Firm Connectivity and Trade Protection under Global Value Chains

Abstract

Antidumping (AD) duties have been the most widely used trade policy globally to protect domestic industries from foreign competition. Prior research assumes that firms within domestic industries will demonstrate a united stance in petitioning their home government for AD protection, and that the political salience of unified domestic industries will compel the home governments to grant protection. However, I find that many firms in the same industry remain silent or oppose these petitions, even though AD aims to protect the entire industry. I offer a firm-level theory that explains how a firm’s business connections with foreign firms shapes its AD participation. As a domestic firm connects with foreign firms, two sources make it vulnerable to potential costs generated if AD duties harm foreign firms with whom it is connected. First, foreign firms can pass along the costs of AD to the domestic firm by increasing the prices of inputs or by cutting demand for products they sell to or buy from the domestic firm. Second, targeted governments can impose various trade and investment barriers on the domestic firm’s business in the target country’s market. I test my theory with a new firm-level dataset that accounts for all domestic firms involvedin US AD cases between 2010 and 2020, matched with millions of shipment records representing their foreign connections. I find that firms that are more sensitive to trade and have more foreign affiliates are less likely to participate in AD.

Next, I demonstrate that the previously identified firm participation in AD significantly reduces the probability that the US International Trade Commission (ITC) will accept the petition and impose AD. I first show that the ITC is largely insulated from external political pressure and that its investigation operates like a quasi-judicial procedure, through which the ITC (i.e., the judge) collects information from supporting firms (i.e., the plaintiff) and the opposing firms (i.e., the defendant) to identify the causal link between foreign dumping and material injury to the domestic industry. Under such a setting, information from opposing firms can help the ITC identify and counteract potentially biased information from the supporting firms, making rejection of the petition more likely. I test my argument by examining the ITC’s AD decisions between 2010 and 2020, using the previously-constructed dataset accompanied by data taken from the ITC’s final reports on these cases. I find that greater opposition from domestic firms in an AD case makes an AD petition more likely to be rejected.

This dissertation offers a more precise understanding of the origins and outcomes of antidumping duties through a firm-based approach, which bring the AD literature in line with more recent scholarship on trade. The dissertation also demonstrates the value of rule-based and transparent trade policymaking in the context of antidumping duties, providing important policy lessons for the current era of rising protectionism.