Subsidy‐Induced Dumping

18 Pages Posted: 8 May 2014

See all articles by Jørgen Hansen

Jørgen Hansen

University of Southern Denmark

J. Aase Nielsen

Aarhus University - Department of Theoretical Statistics and Operations Research

Date Written: May 2014

Abstract

More than two‐thirds of all anti‐subsidy investigations in the EU are paired with an anti‐dumping investigation against the same non‐EU producers. The outcome may be a two‐component duty where one duty addresses the ‘unfairness’ of the subsidy and the other the dumping behaviour. The philosophy behind this practice is that, at least to some extent, the observed dumping has been induced by the subsidy, and as the GATT Treaty, Article VI commits the claimant not to impose double remedies for the same ‘misbehaviour’, it is necessary to make an assessment of the hypothetical dumping without the subsidy. The EU quantification of the hypothetical dumping margin assumes that an export subsidy translates fully to the dumping margin, while a domestic subsidy leaves the dumping margin unchanged. Using an oligopoly model, we show in this paper that in case of an export subsidy, the EU anti‐dumping duty is lower than the predicted hypothetical dumping margin from the oligopoly model. For a domestic subsidy, the results are ambiguous, and the difference between the size of the duty following the EU procedure and the model predictions is relatively small.

Suggested Citation

Hansen, Jørgen and Nielsen, Jørgen Aase, Subsidy‐Induced Dumping (May 2014). The World Economy, Vol. 37, Issue 5, pp. 654-671, 2014, Available at SSRN: https://ssrn.com/abstract=2434343 or http://dx.doi.org/10.1111/twec.12134

Jørgen Hansen (Contact Author)

University of Southern Denmark

Campusvej 55
DK-5230 Odense, 5000
Denmark

Jørgen Aase Nielsen

Aarhus University - Department of Theoretical Statistics and Operations Research ( email )

DK-8000 Aarhus C
Denmark

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