Trade Liberalization, Tariff Overhang and Antidumping Filings in Developing Countries+

It has been argued that antidumping (AD) facilitates trade liberalization by serving as a release valve for protectionist pressure. We focus on a group of prominent ADusing developing countries and examine the validity of the pressure release hypothesis. The fact that these new AD users generally began using AD after significant trade liberalization supports the hypothesis. Yet, if pressure exists to reverse liberalization, it is not because products that were subject to AD scrutiny were treated poorly in the liberalization programme. For nearly all major new users products subject to AD investigations do not have unusually low tariffs nor have they experienced unusually large tariff reductions. Our main point is that that AD is not the only policy option. For all countries studied the tariff bindings are weak in the sense that the bound levels exceed the applied levels by a considerable margin. Because of this, developing countries can raise their applied tariffs without running afoul of WTO rules. This is not just a theoretical possibility – we show that for some countries 8 out of 10 HS6 tariffs have been increased in recent years. Countries could certainly increase applied rates for industries that are particularly susceptible to injury from trade. By doing so AD’s vague and economically illogical rules could be reformed without placing other WTO trade liberalization initiatives at risk. The reality is, however, that industries prefer AD because AD duties are often far larger than the bound rates. With the cumulation provision industries can effectively use AD protection against all major import sources. Because AD is not needed as pressure release valve and because it involves high duties against most import sources, AD is likely more damaging to the world trading system than the pressure release valve hypothesis suggests. + Paper is VERY preliminary. Many cites to related literature are missing. This initial draft is just to get our ideas down on paper and is not ready for circulation. * Department of Economics, Rutgers University, New Brunswick, NJ 08901. Email: [email protected] ** World Bank, Email: [email protected] 1 Dorothy: Oh, will you help me? Can you help me? Glinda: You don't need to be helped any longer. You've always had the power to go back to Kansas. The Wizard of Oz