Has EU import protection gone up during the crisis?

Hylke Vandenbussche, Christian Viegelahn, 4 September 2011

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In December 2009, the EU extended antidumping duties on the imports of leather shoes from China and Vietnam.1 This decision was very controversial since it overruled the advice not to continue protection that had been formulated by the EU Antidumping Advisory Committee and was taken despite heavy protests from consumers, importers, and outsourcing firms in the EU. The fact that the review that led to prolonged protection was launched just a few days after the collapse of Lehman Brothers, generally regarded as the start of the global crisis, fuelled the fear that the EU might engage in a “protectionist spiral” (see for example Evenett 2009). Trade protection can be a less painful remedy than other measures to combat the crisis such as fiscal austerity and budget cuts since tariffs raise revenue for the protecting country and occur at the expense of foreigners. This column evaluates whether the EU has adopted a more protectionist attitude in the face of the global crisis.

A first way to raise protection would be to raise applied most favoured nation (MFN) tariff rates. However, in recent research (Vandenbussche and Viegelahn 2011), we fail to find any evidence of that. Instead they document in their work that the average applied MFN tariff rates of the EU have remained roughly constant during the crisis and at a level close to the bound MFN tariff rates.

A second way to raise protection is through the imposition of technical trade barriers such as an increase in administrative obligations related to a shipment or the technical clearance time at the border.2 Based on an evaluation of the “Doing Business” indicators from the World Bank, which include information on procedural requirements related to importing, we do not observe any evidence for such an increase in the EU member states during the crisis.

Third, countries can raise protection through an increased use of temporary trade barriers such as safeguard, countervailing, and antidumping measures. Since antidumping policy is by far the most used temporary trade barrier in the EU, we focus our discussion on antidumping policy. A use of antidumping policy as a “beggar-thy-neighbour” policy is not precluded by current EU antidumping law. The antidumping rules cannot discriminate well between “unfair” imports or an “uncompetitive” domestic industry suffering from tough but fair foreign competition. Therefore a rise in antidumping measures need not necessarily reflect an increase in “unfair” behaviour but could simply stem from an increasing use of antidumping policy to shelter domestic firms from tough import competition

To evaluate the use of antidumping policy by the EU, we consider the period from 1995 to 2009, for which we match antidumping cases from the World Bank’s Temporary Trade Barrier Database (Bown 2010) with UN Comtrade data, which detail product-level imports to EU member states at the HS 6-digit level by country of origin.

New evidence on EU antidumping policy

One finding is that product coverage of antidumping measures has steadily increased in the period 2004-09. While the number of antidumping measures imposed shows a downward trend in recent years when counted by target country, adding the product dimension gives a different picture. When counting antidumping measures by target country and product, we clearly find an increase in product coverage, which results from an increase in the average number of products that are involved in each antidumping case. This is illustrated in Figure 1 where it can be observed that this trend started before the crisis without clear evidence of a policy change in the crisis years 2008-09.

Figure 1. Number of EU antidumping measures in force


Notes: Cases against EU-27 member states before their EU accession are excluded. Products are counted at the HS 6-digit level (HS-06).

Source: Figure 3.3b, Vandenbussche and Viegelahn (2011).

Another finding on EU antidumping policy relates to country coverage. In recent years there has been a small decrease in the number of trading partners that are subject to EU antidumping measures. Again this is a pattern that prevailed already in pre-crisis years. Also, our results show that the antidumping coverage of the import value during the crisis has been at a rather moderate level. All these findings support the conclusion that there has not been a major protectionist backslash by the EU thus far.

Which trading partners?

We find that EU antidumping policy in recent years has increasingly targeted the developing world with China taking a very prominent position as the main target country.3 The share of products imported by the EU from China and falling under EU antidumping protection has roughly tripled in 2004-09, reaching a level of more than 2% in 2009. This share has been rising even before the crisis and continues on a similar path during the crisis. Also, our findings show that countries with a large overlap in their product-mix compared with that of the EU are more likely to be targeted under EU antidumping policy.4 Put differently, countries that are more similar in their export product-mix to the EU are targeted with EU antidumping measures relatively more often. But again, this phenomenon does not appear to be related to the crisis, but instead characterises EU antidumping policy that was already in place.

Which products?

We find that the range of industries affected by antidumping policy has been widening over time, which is a pattern that is observed before as well as during the crisis. Based on a simple count of cases, EU antidumping policy seems heavily concentrated in base metal, chemical, and textile products. However, other industries such as footwear and animal products feature prominently in EU antidumping policy, when considering the share of import value affected in each industry.

Another pattern emerging is that EU antidumping policy has increasingly involved consumer goods. Using the BEC classification, we show that the share of consumer goods subject to antidumping measures has jumped up rapidly after 2005, as illustrated in Figure 2. A focus of EU’s antidumping policy on consumer rather than industrial goods could be related to the international fragmentation of production. Indeed, EU firms, offshoring parts of their production into foreign countries, could be adversely affected by antidumping duties on intermediates that are shipped back to the EU as shown by Konings and Vandenbussche (2009). This could explain the recent focus of EU antidumping policy on consumer goods.

Figure 2. Share of import value covered by EU antidumping measures by type of product

Source: Figure 3.10c, Vandenbussche and Viegelahn (2011).

The application of the Rauch (1999) classification reveals that the share of differentiated goods subject to antidumping measures relative to homogeneous goods increased rapidly in the years before the crisis, staying at a relatively high level also during the crisis.

Future outlook

In this article we summarise the findings of our recent research (Vandenbussche and Viegelahn 2011) in which we fail to find a major change in the EU’s trade policy during the global crisis thus far. If anything, EU trade policy has pretty much followed its pre-crisis path.5 However, given the fragile situation in the Eurozone, antidumping policy still constitutes a tempting option in the years to come. To rule out the use of trade policy as a “beggar-thy-neighbour” policy, we believe that a continued effort in the careful monitoring of policy trends therefore remains essential, also in the future.6

References

Bown Chad P (2010), “Temporary Trade Barriers Database”, The World Bank, July.

Bown, CP (ed.) (2011), The Great Recession and Import Protection: The Role of Temporary Trade Barriers, CEPR and the World Bank.

Doing Business (2011), The World Bank.

Evenett, Simon (2009), The Global Trade Alert, 8 June – 8 July 2009, globaltradealert.org, 9 July.

Finger, Joseph M and ME Kreinin (1979), “A Measure of ‘Export Similarity’ and its Possible Uses”, Economic Journal,89:905-912.

Konings, Jozef and Hylke Vandenbussche (2009), “Antidumping Protection Hurts Exporters: Firm-level Evidence from France”, CEPR Discussion Paper 7330, Centre for European Policy Research.

Miyagiwa, Kaz, Huasheng Song, and Hylke Vandenbussche (2010), “Innovation, Antidumping and Retaliation”, CORE Discussion Paper 2010/64, Louvain-la-Neuve, Belgium: Center for Operations Research and Econometrics.

Rauch, James E (1999), “Networks Versus Markets in International Trade”, Journal of International Economics, 48:7-35.

Vandenbussche, Hylke and Christian Viegelahn (2011), “EU: No Protectionist Surprises“, in Chad P Bown (ed.), The Great Recession and Import Protection: The Role of Temporary Trade Barriers. London, CEPR and the World Bank.

 


 

1 See Council Implementing Regulation No. 1294/2009 of 22 December 2009, available from EUR-Lex website, and press release from European Commission of 2 October 2008, available on the website of the Directorate General for Trade of the European Commission.

2 The extent to which this is legal is determined by the WTO Agreement on Technical Barriers to Trade.

3 Miyagiwa, Song and Vandenbussche (2010) theoretically show that market size is a critical determinant in the decision to target a country with antidumping measures and to start a potential trade war.

4 To show this, we calculate an index of product-mix similarity, based on the seminal work of Finger and Kreinin (1979) – see (Vandenbussche and Viegelahn 2011).

5 For more detailed results, also on the extent to which individual EU member states’ imports are affected by EU antidumping policy and the relation between “traditional” import protection and antidumping policy in the EU, please see Vandenbussche and Viegelahn (2011).

6 This is currently done by institutions like the World Bank, the WTO and the Global Trade Alert. 

Topics: EU policies, International trade
Tags: antidumping, EU policy, protectionism

Hylke Vandenbussche

Professor of International Economics, Université Catholique de Louvain-la-Neuve; and Research Fellow, CEPR

Christian Viegelahn

Economist, Employment Trends Unit, International Labour Organization