An Empirical Test of the Impact of the Threat of U.S. Trade Policy: The Case of Antidumping Duties

Importing countries frequently use instruments of trade policy for the purpose of retaliating against the practices of foreign exporting companies or their governments. These retaliatory actions obviously affect trade patterns when implemented. The effects of the threat of the imposition of antidumping duties by the US on the pricing conduct of firms exporting to the US during the 1976-1981 period are analyzed. The theory that foreign firms have become more sensitive to the threat of the imposition of antidumping duties over this time period is tested. Results suggest that foreign companies have been incorporating the threat of US antidumping duties into their pricing behavior, although the precise nature of the firms' behavior appears to have changed over time. US trade policy may have been more effective in modifying trade flows than quantitative measures of protection would suggest.