Todd Allee University of Illinois Preventing Protection: Actions by Anti-Protection Interests to Limit U.S. Import Barriers

Emphasize Protection, yet Free Trade Reigns Political economy literature tends to examine protection - “Protection for Sale,” etc. Yet freer and greater trade is the norm: - World trade has grown exponentially since World War II - Development and expansion of global trade institutions WTO members - Continued growth and expansion of PTAs - Average tariff rates are very low - 3-5% in OECD - <10% in most middle and lower-income countries

Understanding Contemporary Trade Policymaking Emphasis historically has been on: - Executive and legislative actors - Tariffs - Trade agreements But much of the “action” in modern trade policymaking involves: - Bureaucratic/administrative actors - Non-tariff barriers

Antidumping Most common and prominent type of NTB Handled by administrative actors General belief that antidumping is frequently abused and that antidumping relief is easy to obtain But is it really? - Administrative agencies are largely independent - Process of investigating and implementing AD is exhaustive - Many petitions for AD are rejected

Overview of Argument The process by which antidumping duties are used is not well understood The role of myriad anti-protection interests in this process has been ignored Anti-protection interests can provide important information during antidumping investigations, which should reduce the likelihood of duties being imposed

The Antidumping Process (in the US) Groups of firms (in an industry) apply for AD duties in response to alleged “dumping” by foreign firms in the US Preliminary investigation Final investigation A bifurcated process - International Trade Administration (ITA) investigates “dumping” - International Trade Commission (ITC) determines whether domestic firms (industry) has suffered “material injury”

The Antidumping Process (in the US) Groups of firms (in an industry) apply for AD duties in response to alleged “dumping” by foreign firms in the US Preliminary investigation Final investigation A bifurcated process - International Trade Administration (ITA) investigates “dumping” - International Trade Commission (ITC) determines whether domestic firms (industry) has suffered “material injury”

Role of Anti-Protection Interests Pro-protection applicant firms provide initial information in support of their request for AD Other, anti-protection, actors also provide information throughout the investigation: - Fill out detailed questionnaires about industry and market conditions - Submit letters and others materials - Testify during ITC hearings

Who Might Testify Against AD Protection? Foreign firms (exporters) who are targeted in the AD petition US importers of the good (i.e., middlemen) US “consumers” of intermediate goods (i.e., manufacturers) US retailers who sell the good Unsupportive US firms in the same industry (often larger multinationals) Academic or industry “Experts” Others (politicians, foreign government representatives)

Who did Testify Against AD Protection? Across 140 final ITC investigations: An average of 4.5 actors testify in opposition to the AD petition Foreign firms named in the petition testified in 43 cases (32%) US importers of the good testified in 28 cases (21%) US intermediate good “consumers” testified in 72 cases (53%) US retailers who sell the good testified in 11 cases (8%) Unsupportive US firms in the same industry testified in 31 cases (23%) Academic or industry “Experts” testified in 59 cases (43%) Others testified in 16 cases (12%)

Sample and Estimation 140 cases between Countries (firms) within investigations Logit with clustering on overall investigation Control variables for: - Testimony by domestic firms and other actors - Economic indicators (import volume, changes in import volume, unemployment, etc) - Industry employment, # of firms, AD user, WTO member, alliance ties, tariff rate, method of investigation, etc.

Findings, part 1 Number of foreign firms negative <.01-<.05 Total number of anti-protection actors negative <.10 Number of different types of negative not sig anti-protection actors

Findings, part 2 US importersno relationship US “consumers”no relationship US retailersnegative < Unsupportive US firms negative <.10 in the same industry Academic or industry “Experts” negative not significant

Substantive Impact Impact of involvement of anti-protection interests: - When there is no testimony provided by foreign firms, retailers, or unsupportive US firms, the likelihood of duties is 73% - With the testimony of just three individuals from each of these firms, the likelihood of duties drops to 59% - With the testimony of six individuals from each of these groups, the likelihood of duties drops further to 44%

Future Work and Extensions More directly pinpoint and explain impact of each anti-protection group Consider “dyadic” or firm-specific effects of testimony Compare anti-protection testimony (which reduces the likelihood of protection) with pro-protection testimony (which seems to have no effect) Code and examine other behavior of anti-protection groups - written submissions and letters Expand sample into 2000s Explore when and why members of Congress submit letters or testify