Professor Maurizio Zanardi

This paper examines how trade protection is affected by changes in the value-added content of production arising through global value chains (GVCs). Exploiting a new set of WTO rules adopted in 1995 that impose an exogenously-timed requirement for countries to re-evaluate their previously-imposed trade protection, we adopt an instrumental variables strategy and identify the causal effect of GVC integration on the likelihood that a trade barrier is removed. Using a newly constructed dataset of protection removal decisions involving 10 countries, 41 trading partners, and 18 industries over 1995–2013, we find that bilateral industry-specific domestic value-added growth in foreign production significantly raises the probability of removing a duty. The results are not limited to imports from China but are only found for the protection decisions of high-income countries. Back-of-the-envelope calculations indicate that rapid GVC growth in the 2000s freed 15% of the trade flows subject to the most common temporary restrictions (i.e. antidumping) applied by high-income countries in 2007.

The literature on antidumping (AD) has documented various aspects of this protectionist tool. However, a peculiar feature of AD has not received much attention: these measures are endogenous to the behaviour of the exporting firms, which can adjust the dumping margin by changing their export price and ask the authority to amend the AD measures accordingly. The objective of this paper is to fill part of this gap in the literature by analysing the AD reviews conducted by the European Union for affirmative petitions initiated in 1980–2009. To this end, a novel data set of all such reviews has been assembled. Summary statistics reveal that more than a third of all petitions concluded with the imposition of AD measures are reviewed at least once before their expiration, and most reviews lead to lower AD duties (although, almost 20 per cent of the firms investigated through interim reviews see their duties increase). There are significant differences in the outcome of the reviews depending on the party requesting them (i.e. reviews lodged by European producers are less likely to lead to lower duties). These conclusions are confirmed by the econometric analysis, which also shows that Chinese firms see their duties reduced significantly less than those of firms from other countries.

Advocates of antidumping (AD) laws downplay their negative effects by arguing that the trade flows that are subject to AD are small and their distortions negligible. But while the adverse effect of AD on product-level trade has long been established, the question remains whether there are trade effects at the aggregate level. The recent proliferation wave of AD laws and their use provides us with a unique policy change to estimate the true trade effects of adopting and enforcing AD laws. For this purpose, we estimate the effect of AD on bilateral trade flows between the “new adopters” of AD laws and their trade partners. Using a gravity model of annual observations (1980–2000) our estimates show that AD has trade chilling effects on aggregate import volumes but the impacts are heterogeneous across sectors. We find that new tough users experience a chilling of their aggregate imports of 14 billion US$ a year (or 5.9%) as a result of AD measures. For some countries like Mexico and India, the dampening effects of AD laws on trade flows are found to substantially offset the increase in trade volumes derived from trade liberalization.

Much economic policy is deliberately shifted away from direct political processes to administrative processes—political pressure deflection. Pressure deflection poses a puzzle to standard political economy models which suggest that having policies to ‘sell’ is valuable to politicians. The puzzle is solved here by showing that incumbents will favor pressure deflection since it can deter viability of a challenger, essentially like entry deterrence. U.S. trade policy since 1934 provides a prime example, especially antidumping law and its evolution.

We compare the drivers of U.S. congressmen's votes on trade and migration reforms since the 1970s. Standard trade theory suggests that trade reforms that lower barriers to goods from less skilled‐labor abundant countries and migration reforms that lower barriers to low‐skilled migrants should have similar distributional effects, hurting low‐skilled U.S. workers while benefiting high‐skilled workers. In line with this prediction, we find that House members representing more skilled‐labor abundant districts are more likely to support trade and migration reforms that benefit high‐skilled workers. Still, important differences exist: Democrats are less supportive of trade reforms than Republicans, while the opposite is true for migration reforms; welfare state considerations and network effects shape votes on migration, but not on trade.

Many skeptics of trade liberalization in the developing world argue that lowering trade taxes can cause significant fiscal pressures in countries particularly reliant on these taxes and result in a reallocation of resources away from important development goals. This paper evaluates whether there is evidence that central governments systematically change the composition of spending priorities in the wake of lowered trade tax revenues as a share of total government revenues. We find no systematic evidence for this concern in a sample of 51 developing countries for the 1991 through 2005 period.

Are preferential trade agreements (PTAs) stumbling blocks or building blocks towards multilateral trade liberalization? We address this question by investigating the effects of the negotiation and implementation of PTAs on the use of antidumping (AD) (i.e., the most common form of contingent trade protection) by member countries against non-members as there has been a concurrent surge in regionalism and AD activity since the 1990s. Theoretically-derived empirical predictions are supported by the empirical analysis based on the 15 most intense users of AD. The results demonstrate that both the negotiation and the implementation of PTAs lead to fewer AD measures against non-member countries, except for members of customs-union agreements in force facing large import surges from non-members. Thus, our results highlight a building-block effect of PTAs on multilateral trade cooperation when it comes to AD protection.

Democracies rarely engage in conflicts with one another, though they are not averse to fighting autocracies. We exploit the existence in many countries of executive term limits to show that electoral accountability is the key reason behind this “democratic peace” phenomenon. We construct a new dataset of term limits for a sample of 177 countries over the 1816–2001 period, and combine this information with a large dataset of interstate conflicts. Our empirical analysis shows that, although democracies are significantly less likely to fight each other, democracies with leaders who face binding term limits are as conflict prone as autocracies. The study of electoral calendars confirms the importance of re‐election incentives: in democracies with two‐term limits, conflicts are less likely to occur during the executive's first mandate than in the last one. Our findings support the Kantian idea that elections act as a discipline device, deterring leaders from engaging in costly conflicts.

A recent phenomenon is the rapid spread of antidumping laws amongst developing countries (i.e. China, India, Mexico). Between 1980 and 2003 the number of countries in the world with an antidumping law in place more than doubled, going from 36 to 97 countries. This paper examines a number of potential explanations for this proliferation of antidumping laws. We look for determinants explaining the timing of trade law adoption using a duration analysis. Results suggest that retaliatory motives are at the heart of the proliferation. This raises serious policy issues since antidumping laws should be about combating unfair trade, not about retaliation which runs contrary to the spirit of the WTO. Results also suggest that past trade liberalization raises the probability of a country to adopt an antidumping law. The proliferation of antidumping laws has important policy implications. In the interest of all users, antidumping rules should be renegotiated at the level of the WTO to make their use less 'easy', in order to avoid an escalation of protection worldwide.

.  In the United States many antidumping petitions are withdrawn before the investigations are completed. Prusa (1992) argues that petitions are used by domestic industries to induce foreign industries into collusive agreements. In his model, all antidumping petitions should be withdrawn, which is not the case. This paper provides a model in which only some petitions are withdrawn. Withdrawal depends on two key parameters: coordination cost and bargaining power of domestic and foreign industries. A new data set is constructed to test the model on the U.S. experience for the period 1980–97. The econometric analysis supports the theoretical conclusions of the model. JEL classification: F13; D43 Loi anti‐dumping en tant que stratagème de collusion.  Aux Etats‐Unis, de nombreuses plaintes contre des pratiques de dumping sont retirées avant que les enquêtes ne soient complétées. Prusa (1992) suggère que ces plaintes sont utilisées par les industries nationales pour inciter les industries étrangères à conclure des accords de collusion. Dans ce modèle, toutes les plaintes devraient être retirées, ce qui n’est pas le cas. Ce mémoire propose un modèle dans lequel seulement une portion des plaintes est retirée. Les retraits dépendent de deux paramètres clés : les coûts de coordination et le pouvoir de négociation des industries nationales et étrangères. Une base de données est construite pour mettre ce modèle au test pour les Etats‐Unis dans la période 1980–97. Les résultats de l’analyse économétrique supportent les conclusions théoriques du modèle.

This chapter contains sections titled: Introduction Antidumping Justification for Competition Policies Multidimensional Economic Integration Conclusions

This article documents that antidumping (AD) “echoing” (i.e., different countries sequentially imposing AD measures on the same product from the same exporter) is common practice among users of AD. We develop a dynamic game where two competing importers can impose AD measures on a third exporting country in one of two periods, if at all. Assuming that governments are politically motivated (favoring their import‐competing industry), AD echoing occurs only for intermediate values of a country's political‐economy parameter. This result is confirmed by our econometric analysis, demonstrating that countries' political‐economy‐driven AD actions are interdependent and should not be analyzed in isolation. (JEL F12, F13, F14)

This paper shows that electoral incentives crucially affect the initiation of trade disputes. Focusing on WTO disputes filed by the United States during the 1995–2014 period, we find that U.S. presidents are more likely to initiate a dispute in the year preceding their re-election. Moreover, U.S. trade disputes are more likely to involve industries that are important in swing states. To explain these regularities, we develop a theoretical model in which re-election motives can lead an incumbent politician to file trade disputes to appeal to voters motivated by reciprocity.

We examine how uncertainty affects firms' internationalization choices. We begin by unveiling a new empirical regularity: using a unique dataset that allows us to study the dynamics of firms' exports and foreign direct investments (FDI) in individual destinations, we show that most firms serve a market via exports before investing there. To rationalize this pattern, we describe a model in which firms are uncertain about their profitability in a foreign market and may experiment via exports before engaging in FDI. In line with this idea, we show that the probability that a firm starts investing in a foreign country increases with its export experience in that country. In more uncertain destinations, firms delay FDI entry, experimenting longer with exports before establishing foreign affiliates. •We examine how foreign market uncertainty affects firms' export and FDI choices.•We show that firms may test a market via exports before establishing foreign affiliates.

This paper shows that electoral incentives deter politicians from supporting trade liberalization. We focus on all major trade liberalization bills introduced since the early 1970s in the U.S. Congress, in which House and Senate members serve respectively two- and six-year terms and one third of senators face elections every two years. We show that senators are more likely to support trade liberalization than House representatives. However, this result does not hold for the last generation of senators, who face elections at the same time as House members, suggesting that inter-cameral differences are driven by term length. Considering senators alone, we find that the last generation is less likely to support trade liberalization than the previous two. This result is pervasive and holds both when comparing the behavior of different senators voting on the same bill and that of individual senators voting on different bills. The protectionist effect of election proximity disappears for senators who are retiring or hold safe seats. •We examine US congressmen's votes on trade reform.•We find that House representatives are more protectionist than senators.•We show that electoral incentives deter politicians from supporting trade liberalization.

One of the few stylized facts in international relations is that democracies, unlike autocracies, almost never fight each other. Recent empirical findings show that binding term limits invalidate this result: democratic dyads in which at least one country imposes term limits on the executive are as conflict prone as autocratic and mixed dyads. Moreover, in democracies with two-term limits conflicts are more likely during the executive's second term. To rationalize these findings, we model international relations as a repeated prisoners’ dilemma. We show that the fear of losing office makes democratic leaders less willing to start costly conflicts. Crucially, this discipline effect can only be at work if incumbent leaders can run for re-election. Term limits thus make it harder to sustain peaceful relations.

In December 2012, Japan requested the establishment of a World Trade Organization (WTO) Panel regarding antidumping (AD) duties that China had imposed on high-performance stainless steel seamless tubes (HP-SSST). The European Union joined as a complainant in June 2013. To some degree, this dispute follows earlier ones involving China, as similar procedural and substantial issues were raised in previous cases. However, this was the first time that the WTO Panel rejected some important claims, only for those decisions to be reversed by the Appellate Body. Now that various rulings have clarified these legal issues, it remains to be seen if HP-SSST represents the last part of growing pains for Chinese authorities to learn about AD legal procedures.

When in 1923 Jacob Viner wrote the book, Dumping: A Problem in International Trade, he probably did not imagine that the system devised to eliminate the effects of dumping (i.e., antidumping) would itself become a problem. However, as we celebrate the 100th anniversary of the first antidumping law, the situation is quite different from that observed by Viner. Although his economic analysis on the nature and causes of dumping remains valid, the debate shifted in the early 1990s and now centers on the widespread use of antidumping. This paper documents the evolution of antidumping by examining the pattern of adoptions of antidumping laws and the statistics pertaining to the worldwide caseload. One striking result is the important role played by the new users of antidumping. Rankings based on the intensity of use magnify this conclusion, suggesting that the true dimension of the antidumping phenomenon is only partly revealed by the usual statistics on usage.

We study how electoral incentives affect policy choices on secondary issues, which only minorities of voters care intensely about. We develop a model in which office and policy-motivated politicians vote in favor of or against regulations on these issues. We derive conditions under which politicians flip-flop, voting according to their policy preferences at the beginning of their terms but in line with the preferences of single-issue minorities as they approach reelection. To assess the evidence, we study U.S. senators' votes on gun control, the environment, and reproductive rights. In line with the model's predictions, we find that election proximity has a pro-gun effect on Democratic senators and a pro-environment effect on Republican senators; these effects arise for senators who are not retiring, do not hold safe seats, and represent states where the single-issue minority is of intermediate size. Also in line with our theory, election proximity does not affect votes on reproductive rights due to the presence of single-issue minorities on both sides.

We develop a simple model of trade relations in which legislators with different stakes in import-competing and export industries decide whether to grant fast-track authority (FTA) to the president, giving up the power to amend international trade agreements. We show that strategic delegation motives are key to understanding FTA votes, which involve a decision between alternative country representatives: the executive or the majority in Congress. We then examine the determinants of all votes by US congressmen on FTA since the introduction of this institutional procedure in 1974. Our empirical analysis provides strong support for the predictions of the model. (JEL D72, F12, F13)

Is the World Bank's Development Policy Lending likely to enhance ownership and have greater effectiveness than structural adjustment? We specify a dynamic common agency model in which a government considering economic reform faces domestic opposition from interest groups. The dynamic specification, which is original in the context of policy reforms supported by the International Financial Institutions (IFIs), is essential to allow the strength of special interest groups to arise endogenously during the reform process. We show that conditionality may alter the country's political equilibrium and lead to higher social welfare. However, under certain circumstances which depend on country‐specific circumstances, conditional assistance could lead to lower social welfare. Thus, for conditionality not to be inconsistent with ownership, its design must be appropriate to the country circumstances and directly affect the domestic political constraint.