Cyclical Dumping and US Antidumping Protection: 1980-2001

In this paper, I test the theory that weak economic conditions in a foreign economy cause cyclical dumping, i.e., the temporary sale of products in a trading partner’s economy at a price below average total cost. In order to test this theory, the econometrician would like to have the information on prices and costs available to two agents, the domestic industry seeking protection and the government that makes a dumping determination. Because this information is not available to the econometrician, I utilize a novel strategy to try to uncover evidence of cyclical dumping. Using country-specific information on foreign economic shocks in manufacturing industries, I estimate a joint model of filing decisions by the US industry and antidumping decisions by the US government. I identify strong evidence of cyclical dumping - economic weakness in a foreign industry is associated with an increase in the probability of antidumping protection. After controlling for other factors that likely drive industry filing and government decisions, I find that a one standard deviation fall in the growth of employment in a foreign economy’s manufacturing industry (a measure of the strength of demand) increases the joint probability that the US industry will file an antidumping petition and the US government will impose a preliminary (temporary) antidumping measure by a factor of 3 to 10, depending on the exact model specification. Further, a one standard deviation fall in foreign employment growth doubles to quadruples, depending on specification, the joint probability that a petition will be filed and a final (long-lasting) antidumping measure will be imposed. In finding that US trade policy is applied countercyclically to foreign economic fluctuations, the paper suggests that trade policy may reduce the extent of business cycle transmission across countries.