Political Economy of Antidumping Reviews: The Impact of Discretion at the International Trade Administration

U.S. antidumping law allows foreign firms to choose to either (1) pay an antidumping duty or (2) increase their price in order to lower (or eliminate) their antidumping duty through the administrative review process. Although foreign firms would obviously enjoy higher profits if they increase their price, thereby eliminating the duty, only 37 percent of firm-specific antidumping tariffs are ever reviewed and those that are reviewed have a lifetime average duty rate of 30 percent. The domestic industry should request a review of the antidumping margin only if the review would result in an increase in protection, but over 90 percent of the reviews undertaken at the behest of the domestic industry result in a decrease in the antidumping margin. In this paper, we illustrate that these empirical regularities could be driven by both the high cost of the review process as well as the level of discretion that the ITA has in setting antidumping margins. Preliminary evidence suggests that the net benefit of the administrative review process is significantly different depending on the country targeted by the antidumping margin and the method in which the initial margin was calculated.