Safeguards and Retaliatory Threats
This 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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomas J. Prusa & Susan Skeath, 2001.
"The Economic and Strategic Motives for Antidumping Filings,"
NBER Working Papers
8424, National Bureau of Economic Research, Inc.
- Thomas Prusa & Susan Skeath, 2002. "The economic and strategic motives for antidumping filings," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(3), pages 389-413, September.
- Desai, Mihir A. & Hines Jr., James R., 2008.
"Market reactions to export subsidies,"
Journal of International Economics,
Elsevier, vol. 74(2), pages 459-474, March.
- Ries, John C, 1993. "Windfall Profits and Vertical Relationships: Who Gained in the Japanese Auto Industry from VERs?," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 259-276, September.
- Edward Tower, 1975. "The Optimum Quota and Retaliation," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 623-630.
- Robert Z. Lawrence, 2003. "Crimes and Punishments?: Retaliation under the WTO," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 372, 03.
- McDonald, Judith A. & O'Brien, Anthony Patrick & Callahan, Colleen M., 1997. "Trade Wars: Canada's Reaction to the Smoot-Hawley Tariff," The Journal of Economic History, Cambridge University Press, vol. 57(04), pages 802-826, December.
- Bruce A. Blonigen & Chad P. Bown, 2001.
"Antidumping and Retaliation Threats,"
NBER Working Papers
8576, National Bureau of Economic Research, Inc.
- Hartigan, James C & Perry, Philip R & Kamma, Sreenivas, 1986. "The Value of Administered Protection: A Capital Market Approach," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 610-617, November.
- Herander, Mark G & Pupp, Roger L, 1991. "Firm Participation in Steel Industry Lobbying," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 134-147, January.
- Gary Clyde Hufbauer & Ben Goodrich, 2003. "Next Move in Steel: Revocation or Retaliation?," Policy Briefs PB03-10, Peterson Institute for International Economics.
- Sykes, Alan O., 2003. "The safeguards mess: a critique of WTO jurisprudence," World Trade Review, Cambridge University Press, vol. 2(03), pages 261-295, November.
- Benjamin H. Liebman & Kasaundra M. Tomlin, 2006.
"Steel Safeguards and the Welfare of U.S. Steel Firms and Downstream Consumers of Steel: A Shareholder Wealth Perspective,"
The Institute for International Integration Studies Discussion Paper Series
- 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.
- Constantinos Syropoulos, 2002. "Optimum Tariffs and Retaliation Revisited: How Country Size Matters," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 707-727.
When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:51:y:2008:i:2:p:351-376. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If references are entirely missing, you can add them using this form.