How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel

“Safeguards” are formally defined under the WTO’s Agreement on Safeguards as “emergency” trade policy actions over specific products that governments may implement in response to import surges that have caused or that threaten to cause serious injury to an industry.

This is not the only potentially important distinction between SG and AD/CVD. In addition to the issue of “fair” versus “unfair” trade, the US AD/CVD process is bureaucratic while safeguards allow for Presidential discretion; the injury threshold is higher for SG cases; the duration of safeguards is shorter than is true of AD/CVD; and the use of SG can require compensation to affected countries, while AD/CVD does not. For a discussion, see Bown (2002). From a second-best perspective that takes the implementation of some import protection as given, the MFN application of a safeguard is one frequent justification that Footnote 2 continued economists give generally to advocate use of SG over AD/CVD. The alternative use of AD and CVD allows for discrimination across export sources which would be more likely to result in trade diversion: to importers’ switching to the sourcing of products to higher cost (but non-targeted) foreign producers, thus inducing the welfare losses to the domestic economy that were initially identified by Viner (1950). Krishna (2004) surveys the literature, focusing on different theoretical elements of the interaction between preferential and multilateral policy under trade agreements more generally.

During 1992–1993 in particular, the US steel industry filed a large number of antidumping (and countervailing duty) petitions that resulted in investigations and the application of new import restrictions. The full coverage of imports that were associated with these cases collectively rivaled the size of the 2002 US steel safeguard. Our econometric approach described below allows us to examine the potential similarities of the impact of the implementation of these different policy instruments across these different time periods.

Bown and Crowley (2007) propose and examine an alternative way through which antidumping and safeguards may have a differential trade impact by considering the effects of application of such US trade policies on Japanese export flows to third country markets; this is a phenomenon that they term “trade deflection.” See also Durling and Prusa (2006) for an analysis of antidumping import restrictions on hot rolled steel that were imposed by a number of countries during 1996–2001. Neither of these papers, however, examines the potential discriminatory impact of safeguard policies on the policy-imposing country’s imports nor compares the impact to explicitly discriminatory policies such as antidumping.

A number of recent papers provide evidence of the relevance of the terms-of-trade theory of trade agreements that dates back to Johnson (1953–1954) and has most recently been formalized by Bagwell and Staiger (1999). Broda et al. (2008) have shown how such incentives affect countries’ tariff levels in the absence of an international agreement that would constrain those tariffs. Bagwell and Staiger (2011) find evidence that economic incentives also affect the terms of WTO accessions as countries negotiate tariff cuts to join the agreement.

Bown and Crowley (2011, in press) provide evidence of this not only for the United States, but also in a sample of data at the quarterly frequency that includes four other high-income economies over the period 1988–2010.

This includes Bulgaria, Canada, Chile, China, Czech Republic, EU, Hungary and Poland (Bown 2012).

Blonigen and Prusa (2003) provide a survey of the economics research literature on antidumping as well as a more detailed description of the US antidumping process. Bown and Crowley (2005) survey the literature on safeguards.

After 1998, only 1035 unique 10-digit HTS categories from chapter 72 or 73 are in our sample of trade data, which suggests that the ratio for the three safeguard actions (all implemented since 1998) is even higher if we factor into account administrative changes in the HTS schedule over time.

More generally and for the full sample of all US use of antidumping and countervailing duties over 1990–2009, Bown (2011) reports that it is relatively rare for a product to be subject to a CVD and not also be subject to antidumping. Nevertheless the converse is not true as most use of antidumping is not necessarily accompanied by a simultaneous CVD.

Note that while the United States excluded Canada and Mexico from application of these particular safeguards in 2000, it excluded no other developing countries. Furthermore, Korea filed a formal WTO trade dispute over the US safeguard on circular welded pipe; and, as part of the settlement, the US granted Korea additional access to the quota in September 2002. We examine the impact of this directly in the estimation results described below.

Specifically, the USTR announced that it would use the following criteria in making its decisions as to which product exclusion requests to accept:

“We will grant only those exclusions that do not undermine the objectives of the safeguard measures. In analyzing the requests, we will consider whether it is currently being produced in the United States, whether substitution of the product is possible, whether qualification requirements affect the requestor’s ability to use domestic products, inventories, whether the requested product is under development by a U.S. producer who will imminently be able to produce it in marketable quantities, and any other relevant factors. Where necessary, we will meet with parties to discuss the information that was submitted and/or to gain additional information.” (USTR 2004a).

There were also a handful of products in chapter 84 of the US HTS that we omit, as our focus is only on trade policies that affected products in HTS chapters 72 or 73.

There is a similar de minimus requirement under the WTO’s Agreement on Antidumping that duties should not be imposed on small suppliers. The question of whether that provision is followed in practice is not under investigation here. A subset of steel imports from seven of these developing countries (Brazil, India, Turkey, Moldova, Romania, Thailand and Venezuela) were “exempted” from the country exclusions in the safeguard and thus faced the new import protection in 2002.

US steel producers had the ability to file objections to these petition requests in which they could claim that they could produce the product for which an exemption was being sought.

During this period a number of countries including Japan and the members of the EU challenged the US safeguard through formal WTO disputes, with threats to retaliate with higher tariffs on US exports; see Liebman and Tomlin (2008). One contributing explanation for the 90 percent is that the USTR granted some product exclusions to compensate such aggrieved parties informally.

The data in Table 3 underestimate the total differential impact across countries as they do not account for the hundreds of product exclusions that were granted by the USTR after March 2002 (see Table 2 and our discussion below). We estimate the impact of these exclusions in our formal econometric analysis.

In the 2002 SG, there were more than 300 10-digit HTS products that were investigated by the ITC but for which the President did not impose import protection against any foreign source. For most of these products, the ITC’s injury investigation also indicated that the competing US industry was not sufficiently injured by an increase in imports to merit new protection; see Table 2.

This could occur because the Department of Commerce found insufficient evidence of dumping/foreign subsidies, the ITC found insufficient evidence of injury to the domestic producers of \(h\), or both.

Note that we organize the AD/CVD policy variables to compare only the bottom outcome in Fig. 1 with the applied SG outcome: Our variable construction conditions on products \(h\) for which some exporter was faced with a final TTB through AD or CVD for these subcategories of outcomes.

Where imports are zero in a year, we exclude that observation in our first set of regressions; below we discuss an alternative method that allows us to include those observations and thus allow for entry and exit.

Because of the dynamic panel structure of our data, two potential problems with the IV estimator used in Eq. (2) are bias that is associated with the use of a weak instrument and bias that is associated with correlation in measurement error.

Konings et al. (2001) apply Prusa’s approach to AD cases in the European Union.

See http://​dataweb.​usitc.​gov/​, last access date of 16 December 2012.

There is some measurement error with the survey data as there were a few instances in which petitioners left the entry for the relevant 10-digit HTS code blank, or instead entered an incorrect product code that was not subject to the safeguard. These exclusions were omitted from the empirical analysis.

We have also estimated model specifications in which we use the different tariff rates that were associated with the 2002 safeguard across different products; our results are broadly robust to using the tariff rates instead. For the 267 10-digit HTS codes that faced a tariff in the first year after the safeguard, 185 (69 percent) received a 30 percent tariff, 60 (22 percent) received a 15 percent tariff, 15 (6 percent) received a 13 percent tariff, and 7 (3 percent) received an 8 percent tariff in the first year. In March 2003, the tariffs for each of the categories were reduced to 24, 12, 10, and 7 percent, respectively. Use of ad valorem tariff rates for AD/CVD cases is a bit more problematic given that some major cases resulted in suspension agreements in which a trading partner agreed to restrain exports but no US tariffs were imposed; see Table 1.

Because the dependent variable in our regression Eq. (2) is defined as the log growth rate, the coefficient estimates on the explanatory variables represent exp(\(\beta _{1}\)); our discussion of magnitudes in the text reflects this transformation.

In 2002, the import growth rate for investigated products for which no exporting country was subject to the applied SG was 9.5 percentage points lower than non-investigated products; this estimate is only slightly different from the estimate (9.3 percentage points) found in column (2). These estimates in (2) and (3) are not identical because we simultaneously introduce other new variables in specification (3) that are related to AD/CVD. While these variables are not shown in Table 5, as we describe below, their impacts are documented in Table 6.

This figure is based on the estimates in column (4) of Table 5. They result from differential impacts on import growth for each set of products relative to the set of steel products that also faced the SG investigation but for which no countries faced an import restriction.

Davis and Haltiwanger also note that this measure of the growth rate is monotonically related to the conventional growth rate measure, with the two measures’ being approximately equal for small rates of growth.

Table 6, column (2) indicates that in the next year (after the initiation of the investigation), relative to non-investigated products, the import growth rate for investigated products for which no exporting country was subject to the applied AD/CVD was 10 percentage points higher. However, the other products for which some trading partner faced an applied AD/CVD grew at a rate that was a 8 percentage points lower. In total, products \(h\) for which some trading partner was subject to the AD/CVD had import growth in the year after the initiation of the investigation that was 2 percentage points lower than products that were not investigated.

This figure is based on the estimates in column (3) of Tables 5 and 6. They are thus based on import growth rates for these products relative to the set of steel products that also faced investigations but for which no countries faced an import restriction.

These results are available from the author upon request.