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Effectiveness of the Effectiveness of the Canadian Antidumping Canadian Antidumping

Regime: Is Trade Regime: Is Trade Restricted?Restricted?

Nisha Malhotra and Horatiu RusNisha Malhotra and Horatiu Rus

WE would like to thank TARGET (UBC) for WE would like to thank TARGET (UBC) for funding the above projectfunding the above project

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MotivationMotivation The large and growing use of antidumping

throughout the world: an interesting phenomenon, theoretically and empirically.

Do antidumping duties amount to trade protection for domestic producers?• Unambiguously yes, when all foreign firms would be

restricted access to the domestic market, but Unclear when only certain firms/countries singled out

• Antidumping - by its nature discriminatory among exporters

Also relevant from a policy point of view: AD duties - higher prices: penalize industries that use these protected goods and hurt final consumers.

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ImportanceImportance A significant amount of work, theoretical and

empirical, to study effectiveness and ramifications of AD investigations for an importing country:• There have been quite a few empirical studies carried

out analyzing the trade effect of ANTIDUMPING investigations for various countries: US, EU, Mexico and more recently for a few other developing countries.

However, the results are not consistent across these studies for the various countries; thus one can not infer the effect of AD in Canada from these studies

Research on the use or the effect of the Canadian AD law is quite scarce.

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LiteratureLiteratureThere is no consensusThere is no consensus

Prusa (1997) : trade effects of US antidumping Prusa (1997) : trade effects of US antidumping actions actions

antidumping duties restrict trade named countries. antidumping duties restrict trade named countries. Trade diversionTrade diversion to the ‘non-named’ countries to the ‘non-named’ countries

Vandenbussche et all (1999): case of European Vandenbussche et all (1999): case of European Union. Union.

antidumping duties restrict trade ‘named’ countriesantidumping duties restrict trade ‘named’ countries No trade diversionNo trade diversion to the ‘non-named’ countries to the ‘non-named’ countries

Niels (2003) shows that for Mexico there isn’t Niels (2003) shows that for Mexico there isn’t significant trade diversion after AD duty is significant trade diversion after AD duty is imposed on the named countriesimposed on the named countries. .

Does not help infer - trade effects of AD policy in CanadaDoes not help infer - trade effects of AD policy in CanadaVideo.edhole.com

Importance of AD in CanadaImportance of AD in CanadaNumber of Properly documented casesNumber of Properly documented cases

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Proportion of AD cases initiated by the countries

0

0.05

0.1

0.15

0.2

0.25

0.3

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

India United States Canada China European Community

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Percentage of AD cases initiated in each sector

11

03

0 0

73

04 2

67

2 0 2

92

138

0 1 1 2 0 1

58

51 12 0

16

8

1 30

13

2 1

34

13

2 4

0

10

20

30

40

50

60

70

80

Agri

MineralChem

Plast/ru

b VIII

wood X

Textile XII

XIII

Base M

etal

Mach/A

ppliance

s

Transp

.equip XX

Sectors

Canada United States European CommunityVideo.edhole.com

Canada-Antidumping lawCanada-Antidumping law Canada's anti-dumping and countervailing law is Canada's anti-dumping and countervailing law is

contained in the contained in the Special Import Measures ActSpecial Import Measures Act (SIMA).(SIMA).

Canada Border Services Agency (CBSA) formerly

- Revenue Canada (CCRA) and the Canadian (CCRA) and the Canadian International Trade Tribunal International Trade Tribunal (Tribunal)(Tribunal) are jointly are jointly responsible for administering SIMA responsible for administering SIMA

If an industry in Canada believes that it is being If an industry in Canada believes that it is being injured by unfair competition through dumping, it injured by unfair competition through dumping, it may request the imposition of antidumping duties may request the imposition of antidumping duties by filing a petition with CBSA.by filing a petition with CBSA.

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Canada-Antidumping lawCanada-Antidumping law Steps undertaken in an AD investigationSteps undertaken in an AD investigation

• Petition filed by the firm/firms on behalf of the Petition filed by the firm/firms on behalf of the industry (petitioners must represent at least industry (petitioners must represent at least 25% of domestic production )25% of domestic production )

• CBSA starts an investigation and decides CBSA starts an investigation and decides whether to begin a formal investigation or drop whether to begin a formal investigation or drop the case (Sends a copy to the Tribunal)the case (Sends a copy to the Tribunal)

• Tribunal’s preliminary Injury findingTribunal’s preliminary Injury finding• CBSA preliminary dumping findingCBSA preliminary dumping finding• CBSA final dumping findingCBSA final dumping finding• Tribunal’s final injury findingTribunal’s final injury finding

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Difference in ANTIDUMPING Difference in ANTIDUMPING legislationlegislation

WTO ADA: harmonization of ground principles (normalvalues, need to prove injury etc.), still allows fornational/regional regulatory variation1. ‘two-track’ AD determination, like the US, unlike the EUprospective system, unlike the US (retrospective)1. no lesser duty rule: “full duty rule” - unlike the EU regime,but similar the US (more protectionist?)1. the cumulation principle repeatedly maintained (poolexporters to determine injury)1. the 2% de minimis principle rarely used, at country level(expect lower diversion if C.A. national)1. Some results may be interpreted from the perspective of

these institutional and procedural differences in AD legislation.

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QuestionQuestion

Trade effects of AD policy in the manufacturing Industry in Canada.

• Are antidumping duties effective in restricting trade from Countries named in the ANTIDUMPING petition?

• Is there any trade diversion to other non-named countries thus making AD ineffective as a protectionist tool.

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Question-Why?Question-Why? imports might be diverted away from the imports might be diverted away from the

alleged source country to the non-alleged alleged source country to the non-alleged countries rendering AD law ineffective in countries rendering AD law ineffective in benefiting the domestic Industry. benefiting the domestic Industry. • beneficiary of AD duties is not the domestic beneficiary of AD duties is not the domestic

industry, but exporters to whom trade is industry, but exporters to whom trade is diverteddiverted

These questions are also relevant from a These questions are also relevant from a policy point of view; AD duties like any policy point of view; AD duties like any other tariff translate into higher prices.other tariff translate into higher prices.• These higher prices penalize industries that These higher prices penalize industries that

use these protected goods and also hurt final use these protected goods and also hurt final consumersconsumers

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DATADATA

Data : 1990 - 2000• Level of Imports: Detailed 10-digit HS-level

import data was obtained from Statistics Canada.

• Antidumping Data: Canadian antidumping measures was constructed using the report from the Canadian Border Services Agency’s Historical Listing of Antidumping Cases.

• confirmed from WTO Antidumping Gateway and complemented from Statistics Canada’s directory of HS codes(The ANTIDUMPING data is available from the authors. nisha@interchange.ubc.ca/ horatiu@interchange.ubc.ca)Video.edhole.com

Empirical SpecificationEmpirical Specification

lnm: Log Importslnm: Log Imports a: affirmativea: affirmative n: negativen: negative u: Undertakingu: Undertaking t(1-3): Years after AD t(1-3): Years after AD

is filed; t1: one year is filed; t1: one year after petition is filedafter petition is filed

Interaction termsInteraction terms Include year Include year

dummiesdummies

Models:Models: Ordinary Least Ordinary Least

Square Square RegressionsRegressions

Fixed Effect ModelsFixed Effect Models

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ResultsResults Sizeable trade restriction effects: strong evidence of

substantial (76%) trade restriction from named countries, one period after the imposition of duties

a time-effective protectionist tool: initial drop not followed by subsequent import decreases in later periods

no strong indication of an “investigation”/“harassment” effect of Canadian AD: a negative dumping determination has no significant trade effects for both named and non-named sources (transparency, prospective AD?)

Canadian Antidumping - timely and effective as a protectionist instrument

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Comparing the resultsComparing the results

Prusa(2001): substantial (50%) import drop from

the named sources in the first period

Vandenbussche et al.(2001): comparable imports restrictions of 67% determination

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Canadian AD = timely and effective as protectionist tool:

significant reduction in imports from named sources, concentrated in the period immediately after the imposition of duties

little to no evidence of imports being diverted toward non-named countries or firms

Possible refinements: does product homogeneity/heterogeneity matter? Why no effect for undertakings?

ConclusionConclusion

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