Meredith A. Crowley

Trade Deflection and Trade Depression

This is the first paper to empirically examine whether a country’s use of an import restricting trade policy distorts a foreign country’s exports to third markets. We first develop a theoretical model of worldwide trade in which the imposition of antidumping and safeguard taris, or “trade remedies,” by one country causes significant distortions in world trade flows. We then empirically test this model by investigating the eect of the United States’ use of such import restrictions on Japanese exports of roughly 4800 products into 37 countries between 1992 and 2001. Our estimation yields evidence that US restrictions both deflect and depress Japanese export flows to third countries. Imposition of a US antidumping measure against Japan deflects trade, as the average antidumping duty on Japanese exports leads to a 5-7% increase in Japanese exports of the same product to the average third country market. The imposition of a US antidumping measure against a third country depresses trade, as the average US duty imposed on a third country leads to a 5-19% decrease in Japanese exports of that same product to the average third country’s market. We also document the substantial variation in trade deflection and trade depression across dierent importing countries and exported products.

Import Protection, Business Cycles, and Exchange Rates: Evidence from the Great Recession

This research estimates the impact of macroeconomic fluctuations on import protection policies over 1988:Q1-2010:Q4 for five industrialized economies -- the United States, European Union, Australia, Canada and South Korea. There is evidence of a strong countercyclical trade policy response in the pre-Great Recession period of 1988:Q1-2008:Q3 during which increases in domestic unemployment rates, real appreciations in bilateral exchange rates, and declines in the GDP growth rates of bilateral trading partners led to substantial increases in new temporary trade barriers. It then applies this pre-Great Recession empirical model to realized macroeconomic data from 2008:Q4-2010:Q4 and find it predicts a surge of new import protection during the Great Recession -- e.g., for the US and EU, the model predicts new trade barriers would cover an additional 15 percentage points of nonoil imports, well above the baseline level of 2-3 percent of import coverage immediately preceding the crisis. Finally, the research examines why the realized trade policy response differed from model predictions. While exchange rate movements played an important role in limiting new import protection during the Great Recession, there is also evidence of one particularly important change in trade policy responsiveness; i.e., in this period, governments refrained from imposing new temporary trade barriers against foreign trading partners experiencing their own weak or negative economic growth.

Self-Enforcing Trade Agreements: Evidence from Time-Varying Trade Policy

The Bagwell and Staiger (1990) theory of cooperative trade agreements predicts new tariffs (i) increase with imports, (ii) increase with the inverse of the sum of the import demand and export supply elasticities, and (iii) decrease with the variance of imports. The authors find US import policy during 1997-2006 to be consistent with this theory. A one standard deviation increase in import growth, the inverse of the sum of the import demand and export supply elasticity, and the standard deviation of import growth changes the probability that the US imposes an antidumping tariff by 35 percent, by 88 percent, and by -76 percent, respectively.

Policy externalities: How US antidumping affects Japanese exports to the EU

This paper investigates the international externalities associated with US use of antidumping (AD) measures by examining the relationship between US AD duties (ADDs) and Japanese exports to the US and EU over the 1992-2001 period. We first examine the trade destruction and trade diversion associated with Japanese exports to the US market resulting from US AD duties. We then investigate whether US ADDs impose externalities on a non- targeted third country by examining the effect of these US policies on Japanese exports to the EU. We document sizable trade deflection and trade depression in the EU market resulting from US ADDs. Model estimates indicate that, on average, roughly one quarter to one third of the value of Japanese exports to the US thought to be destroyed by a US ADD is actually deflected to the EU in the form of a contemporaneous increase in exports. Finally, we present evidence that US ADDs impose terms-of-trade externalities on non-targeted markets. We find that US duties on Japanese exports are associated with substantially lower Japanese export prices in the EU market.

China's Export Growth and the China Safeguard: Threats to the World Trading System?

Is there evidence from Chinas pre-WTO accession period that newly imposed U.S. or EU import restrictions deflect Chinese exports to third markets? The authors examine this question by drawing on a newly constructed data set of U.S. and EU product-level import restrictions on Chinese trade imposed between 1992 and 2001 and estimate their impact on Chinese exports to 38 alternative markets. There is no systematic evidence that the import restrictions imposed during this period resulted in Chinese exports surging to such alternate destinations. To the contrary, there is weak evidence of a chilling effect on Chinas exports to third markets.

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 partners economy at a price below average total cost. Although I am unable to observe prices or costs directly, a novel identification strategy allows me to uncover evidence of cyclical dumping. Using country- specific information on foreign economic shocks in manufacturing industries, filing decisions by the US industry, and antidumping decisions by the US government, I am able to identify strong evidence of cyclical dumping. 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 economys manufacturing industry quadruples the joint probability that the US industry will file an antidumping petition and the US government will impose a preliminary (temporary) antidumping measure. Further, a one standard deviation fall in foreign employment growth more than doubles the joint probability that a petition will be filed and a final (long-lasting) antidumping measure will be imposed.

The Empirical Landscape of Trade Policy

This paper surveys empirically the broad features of trade policy in goods for 31 major economies that collectively represented 83 percent of the worlds population and 91 percent of the worlds GDP in 2013. It addresses the following five questions: Do some countries have more liberal trading regimes than others? Within countries, which industries receive the most import protection? How do trade policies change over time? Do countries discriminate among their trading partners when setting trade policy? Finally, how liberalized is world trade? The analysis documents the extent of cross-sectional heterogeneity in applied commercial policy across countries, their economic sectors, and their trading partners, over time. It concludes that substantial trade policy barriers remain as an important feature of the world economy.

US–Stainless Steel (Mexico)

The US–Mexico Stainless-Steel dispute presents two interesting questions. First, what role does and should stare decisis (precedent) play in the WTO dispute-resolution system? Second, are there circumstances under which exceptional methodologies, i.e. ‘zeroing’, can better achieve the stated objectives of the agreement than the standard methodologies explicitly stated in the agreement? We argue that the institutional structure and foundational norms of the WTO imply the need for Panels to be bound by the prior decisions of the Appellate Body. Our economic analysis describes the costs and benefits of legal systems with and without precedent. Regarding methodology, we argue that any analysis of the suitability of a methodology (i.e. ‘zeroing’) must be undertaken jointly with an analysis of the underlying objective of the agreement (i.e. remedying injury). We conclude that, under limited circumstances, the ‘zeroing’ methodology is more effective at remedying injury than the ordinary methodology outlined in the Anti-Dumping Agreement.

Understanding the Great Trade Collapse of 2008-09 and the Subsequent Trade Recovery

This article documents the Great Trade Collapse of 2008–09, as well as the dramatic recovery in trade of 2009–10. The authors consider how three distinct policy actions — fiscal stimulus, funding for trade finance and a commitment to refrain from increasing trade barriers — might have affected both the collapse and recovery.

Japan – Countervailing Duties on Dynamic Random Access Memories from Korea (DS 336 and Corr.1, adopted 17 December 2007)

This article analyzes the decision of the WTOs Appellate Body in the dispute between Japan and Korea over Japans imposition of countervailing duties on DRAMs imported from Korea. The legal analysis comments on the analysis of evidence, the lack of remand authority in the WTO system, and the meaning of a ‘direct transfer of funds’. The economic analysis discusses several issues related to determining the magnitude of the benefit to a firm of a financial bailout and the appropriate duration of a countervailing duty to offset the injury caused by a non-recurrent subsidy. We offer legal and economic criticisms of the Appellate Bodys conclusion regarding the relationship between subsidies and injury to the domestic import-competing industry. We conclude that the Appellate Bodys decision weakens the requirement of a causal link between subsidies and injury and, consequently, may open the door to protectionist abuse of the Subsidies and Countervailing Measures Agreement.