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Using safeguard protection to raise domestic rivals' costs

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  • Durling, James P.
  • Prusa, Thomas J.

Abstract

The primary impact of import protection is to raise foreign firms’ costs. We show that poorly designed protection also raises domestic rivals’ costs. We find that simultaneously taxing both the upstream and downstream import markets results in a very small expansion in industry-wide downstream production. We use the US’ recent steel safeguard action as a case study. Our analysis sheds new light on the controversial steel slab restrictions. We show that the primary effect of the steel tariffs is distributional. In particular, the steel tariffs will mainly benefit minimills and will provide relatively small benefits to traditional mills.
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Suggested Citation

  • Durling, James P. & Prusa, Thomas J., 2003. "Using safeguard protection to raise domestic rivals' costs," Japan and the World Economy, Elsevier, vol. 15(1), pages 47-68, January.
    • Handle: RePEc:eee:japwor:v:15:y:2003:i:1:p:47-68
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    References listed on IDEAS

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    1. Spencer, Barbara J. & Jones, Ronald W., 1992. "Trade and protection in vertically related markets," Journal of International Economics, Elsevier, vol. 32(1-2), pages 31-55, February.
    2. Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
    3. Baumol, William J & Ordover, Janusz A, 1985. "Use of Antitrust to Subvert Competition," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 247-265, May.
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    Cited by:

    1. Sérgio Kannebley Júnior & Glauco Avelino Sampaio Oliveira, 2019. "Documento de Trabalho 02/2019 - Probabilidade de investigação e aplicação de medidas antidumping para a indústria brasileira: Efeitos para a concorrência," Documentos de Trabalho 2019020, Conselho Administrativo de Defesa Econômica (Cade), Departamento de Estudos Econômicos.
    2. Erbahar, Aksel & Zi, Yuan, 2017. "Cascading trade protection: Evidence from the US," Journal of International Economics, Elsevier, vol. 108(C), pages 274-299.
    3. 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.
    4. Chad P. Bown & Rachel McCulloch, 2012. "Antidumping and Market Competition: Implications for Emerging Economies," Working Papers 50, Brandeis University, Department of Economics and International Business School.
    5. Hylke Vandenbussche & Ziga Zarnic, 2008. "US Safeguards on Steel and the Markups of European Producers," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(3), pages 458-490, October.
    6. Aksel Erbahar & Yuan Zi, 2015. "Cascading Trade Protection: Theory and Evidence from the U.S," CTEI Working Papers series 04-2015, Centre for Trade and Economic Integration, The Graduate Institute.
    7. Bown, Chad P., 2009. "The global resort to antidumping, safeguards, and other trade remedies amidst the economic crisis," Policy Research Working Paper Series 5051, The World Bank.

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