Safeguards and Retaliatory Threats
AbstractThis is the first empirical article to analyze the response of shareholders to the threat of retaliatory tariffs authorized by the World Trade Organization (WTO). We use event study methodology to gauge the impact of European Union (EU) retaliatory threats stemming from the 2002 imposition of U.S. steel safeguards. Results indicate that the U.S. stock returns of firms slated for WTO-authorized tariffs reacted negatively to the announcements, signaling an increased likelihood of retaliation. Shareholders also generally responded positively to the early cancellation of the safeguards, which removed the risk of retaliation. Industry-level analysis indicates that producers of apparel, tobacco, and transportation equipment were particularly affected by the threat of retaliatory tariffs. Second-stage estimates suggest that retaliatory threats have a more negative impact on firms with a higher export share to the EU, greater profit growth, and low research-and-development intensity. (c) 2008 by The University of Chicago. All rights reserved..
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Bibliographic InfoArticle provided by University of Chicago Press in its journal The Journal of Law and Economics.
Volume (Year): 51 (2008)
Issue (Month): 2 (05)
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- Bown, Chad P., 2013.
"How different are safeguards from antidumping ? evidence from us trade policies toward steel,"
Policy Research Working Paper Series
6378, The World Bank.
- Chad Bown, 2013. "How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel," Review of Industrial Organization, Springer, vol. 42(4), pages 449-481, June.
- Chad P. Bown, 2004. "How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel," Econometric Society 2004 North American Summer Meetings 434, Econometric Society.
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