timing of the Impact of the 2002 Safeguard and toCompare to the Impact of other Trade Remedies

Dependent Variable:

Quarterly Growth Rate of the Value of Imports : )ln( ihtvm∆

Explanatory Variables Within Quarter t

Quarter t+1

Quarter t+2

Quarter t+3

Quarter t+4

Quarter t+5

2002 Steel SG Policy Variables

March 2002 SG Policy Imposed ht NA* -0.451 a (0.058)

0.155 a (0.056)

0.074 (0.053)

-0.197 a (0.056)

0.024 (0.052)

March 2002 Announcement of PTA Country Exclusion from SG iht

NA* 0.037 (0.197)

0.078 (0.227)

-0.466 a (0.166)

0.402 (0.263)

-0.308 (0.239)

March 2002 Announcement of Developing Country Exclusion from SG iht

NA* 0.105 (0.150)

0.391 a (0.139)

0.097 (0.110)

0.191 (0.117)

-0.480 a (0.141)

March 2002 Announcement of Product Exclusion from SG iht

NA* 0.390 b (0.192)

0.116 (0.163)

-0.183 (0.151)

0.077 (0.154)

-0.242 c (0.134)

Ex Post Announcement of Product Exclusion from SG iht

0.070 (0.072)

0.112 c (0.063)

0.013 (0.063)

0.012 (0.064)

-0.159 b (0.070)

0.151 b (0.078)

June 2001 Indicator for a 10-digit HTS product under the USTR SG Investigation Order ht

0.016 (0.032)

0.008 (0.031)

-0.043 (0.031)

-0.036 (0.033)

-0.046 (0.040)

-0.036 (0.036)

2000 Steel Wire Rod and Circular Welded Pipe SGs

2000 SG Policy Imposed ht -0.704 a (0.234)

0.050 (0.261)

0.378 b (0.183)

-0.010 (0.145)

-0.104 (0.203)

-0.281 (0.219)

Canada/Mexico Country Exclusion from 2000 SG iht

0.190 (0.244)

0.385 (0.269)

-0.199 (0.376)

-0.648 (0.587)

-0.129 (0.217)

0.754 a (0.234)

Korea�s September 2002 Exemption from 2000 Circular Welded Pipe SG

1.014 a (0.069)

0.438 a (0.065)

0.304 a (0.064)

0.130 c (0.071)

0.030 (0.071)

0.099 (0.062)

Imposition of AD/CVD Policies on Steel, 1989-2003

AD/CVD investigation ht -0.581 a (0.057)

-0.089 (0.065)

-0.037 (0.059)

-0.008 (0.059)

0.121 b (0.061)

-0.060 (0.052)

AD/CVD investigation iht terminated with imposition of suspension agreement

-0.728 b (0.302)

-0.564 (0.620)

-0.114 (0.617)

0.772 b (0.363)

0.535 (0.357)

0.314 (0.276)

AD/CVD investigation iht resulting in final duties after a negative preliminary duty determination

0.593 (0.378)

0.259 (0.355)

0.431 (0.384)

-0.130 (0.253)

-0.682 b (0.317)

-0.052 (0.248)

AD/CVD investigation iht resulting in preliminary duties but terminated/ withdrawn before imposition of final duties

0.038 (0.093)

-0.234 c (0.120)

0.342 a (0.102)

0.252 a (0.093)

0.101 (0.088)

0.137 c (0.082)

AD/CVD investigation iht terminated/ withdrawn without any duties

0.411 a (0.123)

-0.021 (0.140)

0.112 (0.146)

0.243 c (0.133)

0.015 (0.111)

0.039 (0.113)

Exporters in i not named in AD/CVD investigation ht

0.588 a (0.059)

0.116 c (0.066)

0.084 (0.060)

0.014 (0.061)

-0.128 b (0.062)

0.056 (0.055)

Removal of AD/CVD Policies on Steel, 1989-2003

AD/CVD removal of dutiesht after revocation order and/or sunset review

-0.058 b (0.028)

-0.051 c (0.028)

0.037 (0.031)

-0.017 (0.030)

0.014 (0.030)

0.049 c (0.029)

Exporters in i have AD/CVD removal of dutiesht

-0.105 (0.105)

0.227 b (0.108)

-0.077 (0.109)

0.037 (0.094)

-0.127 (0.094)

-0.100 (0.103)

Other Control Variables

Instrument� for )ln( 1−∆ ihtvm 0.085 a (0.003)

∆α i,t : Country and Time Fixed Effects [number of fixed effects]

Yes [4207]

Observations

279008

R2

0.03

Notes: Subscript i is an exporting country, h is an HTS 10-digit product in Chapter 72 or 73, and t is a quarter. In parentheses are White�s

heteroskedasticity-consistent standard errors. Superscripts a, b and c denote variables statistically different from zero at the 1, 5 and 10 percent levels, respectively. * Within-quarter estimates for the March 2002 steel safeguard omitted from the estimation because the policy went into effect at the very end of the first quarter, on March 20, 2002. �Estimates available from the author upon request.

32

Figure 1: Trade Diversion and Welfare Implications of Discriminatory and MFN Trade Remedies

A B C D E F G H

MFN – remedy P

Discriminatory – remedy P

Pre – remedy P

S1 + τ S2 S1

P

DUS

SUS

Q

33

Figure 2: Response of Quarterly Imports to Different Elements of the Steel Safeguard Process

40

50

60

70

80

90

100

110

120

130

140

2001,1 2001,2 2001,3 2001,4 2002,1 2002,2 2002,3 2002,4 2003,1 Year, Quarter

Index of Valueof 10-Digit HTS

Quarterly Imports(2001,1 =100)

Developing country exclusion

Investigated, but non-targeted product

March 2002 product exclusion

Summer 2002 product exclusion

PTA-member exclusion Product targeted with SG measure, not receiving any exclusions

USTR-Initiated SG Investigation

Presidential Steel SG

Proclamation

Additional USTR product exclusions

granted

Investigated products

Non-investigated steel products

Note: predictions for impact on imports based on parameter estimates reported in Table 8.

34

Figure 3: Response of Quarterly Imports to Differential Outcomes in the AD/CVD Investigations

0

20

40

60

80

100

120

140

-1 0 1 2 3 4 5

Quarter After Preliminary AD/CVD Duty Determination

Index of Valueof 10-Digit HTS

Quarterly Imports(t-1=100)

Investigated but No Duties Imposed

Not Named in Petition

Preliminary Duties Affirmative, but Final Duties Negative

Suspension Agreement

Preliminary and Final Duties Affirmative

Note: predictions for impact on imports based on parameter estimates reported in Table 8.

35