Anti -dumping measures have become an important form of commercial protection for countries, supervised by theOmc. The effect of these measures on business productivity is very heterogeneous. If thanks to them, the domestic companies initially not very productive can restructure and improve their performance, more productive domestic companies and exporters seem to be penalized by these devices.
Photo (CC): Scalino
The sharp drop in customs tariffs of the last twenty years does not mean the end of trade barriers: their shape has just changed. Thus, Figure 1 presented below shows that the drop in customs prices coincides with a spectacular increase in anti-dumping measures which have become the most common means to strengthen trade barriers. While the number of these measures had gradually decreased since 2003, the latter, as well as the number of anti -dumping surveys, has quickly increased since the start of the global financial and economic crisis. This trend seems to be extended in 2009.
The agreements of theOmcwhich aim to promote free trade between its signatories by limiting commercial barriers, have a number of exceptions. In particular, signatories have the possibility of implementing anti -dumping measures in the event of unfair competition. We will talk about dumping if a company applies to its products a lower price for export than for the local market. Is this unfair competition ? The agreements of theOmc do not decide on this point. They deal with how governments may or may not fight against dumping: they supervise anti -dumping actions and are often called “ Anti -dumping agreements ». The current rules, however, provide few tools to distinguish competition “ loyal “Competition” unfair ». If a foreign producer produces at a lower cost, its prices will necessarily be lower in large markets such as Europe or the United States since competition is probably stronger than in its own country. What first appears as unfair competition could be a revealer of the comparative advantages of the foreign producer. This then means that the least efficient businesses in their production processes will have more interest than others to ask and take advantage of protection against international competition pressure.
We show in this article that it is indeed the least efficient companies that request and receive protection against dumping practices, a protection which can only last five years. If they are able to improve their performance, they do not catch up with the gap they had with those who have never received these protections. It also appears than among the companies that took advantage of it, those that have drawn the most profits were those that were mostly lagging behind. Conversely, the beneficiaries who were originally the most efficient lost. This is explained by the nature of the production chain and the export behavior of these latter companies compared to the weakest.
Anti -dumping measures protect the least effective domestic companies
Table 1 indicates the average level of performance (defined by total productivity of the factors) of European companies that have requested and benefited from the anti -dumping measures and compares them to the control group of European companies never having requested this type of protection. The sample studied is made up of around 4,000 European companies followed between 1993 and 2003. All anti -dumping cases from 1996, 1997 and 1998 are therefore included in this table. In addition, two periods are compared: the period before anti -dumping measures and the period during which the companies that have requested them took advantage of it (these are most often periods of five years). Clearly, companies have never requested and therefore having never benefited from these measures are on average more efficient (the level of performance being defined as the total productivity of the factors). On the other hand, companies having benefited tend to be less efficient before any protection (1.32 against 2.23 for other companies). This confirms our idea that it is the most ineffective companies that use the most of anti -dumping measures and that it has little to do with any practices of competition called “ unfair By foreign companies.
In addition, Table 1 shows that protected companies and unprotected have experienced an increase in their productivity during the anti -dumping protection period, but this increase is stronger for the first (17 % against 4 % for unprotected companies). However, this is not enough for protected companies to reach the level of productivity of others (1.55 against 2.32). This shows on the one hand that anti -dumping protection allows less efficient businesses to restructure in order to cope with international competition. On the other hand, it appears that these restructuring efforts are not enough to fill the gap with the more efficient companies. It is very likely that some companies having benefited from anti -dumping measures would have left the market without them. This would have enabled their production factors to be reallocated to more efficient sectors in the economy, and therefore a stronger growth in productivity.
Anti -dumping measures: good for bad businesses, but bad for good companies
If the average efficiency seems different between protected and unprotected companies, we must not forget the differences within these groups. One of the specifics of anti -dumping measures is that they apply to all European companies producing the property that has been the subject of a survey, even if some of these companies have never applied for such protection. As Figure 2 shows well, companies receiving protection do not all have the same initial productivity. The concentration on the left of the productivity distribution curve indicates that most protected companies have low initial productivity. In addition, the narrow tail of this distribution curve indicates that there are few protected companies to have a high level of high productivity. This last point raises the following question: companies all react in the same way to commercial protectionism ?
An econometric analysis taking into account these initial data reveals that companies react very heterogeneously to anti -dumping measures. While the latter seem to promote the productivity of ineffective companies, they harm the productivity of the most efficient. This implies that anti -dumping measures are “ Good for bad businesses but bad for good companies ».
There are several possible explanations for this result. A first would be to point out that the risk of getting out of the market is greater for less efficient businesses and that temporary protection pushes them more than others to restructure before facing international competition. But this does not explain why protection is prejudice to the most efficient businesses. A more credible explanation would go through the very nature of the company, in particular the extent of its international activities. Commonly established, the most efficient companies are also the most active in international trade due to non-recurable costs relating to the latter (transaction costs). Anti-dumping measures can in particular affect exporters who subcontract part of their production in countries targeted by these measures. Indeed, only the most efficient businesses can deal with the fixed costs involved in subcontracting. Exporting companies being rather efficient than the others, they undoubtedly invest more in subcontracting.
Take a French export company assembling its bikes in China in order to import them into France, brand management, labeling and other distribution activities being located in France. This company will face an increase in the price of its imports since the latter suffer the customs duties imposed on bikes imported from China. The current anti-dumping law does not automatically exercise these rights, companies using subcontracting, even if most of the added value is created in the European Union. This represents a serious handicap for companies that outsource in relation to domestic producers, the latter do not have to pay customs duties that could negatively affect their domestic demand and their exports. The competitiveness of exporting companies could be threatened, insofar as they cannot set lower prices outside the European Union under penalty of being accused of dumping practices. In addition, exporters could see their access to foreign markets reduced if their business partners were to apply protectionist measures in retaliation for anti -dumping measures.
Table 2, taken from a recent article by Konings and Vandenbussche (2009), shows that exports of products taking advantage of the anti -dumping measures tend to drop, if they are compared to the product control group that do not benefit from it. In addition, a recent European case study shows that, within the same sector exposed to competition from imported products, the degree of opening of a business to international trade, or rather its lack of openness, determines its interest in anti -dumping policies. Thus, a recent anti -dumping survey on imports of leather shoes from China recently divided European producers. Producers “ globalized “Argued that the anti-dumping measures were unfavorable to them since, subcontracting the assembly of their shoes in China, they undergo anti-dumping customs rights when they re-import them to Europe. Gold more than 50 % of their added value is created within the European Union by activities such as research, design, logistics, development and marketing, making their shoes European and non -Chinese shoes.
Conclusion
This article shows that it is typically the least efficient companies that take advantage of the anti -dumping protections to restructure. But these protections do not allow them to fill the productivity gap compared to other companies, which raises the question of the effectiveness of anti -dumping measures to protect domestic companies. What is more, the effect of these measures on companies depends on their productivity and the initial place of their exports in their activities. To put aside the interest of exporters when the decision to protect a given sector is also wrongly neglecting inevitable long -term unfavorable effects.
Text translated from English by Hélène Blake