UNIVERSITY OF CINCINNATI Date:___________________ I, _________________________________________________________, hereby submit this work as part of the requirements for the degree of: in: It is entitled: This work and its defense approved by: Chair: _______________________________ _______________________________ _______________________________ _______________________________ _______________________________ Antidumping as a Form of Protectionism Christiane Haberl January 14, 2006 Previous Degrees: MA International Business Studies, FH Kufstein, Austria Degree to be conferred: MA Political Science, McMicken College of Arts and Science Committee Chair: Prof. Thomas Moore Abstract: The purpose of this study is to test statistically the theory advanced by opponents of antidumping measures, that antidumping actions are in reality pure protectionism. Specifically, it relates the internal economic condition such as the international competitive position of countries to the number of antidumping initiations and the antidumping measures taken by them. The independent variables are generally defined as the internal economic condition and the international competitive position. That is, the internal economic condition is measured by Gross National Income (GNI) per capita and the unemployment rate. The international competitive position is expressed in the trade balance and import penetration. The dependent variables are generally defined as protectionist pressure and protectionism. The former is quantified in antidumping initiations and the latter in antidumping measures. The research is conducted separately for the two dependent variables for all 147 WTO member states. The results show that GNI and import penetration have a statistically significant relationship with antidumping actions. Christiane Haberl Antidumping as a Form of Protectionism Master Thesis Table of Contents List of Tables and Graphs............................................................................................ 2 I. Introduction............................................................................................................... 3 II. Review of Literature................................................................................................. 6 II. A. General International Trade Literature............................................................. 6 II. B. General International Political Economy Literature.......................................... 8 II. C. International Organizations and Government Departments............................. 9 II. D. Literature on Protectionism............................................................................ 11 II. E Literature on Antidumping............................................................................... 13 II. F. Literature on Antidumping as Protectionism................................................... 14 II. G. Quantitative Studies Relating Protectionism to Antidumping......................... 18 III. Theoretical Research Design................................................................................ 20 III. A. Hypothesis.................................................................................................... 20 III. B. The Theoretical Regression Model ............................................................... 22 III. C. Description of Data ....................................................................................... 25 IV. Statistical Procedure ............................................................................................ 38 IV. A. Outliers......................................................................................................... 38 IV. B. Statistical Assumptions Concerning the Structure........................................ 39 IV. C. Estimates of the Parameters and Residuals ................................................ 41 IV. D. The Regression Model Including Statistical Aspects.................................... 44 IV. E. Regression Equation .................................................................................... 45 V. Results .................................................................................................................. 47 VI. Conclusion............................................................................................................ 49 Bibliography............................................................................................................... 55 Appendix.................................................................................................................... 59 Page 1 of 72 Christiane Haberl Antidumping as a Form of Protectionism Master Thesis List of Tables and Graphs Tables Table 1: Protectionist Reasons for Antidumping 17 Table 2: Descriptive Statistics for Independent Variables 32 Table 3: Independent Variables Total 33 Table 4: Descriptive and Quartile Statistics for Independent Variables 34 Table 5: Correlations 40 Table 6: Multicollinearity 40 Table 7: Initiations Parameters 41 Table 8: Measures Parameters 42 Table 9: Initiations Coefficients 45 Table 10: Measures Coefficients 45 Table 11: Model Summary 46 Table 12: Significance 46 Graphs Graph 1: % Initiations over Time 27 Graph 2: % Initiations Total 28 Graph 3: % Measures over Time 29 Graph 4: % Measures Total 29 Graph 5: GNI/Capita 34 Graph 6: Unemployment 35 Graph 7: Trade Balance/GNI 36 Graph 8: Import Penetration 37 Graph 9: Boxplots: GNI/capita-Unemployment-Trade Balance-Import Penetration 37 Graph 10: Boxplots: GNI/capita-Unemployment-Trade Balance-Import Penetration 39 Graph 11: P-P Plots 43 Graph 12: Scatterplots 43 Page 2 of 72 Christiane Haberl Antidumping as a Form of Protectionism Master Thesis I. Introduction “The starting point for any discussion of policy for the international economic system of today is the notion of ‘liberal trade’, meaning the goal to minimize the amount of interference of governments in trade flows that cross national borders.” (Jackson 1989, 8). The key principle of the WTO (World Trade Organization), perfectly matching with this statement, is trade liberalization, the elimination of quantitative and non- quantitative trade barriers (Krugman, Obstfeld 2003, 239). However, even from this perspective states can make exceptions and impose trade barriers to fight against unfair competition. One controversial issue concerning the nature of unfair competition is dumping. Dumping means that a company exports a product at a price lower than the price it normally charges on its own home market (WTO 2003a). As to the question if dumping should be considered an unfair trade practice, opinions differ. The WTO does not pass judgment but allows its member states to take antidumping actions when they claim to find evidence of dumping by foreign companies. Specifically, the WTO “allow[s] countries to act in a way that would normally breach the GATT principles of binding a tariff and not discriminating between trading partners” (WTO 2003a). According to proponents of antidumping measures, antidumping legislation can be seen as one of the methods to ensure fair trade (Lindsey 1999, 1). Its opponents think that antidumping actions, disguised as devices to ensure fairness in international trade, can be misused as protectionist measures (Bhagwati 1988, 48), which is a breach of the basic liberal principle of trade liberalization. Page 3 of 72 Christiane Haberl Antidumping as a Form of Protectionism Master Thesis The purpose of this quantitative study is therefore to test statistically the theory advanced by opponents of antidumping measures, that these actions are in reality pure protection. Specifically, it relates the internal economic condition such as the international competitive position of countries to the number of antidumping initiations and the antidumping measures taken by them. The independent variables are generally defined as the internal economic condition and the international competitive position. That is, the internal economic condition is measured by Gross National Income (GNI) per capita and the unemployment rate.1 The international competitive position is expressed in the trade balance and import penetration. The dependent variables are generally defined as protectionist pressure and protectionism. The former is quantified in antidumping initiations and the latter in antidumping measures (Creswell 2003, 96- 97). The research is conducted separately for the two dependent variables for all 147 WTO member states (WTO 2004), which for our purposes are amply representative of the 192 recognized internationally.2 In other words, I wanted to conduct a global study so as to find out to what extent antidumping initiations are a form of protectionist pressure and antidumping measures are a form of protectionism by relating macroeconomic factors to antidumping initiations and measures. Interestingly, the results show a statistically significant relationship between two independent variables - internal economic situation represented by GNI per capita and the international competitive position measured by import penetration - and the dependent variables measured by antidumping initiations and measures. By contrast, 1 According to the World Bank, GNI is the same (World Bank, 2004a). 2 The UN has 191 member countries (UN 2004), which are all states of the world apart from the Vatican. Page 4 of 72 Christiane Haberl Antidumping as a Form of Protectionism Master Thesis unemployment and the trade balance per GNI do not have a statistically significant influence