How Do Exporters Respond to Antidumping...

How Do Exporters Respond to AntidumpingInvestigations?

Yi Lua, Zhigang Taob and Yan Zhangb

aNational University of Singapore, bUniversity of Hong Kong

March 2013

Lu, Tao, Zhang (NUS, HKU) How Do Exporters Respond to Antidumping Investigations? March 2013 1 / 45

IntroductionBackground

Increasing trade �ows due to rounds of reduction in tari¤s andadvancement in telecommunications and logistics

Yet persistent and even increasing use of contingent trade protectionpolicies (especially antidumping investigations), which are permissibleunder the World Trade Organization (WTO) rules and regulations(e.g., Prusa, 2001; Zanardi, 2006; Bown, 2011).


IntroductionResearch Question

Existing research generally focuses on the impact of antidumpingmeasures on protected �rms and industries (see, for example,Gallaway, Blonigen and Flynn (1999), Konings and Vandenbussche(2008), and Pierce (2011))

Limited studies on the impact of antidumping measures on a¤ectedforeign exporters.Using China Customs data that covers monthly transactions of allChinese exporters, we investigate how Chinese exporters respond toU.S. antidumping investigations during the period of 2000-2006.


IntroductionImportance

Essential for piecing up a picture of market competition betweendomestic �rms and foreign exporters in both the short-run and thelong-run, and its implications for industry dynamics and nationalcompetitiveness

Understanding whether foreign a¤ected exporters should continuetheir exporting behavior in response to negative shocks brought byantidumping investigations compliments the existing �rmheterogeneity literature that focuses primarily on the entry decisioninto export market


IntroductionOur Focus

Anatomize how the trade-dampening e¤ect operates: extensivemargin versus intensive margin

Investigate how di¤erent exporters (direct exporters versus tradeintermediaries, and single-product direct exporters versusmulti-products direct exporters) may respond to antidumpinginvestigations

Study whether exporters adjust export prices of the concernedproducts.

Examine di¤erential impacts across di¤erent stages of theantidumping investigation process

Finally, provide a coherent explanation to the aforementioned �ndingsbased on recent developments in trade theories.


Road Map

Background

Data

Estimation Strategy: DID

Main Results: Figures

Robustness

Discussion

Conclusion


Background


Data

China Customs Data over the period of 2000-2006

covers monthly export transaction of every Chinese exporter to theU.S., including product information (classi�ed at the Chinese HS-8 digitlevel), export volume, export value, and identity of Chinese exporters

Global Antidumping Database from the World Bank

has detailed information on each antidumping case, such as productinformation (classi�ed at the U.S. HS-10 digit level), initiation date,preliminary ITC and DoC determination dates, and �nal ITC and DoCdetermination dates

We match the two data sets at the HS-6 digit level, the mostdisaggregated level at which the two data are comparable


DataUS Antidumping Cases against Chinese Exporters over 2000-2006

A total of 47 U.S. antidumping cases against Chinese exporters

Two cases (one in early 2000 and the other in late 2006) are droppedas there is not enough pre- or post-antidumping period for us to carryout di¤erence-in-di¤erences estimation.

28 cases out of the remaining 42 cases ended up with a¢ rmative �nalITC determination (referred to as successful cases)

5 out of the 6 cases that had a¢ rmative preliminary ITCdetermination received negative �nal ITC determination (referred toas unsuccessful cases) and 1 was withdrawn before the �nal ITCdetermination (referred to as withdrawn cases);

8 cases were either withdrawn before the preliminary ITCdetermination or given the negative preliminary ITC determination(referred to as terminated cases).


Estimation strategy

To identify the possible e¤ects of antidumping investigations, weemploy the di¤erence-in-di¤erences (DID) estimation strategy at boththe product level (de�ned at HS-6 digit) and the �rm-product level

time variation: before and after the relevant stages of the antidumpinginvestigation process: initiation, ITC preliminary determination, andITC �nal determinationcross-sectional variation: a¤ected products (treatment group) anduna¤ected (control group)

Control groups

all una¤ected products/�rms within the same HS-4 digit productcategory where the a¤ected products/�rmsa matched group, constructed using the method of Blonigen and Park(2004).


Estimation strategy

Estimation speci�cation

binary variables

ypt = β1Treatmentp � Post1pt + β2Treatmentp � Post2pt+β3Treatmentp � Post3pt + λp + λt + εpt , (1)

duties

ypt = β1Treatmentp � Post1pt + β2Preliminary Dutiespt � Post2pt+β3Final Dutiespt � Post3pt + λp + λt + εpt , (2)


Main ResultsProduct-level Quantity Response


Main ResultsExtensive versus Intensive Margins: Extensive Margin


Main ResultsExtensive versus Intensive Margins: Intensive Margin


Main ResultsHeterogeneous Responses: Trade Intermediaries versus Direct Exporters


Main ResultsHeterogeneous Responses: Single-product versus Multi-product Direct Exporters


Main ResultsPrice Response


Main ResultsTrade-de�ection Response


Robustness checks

Checks on the DID identi�cation assumption

di¤erential time trends before the antidumping investigation (Table A3)inclusion of product-speci�c time trends (Table A4)

Measurement errors

quarterly instead of monthly data (Table A5)exclusion of outliers � the top and bottom 1% observations (Table A6)

Inclusion of unsuccessful and withdrawn cases (Table A7)

Exclusion of antidumping cases concurrently investigated by othercountries (Table A8)


Robustness checks

Exclusion of processing trade (Table A9)

Exclusion of foreign �rms (Table A10)

Aggregation bias (Table A11)

Controlling for other trade shocks

safeguard measures (Table A12)China�s WTO accession (Table A13)

Di¤erent products (import demand elasticity) (Table A14)

Alternative de�nition of single-product direct exporters (Table A15)


DiscussionDi¤erences across Products

Summary of the �ndings

there is signi�cant extensive margin e¤ect, i.e., a sharp decrease in thenumber of exportersintensive margin e¤ect is not found when a binary variable of treatmentstatus is used, but uncovered when the antidumping duties are usedthere is little adjustment in F.O.B. export prices when a binary variableof treatment status is used, but a modest increase in prices when theantidumping duties are usedno trade de�ection



No trade de�ection

to Canada or the EU (similar structure to the U.S.)among di¤erent types of exportersdi¤erent quantiles

Possible explanations

the �xed costs of exporting are country-speci�c (e.g., Chaney, 2008;Arkolakis, 2010)Indeed, we �nd in our data that Chinese exporters to the U.S. areheavily weighted in the U.S. market (63% of these exporters�worldexport revenues)



Inference: products facing di¤erent levels of antidumping duties maybehave di¤erently

Further investigation: three quantiles

low (i.e., < 50%)medium (i.e., 50 � 100%)high (i.e., > 100%) antidumping duties.


DiscussionDi¤erences across Products: Low Quantile

Low margins of antidumping duties are quite small: average about20.85%

the a¢ rmative determinations should be viewed as surprises to theproducers in these products

according to the study by Blonigen and Park (2004), exporters undersuch a scenario will raise prices over time

the small magnitude of duties makes it easy for producers easy raiseprices, and by doing so, they can get rid of the duties (and nuisances)in the future years through administrative reviewsraising prices is achievable given that these products are relativelyinelastic (i.e., the average elasticity of import substitution is 3.1)

The estimation results suggest that producers in these productsincrease prices by around 24%


DiscussionDi¤erences across Products: Low Quantile

Final sales prices of the export products concerned in the U.S. marketwill generally increase

lead to a decline in demand of the products concernedat the status quo, shrinking market demand is likely to lead to adecrease in �rm export volume across the boardindeed, it is found that the average export volume per exporterdecreases by 20%

Exporters could compensate the loss in demand by the increase intheir F.O.B. export prices

24% increase in export prices versus 20% decrease in export volumeno signi�cant exit of exporters


DiscussionDi¤erences across Products: High Quantile

High margins of antidumping duties: average about 185%

Such huge negative shocks drive weak exporters out of the market

especially, with large variations in exporter heterogeneity: i.e., theaverage coe¢ cient of variation is 0.32indeed, we �nd that the number of exporters fall by 52%

The wipeout substantially consolidate the market

more productive exporters can not just survive but even grow after theimposition of antidumping dutiesindeed, we �nd that surviving exporters modestly increase their F.O.B.prices and maintain their export volume by grabbing the market left theexiting �rms


DiscussionDi¤erences across Products: Medium Quantile

Blow is relatively large but not devastating: average about 86%

a number of exporters exit the market: fall by 30%

The post market remains competitive

especially in such elastic markets: the average elasticity of importsubstitution is 8.98surviving exporters may lower the prices to increase the competitivenessand their export volume also fall


DiscussionDi¤erences across Firms

Summary of the �ndings

less productive �rms more likely to exit U.S. marketdirect exporters more likely to exit U.S. market than are tradeintermediariesmulti-product direct exporters are more likely to exit the U.S. marketthan are single-product direct exporters upon issuance of an a¢ rmativepreliminary ITC determination, but the opposite holds following ana¢ rmative �nal ITC determination


DiscussionDi¤erences across Firms: Productivity E¤ect

Generally in line with the �rm heterogeneity literature

in the case of a per-period �xed cost of exporting (Melitz, 2003), thenegative shock causes a fall in export revenue, as a result of whichsome less productive ones are unable to recover the per-period �xedcost of exportingin the world without �xed cost of exporting (Melitz and Ottaviano,2008), the negative shock causes a decrease in exporters�markups, as aresult of which some less productive ones incur losses


DiscussionDi¤erences across Firms: Trade Intermediaries versus Direct Exporters

Stylized facts

trade intermediaries are more multi-market for the concerned products,and sell more products in the US68% of trade intermediaries sell the a¤ected products to countriesother than the U.S., versus 64% for direct exporters91% of trade intermediaries sell products other than the a¤ectedproducts in the U.S. market, versus 81% for direct exporterstrade intermediaries could tap into their reserves in other products andother markets to cross-subsidize their a¤ected products in the U.S.,which allows them to better weather the storm brought by theantidumping investigations


DiscussionDi¤erences across Firms: Single- versus Multi-product Direct Exporters

Overall, single-product direct exporters are more likely to exit the U.S.market

This can be explained by the greater capabilities of multi-productdirect exporters to cross-subsidize the a¤ected products than theirsingle-product counterparts, which is in line with our aforementionedexplanation on the di¤erential likelihood of exiting between tradeintermediaries and direct exporters



Di¤erence between preliminary and �nal determination: uncertainty

A simple model

two periods: 1 for preliminary and 2 for �nal determinationpro�ts in each period: πduties paid: dprobability of a¢ rmative �nal determination at period 1: p (28 out of34 in our sample)



Choices

period 2: if π > d , stay; if π < d , exitperiod 1: if stay, expected payo¤ isπ � pd + δ(π � pd) = (1+ δ)(π � pd); if exit, 0) if π > pd , stay; if π < pd , exit

Equilibrium

if π > d , stay after the preliminary and �nal determinationsif d > π > pd , stay after the preliminary but exit after the �naldeterminationif pd > π, exit after the preliminary



Our �ndings imply

single-product direct exporters relatively concentrate in the secondgroupmulti-product direct exporters relatively separate in the �rst and thirdgroupsmulti-product direct exporters are more heterogeneous thansingle-product direct exporters

Dispersion in the data

single-product direct exporter: 0.23multi-product direct exporter: 0.32


Conclusion and Implications

Our results suggest that U.S. antidumping investigations wipe outweaker Chinese exporters and leave behind more productive exportersoften with multi-market and multi-product coverage

In many product categories (especially those facing high margins ofantidumping duties), the wipeout results in a substantialconsolidation of Chinese exporters, under which the surviving,stronger Chinese exporters can even raise their F.O.B. export pricesand at the same time grab the market share left by the weaker ones



Existing studies (e.g., Pierce, 2011) on the impacts of U.S.antidumping measures on its domestic, protected �rms have shownthat while protected �rms are able to increase their prices, theirphysical productivity actually falls

And the protection through temporary imposition of antidumpingduties is more tilted toward the weaker domestic producers, therebyslowing down the resource reallocation towards more productive ones.



Taken together, U.S. antidumping investigations de�nitely bringtemporary bene�ts to domestic producers, who expand their marketshare, as Chinese imports substantially fall and numerous Chineseexporters exit the market

In the long-run (especially when the antidumping duties are lifted),however, antidumping investigations may spell more troubles for U.S.domestic producers in their competition with the Chinese exporters,as the former become less productive on average whereas the latterexperience just the opposite


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