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Vertical Integration and Trade Protection: The Case of Antidumping Duties

Mar 2009
Working Paper
By  Maya Cohen-Meidan
This paper analyzes the interaction of trade policy with the vertical structures of foreign firms exporting goods to the United States, focusing on the case of antidumping duties. I use a model that incorporates both vertical structure and the dynamics of U.S. antidumping duties to show that the policy has a notably different impact on vertically integrated and non-integrated foreign firms. I then successfully test the theoretical predictions using data on 489 antidumping cases. In particular, I find that non-integrated firms are more likely than vertically integrated firms to exit the U.S. market following the imposition of duties, and less likely to pass the duties on to consumers for certain products. My empirical ndings also indicate that antidumping duties oscillate between low and high levels -a previously unnoticed, surprising and most-likely unintended consequence of the design of U.S. antidumping policy that is nevertheless predicted by my model.