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Steel safeguards and the welfare of U.S. steel firms and downstream consumers of steel: a shareholder wealth perspective

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  • Benjamin H. Liebman
  • Kasaundra M. Tomlin

Abstract

This paper analyses the steel safeguards applied during 2001-3. Results reveal that for shareholders of U.S. steel companies safeguards generated positive `abnormal' returns of approximately 6%. The cancellation of the safeguards resulted in wealth gains of about 5%. Steel shareholders experienced negative abnormal returns of 5% in response to the WTO ruling that the U.S. had violated WTO law. Our results are consistent with the neoclassical view that producers gain at the expense of consumers. Also, findings indicate that downstream-consuming firms that diversify production in NAFTA countries avert some trade policy risk associated with higher steel costs caused by safeguard protection.

Suggested Citation

  • Benjamin H. Liebman & Kasaundra M. Tomlin, 2007. "Steel safeguards and the welfare of U.S. steel firms and downstream consumers of steel: a shareholder wealth perspective," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 812-842, August.
  • Handle: RePEc:cje:issued:v:40:y:2007:i:3:p:812-842
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    References listed on IDEAS

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    1. Rehbein, Kathleen & Starks, Laura T., 1995. "Changes in U.S. trade policies: the wealth effects on Japanese steel firms," Japan and the World Economy, Elsevier, vol. 7(3), pages 309-327, September.
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    Cited by:

    1. Sébastien Jean & Ariell Reshef, 2017. "Why Trade, and What Would Be the Consequences of Protectionism?," CEPII Policy Brief 2017-18, CEPII research center.
    2. Chad Bown, 2013. "How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(4), pages 449-481, June.
    3. Ronald B. Davies & Zuzanna Studnicka, 2017. "The Heterogeneous Impact of Brexit: Early Indications from the FTSE," Working Papers 201708, School of Economics, University College Dublin.
    4. Benjamin H. Liebman & Kasaundra M. Tomlin, 2008. "Safeguards and Retaliatory Threats," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 351-376, May.
    5. Nisha Malhotra & Sumeet Gulati, 2010. "The Effects Of The 1996 U.S.-Canada Softwood Lumber Agreement On The Industrial Users Of Lumber: An Event Study," Contemporary Economic Policy, Western Economic Association International, vol. 28(2), pages 275-287, April.
    6. Benjamin Liebman & Kasaundra Tomlin, 2015. "World Trade Organization sanctions, implementation, and retaliation," Empirical Economics, Springer, vol. 48(2), pages 715-745, March.
    7. Ronald B. Davies & Benjamin H. Liebman & Kasaundra Tomlin, 2015. "I've Been Everywhere (Except Mexico): Investor Responses to NAFTA's Cross-Border Trucking Provisions," The Institute for International Integration Studies Discussion Paper Series iiisdp467, IIIS.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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