What Explains the Proliferation of Antidumping Laws?

Abstract

A recent phenomenon is the rapid spread of Antidumping (AD) laws mainly amongst developing countries ‘i.e. China, India, Mexico). Between 1980 and 2003 the number of countries in the world with an AD law more than doubled going from 36 to 97 countries. This proliferation of trade protection laws amongst developing countries is likely to have substantial implications for trade as recently shown by Vandenbussche and Zanardi (2007). The purpose of this paper is to use a duration analysis to investigate the determinants leading a country to adopt an AD law. We also analyze the related question of what explains the heterogeneity between countries that can be observed in terms of the time between adoption and their first use of the AD law. We find strong evidence that retaliatory motives are at the heart of the proliferation decision as countries that were targeted by AD actions of traditioal users in the past (i.e., US, EU) are much more likely to adopt an AD law. Also, our evidence suggests that past trade liberalization substantially increases the probability of a country to adopt an AD law. In addition, we find that the size of the chemicals sector and the extent of steel imports are positively correlated with the probability to adopt. The amount of inward FDI on the other hand has a clear negative effect on the probability to adopt. While short term macroeconomic factors like GDP growth and exchange rate volatility seem to matter less for adoption, asymmetric regional shocks and the development level of a country seem to raise the probability of starting to use an AD law. Our results are robust to several specifications of duration models.

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