The Global Resort to Antidumping, Safeguards, and Other Trade Remedies Amidst the Economic Crisis

Trade Implications of Policy Responses to the Crisis
Joint World Bank – CEPR Conference

Brussels, 26-27 May 2009

The Global Resort to Antidumping, Safeguards,
and Other Trade Remedies
Amidst the Economic Crisis

Chad Bown

OK, so I'm going to talk about trade defense instruments, trade remedies, in particular instruments like anti dumping safeguards, countervailing duties, China-specific safeguards, etcetera. So this is a basic outline. In the packet of what you got today there is a copy of an earlier version of this outline, which also has some appendix slides in it as well that I probably won't be able to get through today.

This is essentially what I'm going to cover. First I'm going to introduce you to the source of the data, and then I'm going to take you through basically what we're seeing so far on our early look at the data. Looking at anti dumping safeguards, countervail. A brief look at some questions that the data raise at first glance, and then we'll see how far we get through there.

OK, so first let me introduce you to the database. Because what I want to do is to highlight this a little bit, because there's a lot of information here. It's new and it's becoming available and it's free. All we ask is that you use it.

What we have put together through funding of the World Bank and DFID and the data collection project that started four or five years ago, was to collect really detailed, product-specific information on anti-dumping cases, countervail, safeguards, China safeguards. Organize it in a way that's transparent, that then can be matched up to other data sets.

So we've got information there on products codes, HS codes which you can take. We've got firm names in there, the petitioning firms, the exporting firms. And as you'll see, I'll be able to exploit some of that to try to tell some of the stories that we're interested in investigating today.

It derives directly from national government publications. So this is not - if you go to the WTO's website - we don't get this data from the WTO. We go back to national governments - the Official Journals and the Federal Register. Which tend to publish very detailed descriptions about what is going on in these cases. So these are original sources. And the "global anti dumping database" is a bit of a misnomer, because it includes much more of these other policy instruments.

OK. The first thing is what I'm going to present to you is going to be a combined analysis of these sorts of policy instruments. We heard a little bit of the discussion this morning already about policy space, and the discussion was pitted about developing countries and how they may be raising applied tariffs because they have water, which they currently do so. Because developed economies primarily don't have this, their applied rates are really close to their bound rates. This is sort of an asymmetric issue.

Well, you can have protection through many different mechanisms, of course. And we just saw one in what Simon illustrated. But you can also use these kinds of measures also. You can use safeguards, anti-dumping. And you have a lot of additional discretion in what you can possibly use these things.

Now when we have multiple instruments like this that we're trying to be able to get an aggregated assessment, a combined assessment, we have to normalize somehow. Because as we know, anti-dumping is country-specific, countervail and China safeguards are country-specific, whereas as global safeguards are supposed to be applied on an MFN basis.

So what we're going to do is we're going to look at these things at the product level. And of course most anti-dumping and countervailing duty investigation, they may target multiple countries. And so what we're going to do is say let's have our unit of observation be a product, a six-digit or eight-digit - whatever the codes are in a given investigation. And then we'll aggregate over policy instruments.

OK, so what does this mean in terms of data? If we take a case like India, India had to anti dumping investigations over certain phosphorous-based chemical compounds, one from China and one from Europe. That's essentially going to be one observation in our data set. One of the results I'll show you here. One product-level investigation. The US had three anti-dumping investigations over polyethylene retail carrier bags, and one countervailing duty investigation over the same product. We're just going to lump that in as basically "the polyethylene retail carrier bag industry asking for protection". That's going to be unit of observation, so that would count also as one in our data set.

OK. When we do that - this is what we have. We've been tracking this data, and if you're a real policy geek and you saw the WTO came out with their numbers on what was happening with anti-dumping in 2008, a couple of weeks back. We've got all of that here. And also the first quarter of 2009.

So what you can see here is the numbers are going up, right? So these are, first of all, new investigations. These are the domestic industries going to their governments and requesting the initiation of a new investigation.

The low point - over basically the 1995 time period until now, across all the countries - is 2007. So we are admittedly going to be starting from the low point. That's when really the lull for trade remedy activity was.

But since 2007 - and this data here is quarterly. On the vertical axis is just the count of new investigations per quarter. You see it increasing in 2008 and into the first quarter of 2009. The breakdown is by developed versus developing. And most of the recent activity is actually by developing countries. Say three-quarters or so of the recent investigations have been by developing countries.

These are imposed measures. So if the lag, there's roughly 12-14 months on average between when an investigation starts and when definitive measures are going to be imposed. So a year. If the low point for new investigations was 2007, the low point for new measures being imposed is going to be in 2008. And that's what we see here: the low point on the last slide bar for new investigations was second quarter of 2007. Here the low bar for new measures being imposed subsequent to those investigations was second quarter of 2008. And since then it's increasing. What that means, of course, is all of the increase in investigations that have occurring over the last couple of quarters, that's going to be pushing out further into this year and into next year in terms of the new definitive measures that are being imposed.

Who are the countries? This is a breakdown for each of the three time periods: 2007, 2008, and then the first quarter of 2009. The left-most columns are the new investigations, and the right-most columns are the new measures that are being imposed.

Who are the countries that are using the instruments? Among the rich, the developed countries, it's the US and Europe. We know that they're big historical users of this, so this probably isn't a surprise.

But there are dominated, especially in the more recent activity, by developing countries. And amongst those developing countries, it's a lot of the emerging markets that we've been talking about: Brazil, Argentina, India, and Turkey especially, are the major users. And so they're now roughly two-thirds of the new cases that have been initiated 2008 into 2009. More than two-thirds are developing countries.

Who are the targets? OK, what exporting countries are the targets? This is just counting up in these country-specific investigations. So this is not going to be - we're going to not include safeguard here, because safeguard is supposed to be applied under an MFN basis, so all exporters are covered there. We'll strip those out and just look at the discriminatory actions where you can name export targets at the country level.

What do we see here? Who are they? More than two-thirds of the targets are going to be developing countries. There is a lot of south-south activity - new protectionism - that's coming in this form, developing countries taking on other developing countries. Within the developing country exporters, of course, a big chunk of that is China. Right? And it's increasing: a third to now more than 40 percent of these new cases, the new investigations, and new measures being imposed are being imposed on China's exports.

With respect to the China-specific question, is this new? The answer to that is no, absolutely not. This is a picture from an earlier paper that I had put together that looked at what's been happening to China and the WTO membership's use of antidumping to target China since 1995. You can see, even since its 2001 accession to the WTO, there's still been a continued increase in anti-dumping use against China. So this phenomenon of using either anti-dumping, countervail, or China-specific safeguards to target exports from China is not new, but it is continuing.

Since the beginning of 2007, what are countries targeting for China's exports? This is just broken down by quarter for various industries. The black on the bottom is chemicals. So, these are sort of traditional industries that tend to go to these particular policy instruments to ask for protection, anti-dumping in particular. Chemicals, iron and steel, they are big representatives here, machinery, but then also textiles and apparel. So it's sort of the usual suspects.

Now I said before, if we measure - a lot of this is just kind of accounting but if you measure how frequently China is targeted as a share of all product country-level investigations, it's a third to 40 percent. If we measure it slightly differently, if we measure it at the product level and we ask the question - in what share of all product-level investigations is China named as one of the countries - it's two-thirds to 70 percent. So, two-thirds to 70 percent of all of these product-level investigations, the primary worry is China. This is a big part of the story here.

Why is it not surprising that countries are targeting China, and why has this not been diminished, especially since China's accession to the WTO in 2001? Arguably, China came into the WTO expecting more MFN treatment than it had received historically. Well, one obviously is with its accession, its exports have been increasing. One of the necessary conditions to be able to use these kinds of instruments is to have exports in the market. So with an increase in exports, there is going to be more potential stuff to target.

When it came into the WTO, now all WTO members had to give China MFN tariff treatment in their schedules. So if you want or need to do something politically about an increase in imports coming in from China, you need to have some potentially WTO-consistent way of doing so. And so these are the kinds of instruments you then resort to, these discriminatory ones. For many countries' anti-dumping provisions in particular, China continues to receive non-market economy status, which makes it easier to find evidence of dumping and to be able to construct larger dumping margins than it would be against other countries. So, that's a potential explanation there.

And then, China really has not yet pushed back on foreign use of anti-dumping against its exporters to any substantial degree. In 2008, they initiated really their first WTO dispute, challenging a couple of US measures here. But this is really the first instance in which they've done that. They have begun to use anti-dumping somewhat themselves, but it's hard to argue that they're doing so in any sort of calculated, retaliatory manner. So there hasn't really been much pushback from China yet.

OK, with the remainder of my time, what I want to look at are some other elements of the data and then try to see what we can see, what we observe, in it so far. So we'll look and see what sectors are being affected, how developed versus developing countries are using it, look at some potential issues that we may be concerned about here and then, in particular, begin to think a little bit about how trade remedy is used in this era of fragmentation and global supply chains. Is there interesting or new stuff going here that we might be concerned with?

So first let's look at how developed economies are using it. This is US, Europe, Canada, Australia, New Zealand, South Korea and Taiwan. What sectors are they targeting? Well, it's not surprising - the historical sectors that have always used trade remedies in these countries. So, it's chemicals, iron and steel, machinery and a little bit of wood products.

How about developing countries? It's basically the same sectors, chemicals, iron, steel and machinery. And then also you add into that plastics, rubber and textiles. So here, the underlying data is coming from the big developing country users: India, Argentina, Brazil, Turkey, etcetera.

The next thing that we did is we said "OK, let's go and look in the database, since we have product codes, HS codes for each one of these investigations and measures. Let's go and look at some questions." So, are countries tending to start investigations and impose measures over the same types of products?

What we did was to say, "Well, how many common six-digit HS codes do we have that are facing new protections?" What we found is basically a list of - I think our last check was 34 products that had common HS codes that were being investigated with potentially new measures imposed across multiple countries. At least two, it could be three; it could be four.

So for example, the first one we have up there is sodium. This is the one interesting case of just clear tit for tat retaliation. In October of 2007, the US initiated an anti-dumping investigation over sodium metal from France. Then in July 2008, this firm MetoSpecio, that also makes sodium metal in Europe, initiated their basically retaliatory anti-dumping case against the same US firm. Right? So, this is just in the same product, or in some variety of the same product.

There are also lots of common products. So one potential concern is the issue that we now sometimes refer to as "trade deflection." So your exports get shut out of one market because one country imposes anti-dumping or countervail or a safeguard or something like that, where's it going to go? And if it goes to some other market, does that then lead to new measures being imposed in subsequent markets? We're going to eventually be able to look into those kinds of issues here.

If you see something like bus and truck tires, the US initiated the first anti-dumping investigation over that, and then Brazil and India followed suit. In all three cases - the US, Brazil and India China was the target. And then Thailand was also brought in in the Indian case as well. So there's of examples, 34 different examples of those kinds of actions.

One potential concern over use of anti-dumping, even if we don't necessarily think that it's substantially increasing, or protection and we don't need to worry about it, the language of anti-dumping, talking about unfair trade. Economists have written about this for decades now, suggesting that we also need also need to worry about funny business going on. And firms in particular manipulating the use of anti-dumping for basically anti-competitive reasons, perhaps market segmenting reasons.

Here's an example of one. I don't know if that's what's going on in this case, but in our fabulous, fabulous database what you can do is you can look up firm names and see if there are common firm names across these countries that are using it. So here's a case. November, 2008, the US imposed definitive anti-dumping duties on PET film. I don't know what this product is. But one of the suppliers was DuPont Teijin Films China, Limited. So a Chinese subsidiary of DuPont Teijin Films the American affiliate of the subsidiary was actually one of the domestic petitioning industries. So I don't know if this is going on in this case, but if I were a competition authority I might say, "What's going on here? Are you trying to segment markets in ways that would lead to higher prices for consumers that we should be worried about?"

India imposed in February, 2009, definitive anti-dumping measures on compact fluorescent lamps from Osram China Lighting Company Limited. So Osram is a German lamp and lighting system, I don't know, somehow related to Siemens. But the Indian subsidiary of Osram was one of the domestic petitioners targeting another foreign subsidiary of basically the same multinational family. So these are just some of the competition concerns that we get concerned with.

Other concerns that economists identified over the years with policies like anti-dumping. Anti-dumping jumping foreign direct investment can sometimes lead to what we call now "protection building trade." Here's a specific example. As we all know, there were some major mergers and acquisitions in the steel industry, especially in Europe in 2006 and 2007. So Mittal acquires Arcelor, Corus and Tata, etcetera. The last major wave of anti-dumping in steel products in Europe, Indian steel exporting firms - before this wave of merger activity came in place - Indian steel exporters were some of the countries targeted. If you look at the investigations this year, so in December 2008, Arcelor and Mittal and Corus are now part of the domestic petitioners within Europe. There's examples of three investigations, some of which have resulted in duties. Certain welded tubes and pipes, wire rods, certain seamless pipes: China, Russia, Belarus, Moldova, Turkey. India is not named in any of these any more. So I don't know in these particular products. You'd have to go and look at the product codes to see if India actually produces this stuff and is big supplier.

But this is the kind of concern we have with policy instruments like anti-dumping in particular, which have this potentially discriminatory element to them: that they can be manipulated in this way.

And then finally if we look at what India is doing with its own anti-dumping, it has preliminary anti-dumping duties that were just imposed on code word flat" from the EC and seven other exporting countries. But Arcelor, Mittal, and Tata were not part of those petitions. So what's going on there? Is this one Indian firm targeting the subsidiaries of other Indian firms in Europe somehow? Are they trying to segment the Indian market? I don't know. These are just questions that come up that we should look into in a little bit more depth.

Finally, for questions about supply chain, you look at what's happening in some of the developing countries in particular. So India, Brazil, and Argentina over the last few months have all initiated new cases over important inputs for textiles industries like yarn, which obviously have implications for downstream producers as well, and which could affect the competitiveness of their textiles suppliers.

And then there is question - India, there's a lot of anti-dumping and new remedy activity going on in India. India has also really started to use these new China-specific safeguards which were embodied in China's accession agreement to the WTO that give WTO members access to this particular policy instrument until 2014. India has five or more of these in 2009 alone that they've just started. They've just started using countervailing duties.

But in terms of anti-dumping, one question is, is India using anti-dumping differently than other countries in East Asia would be, because they might be perhaps more outside of the global supply chain than some of these other countries. And I don't know. But some of the industries, some of the products that they seem to be targeting, they are related to the electronics industry that other countries don't seem to be targeting. So CDs and DVDs and TVs. I don't know that SDH transmission equipment except that it's something that's important for computer hardware or something like that. There could be something to look into there as well. Just a lot of questions that are raised.

So the trade remedy use is on the rise in 2008 with the crisis. There's some developed economy use, but a lot of it is developing countries. The countries are by and large other developing countries, which is important for South/South trade, South/South protectionism issues. And China, especially.

And while arguably the trade remedy protection is only a small part of what's happening overall, it is important to point out that we can't just look at anti-dumping any more. In fact I didn't say this, but if you just look at the first quarter numbers on anti-dumping, it's actually down. The anti dumping numbers are down in the first quarter of 2009. They're down compared to what they were in 2008.

So if you just looked at anti-dumping, you would say the crisis is over, there's no more protectionism. That's why it's important to look beyond anti-dumping to countervail, safeguards, China safeguards, etcetera. The measures through which countries are seeking to impose protection are extending as well.

But the key element of this is, the advertisement on the bottom. We have a lot of freely available detailed data there. Please go use it.