IDEAS home Printed from https://ideas.repec.org/p/fip/fedhwp/wp-03-26.html
   My bibliography  Save this paper

Trade deflection and trade depression

Author

Listed:
  • Chad P. Bown
  • Meredith A. Crowley

Abstract

This is the first paper to empirically examine whether the United States' imposition of a special import restraint distorts foreign exports and thus affects world trade flows. We first develop a theoretical model of worldwide trade in which the imposition of a special import restraint by one country - an antidumping duty or a safeguard measure - causes significant distortions in world trade flows. We then empirically test this model by investigating the effect of US special import restraints on Japanese exports of roughly 3500 commodities into 29 countries between 1992 and 2001. Our estimation of a fixed-effects model of Japanese exports yields evidence that US import restraints both deflect and depress Japanese export flows. Imposition of a US antidumping duty against Japan deflects trade: export growth to non-US trading partners rises by 11 to 22 percentage points. The simultaneous imposition of a US antidumping duty against both Japan and a third country depresses trade: Japanese export growth to the third country falls by 0 to 18 percentage points. The magnitude of the trade depression effect is also larger when the US imposes an antidumping duty against a third country but not against Japan. A US safeguard measure leads Japanese export growth to third countries to rise 12 to 15 percentage points.

Suggested Citation

  • Chad P. Bown & Meredith A. Crowley, 2003. "Trade deflection and trade depression," Working Paper Series WP-03-26, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-03-26
    as

    Download full text from publisher

    File URL: http://www.chicagofed.org/digital_assets/publications/working_papers/2003/wp2003-26.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas J. Prusa, 2021. "The Trade Effects of U.S. Antidumping Actions," World Scientific Book Chapters, in: Thomas J Prusa (ed.), Economic Effects of Antidumping, chapter 3, pages 21-43, World Scientific Publishing Co. Pte. Ltd..
    2. Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry-Specific Protection: Antidumping in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994 Micr), pages 51-118.
    3. Bagwell, Kyle & Staiger, Robert W, 1997. "Multilateral Tariff Cooperation during the Formation of Free Trade Areas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 291-319, May.
    4. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    5. Thomas J. Prusa & Susan Skeath, 2021. "The Economic and Strategic Motives for Antidumping Filings," World Scientific Book Chapters, in: Thomas J Prusa (ed.), Economic Effects of Antidumping, chapter 11, pages 233-257, World Scientific Publishing Co. Pte. Ltd..
    6. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers Archive 11375, Iowa State University, Department of Economics.
    7. Won Chang & L. Alan Winters, 2015. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," World Scientific Book Chapters, in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 11, pages 199-214, World Scientific Publishing Co. Pte. Ltd..
    8. Kimberly A. Clausing, 2001. "Trade creation and trade diversion in the Canada - United States Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 677-696, August.
    9. Nelson, Charles R & Startz, Richard, 1990. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 58(4), pages 967-976, July.
    10. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
    11. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-519, September.
    12. Thomas J. Prusa, 2006. "East Asia's Anti‐dumping Problem," The World Economy, Wiley Blackwell, vol. 29(6), pages 743-761, June.
    13. Wilfred J. Ethier, 2004. "Political Externalities, Nondiscrimination, and a Multilateral World," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 303-320, August.
    14. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    15. Bruce A. Blonigen & Thomas J. Prusa, 2001. "Antidumping," NBER Working Papers 8398, National Bureau of Economic Research, Inc.
    16. Bagwell,K. & Staiger,R.W., 1999. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT," Working papers 6, Wisconsin Madison - Social Systems.
    17. Robert C. Feenstra, 1997. "The Effects of US Trade Protection and Promotion Policies," NBER Books, National Bureau of Economic Research, Inc, number feen97-1, December.
    18. Blonigen, Bruce A. & Bown, Chad P., 2003. "Antidumping and retaliation threats," Journal of International Economics, Elsevier, vol. 60(2), pages 249-273, August.
    19. Thomas J. Prusa, 2021. "On the spread and impact of anti-dumping," World Scientific Book Chapters, in: Thomas J Prusa (ed.), Economic Effects of Antidumping, chapter 4, pages 45-65, World Scientific Publishing Co. Pte. Ltd..
    20. Robert C. Feenstra, 1997. "Introduction to "The Effects of U.S. Trade Protection and Promotion Policies"," NBER Chapters, in: The Effects of US Trade Protection and Promotion Policies, pages 1-7, National Bureau of Economic Research, Inc.
    21. John McLaren, 2002. "A Theory of Insidious Regionalism," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 571-608.
    22. Horn, Henrik & Mavroidis, Petros C., 2001. "Economic and legal aspects of the Most-Favored-Nation clause," European Journal of Political Economy, Elsevier, vol. 17(2), pages 233-279, June.
    23. Kennedy, Peter E, 1981. "Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations [The Interpretation of Dummy Variables in Semilogarithmic Equations]," American Economic Review, American Economic Association, vol. 71(4), pages 801-801, September.
    24. Bagwell, Kyle & Staiger, Robert W., 2004. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO," Journal of International Economics, Elsevier, vol. 63(1), pages 1-29, May.
    25. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    26. Feenstra, Robert C. (ed.), 1997. "The Effects of U.S. Trade Protection and Promotion Policies," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226239514, July.
    27. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
    28. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Bown, Chad P. & Crowley, Meredith A., 2006. "Policy externalities: How US antidumping affects Japanese exports to the EU," European Journal of Political Economy, Elsevier, vol. 22(3), pages 696-714, September.
    3. Hylke Vandenbussche & Maurizio Zanardi, 2008. "What explains the proliferation of antidumping laws? [‘Antidumping Laws in the US; Use and Welfare Consequences’]," Economic Policy, CEPR;CES;MSH, vol. 23(53), pages 94-138.
    4. Chandra, Piyush, 2016. "Impact of temporary trade barriers: Evidence from China," China Economic Review, Elsevier, vol. 38(C), pages 24-48.
    5. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    6. Vandenbussche, Hylke & Zanardi, Maurizio, 2010. "The chilling trade effects of antidumping proliferation," European Economic Review, Elsevier, vol. 54(6), pages 760-777, August.
    7. Chad P. Bown & Meredith A. Crowley, 2004. "China's export growth and U.S. trade policy," Working Paper Series WP-04-28, Federal Reserve Bank of Chicago.
    8. Ludo Cuyvers & Michel Dumont, 2005. "EU Anti‐dumping Measures against ASEAN Countries: Impact on Trade Flows," Asian Economic Journal, East Asian Economic Association, vol. 19(3), pages 249-271, September.
    9. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    10. Laura Rovegno, 2013. "Trade protection and market power: evidence from US antidumping and countervailing duties," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(3), pages 443-476, September.
    11. Malhotra Nisha & Rus Horatiu & Kassam Shinan, 2008. "Antidumping Duties in the Agriculture Sector: Trade Restricting or Trade Deflecting?," Global Economy Journal, De Gruyter, vol. 8(2), pages 1-19, June.
    12. Ahmed Nawaz Hakro & Syed Hasanat Shah, 2007. "Economic Rationale, Trade Impact and Extent of Antidumping – A Case Study of Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 12(1), pages 79-98, Jan-Jun.
    13. Meredith A. Crowley, 2003. "An introduction to the WTO and GATT," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 27(Q IV), pages 42-57.
    14. Taylor, Christopher T., 2004. "The economic effects of withdrawn antidumping investigations: is there evidence of collusive settlements?," Journal of International Economics, Elsevier, vol. 62(2), pages 295-312, March.
    15. Chad P. Bown, 2010. "China's WTO Entry: Antidumping, Safeguards, and Dispute Settlement," NBER Chapters, in: China's Growing Role in World Trade, pages 281-337, National Bureau of Economic Research, Inc.
    16. Chisik, Richard, 2012. "Trade disputes, quality choice, and economic integration," Journal of International Economics, Elsevier, vol. 88(1), pages 47-61.
    17. Robert M. Feinberg & Kara M. Reynolds, 2006. "The Spread of Antidumping Regimes and the Role of Retaliation in Filings," Southern Economic Journal, John Wiley & Sons, vol. 72(4), pages 877-890, April.
    18. Jozef KONINGS & Hylke VANDENBUSSCHE, 2009. "Antidumping Protection hurts Exporters: Firm-level evidence from France," LIDAM Discussion Papers IRES 2009017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    19. Jozef Konings & Hylke Vandenbussche, 2004. "Antidumping Protection and Markups of Domestic Firms: Evidence from Firm Level Data," LICOS Discussion Papers 14104, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    20. Jozef Konings & Hylke Vandenbussche & Linda Springael, 2001. "Import Diversion under European Antidumping Policy," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 283-299, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedhwp:wp-03-26. 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: . General contact details of provider: https://edirc.repec.org/data/frbchus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Deng Pan (email available below). General contact details of provider: https://edirc.repec.org/data/frbchus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.