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Trade Diversion as Firm Adjustment to Trade Policy: Evidence from EU Antidumping Duties on Vietnamese Footwear

42 Pages Posted: 20 Jun 2014 Last revised: 25 Dec 2015

Nguyen Trong Hoai

University of Economics Ho Chi Minh City

Toan Truong Nguyen

Curtin University

Van H. Pham

Baylor University - Department of Economics

Date Written: December 1, 2015

Abstract

This paper evaluates the impact of the 2006 European Union antidumping action on Vietnamese footwear in three markets: imports to the EU, footwear producers in Vietnam, and the trade diversionary adjustment of Vietnamese firms in the U.S. market. We find that the AD action reduced Vietnamese footwear imports to the EU by as much as 65%. Given that the EU makes up almost two-thirds of Vietnam's footwear exports and footwear is among the top four export industries for Vietnam, this reduction is economically significant. Consistent with predictions of our model, we also find evidence of trade diversion by Vietnamese producers from the EU to the U.S. market. Our difference-in-difference estimates of the AD actions on the value of Vietnamese footwear imports to the U.S. ranged from 69-71% over the period 2004-2007 and 69-72% in terms of quantity. These results highlight the (perhaps unintended) indirect effects of trade policy in third markets that can result from firms adjusting to trade barriers. Our results are robust to triple difference specifications where we adjust for trend-differences and a series of placebo specifications.

Keywords: Antidumping, Trade Diversion, Vietnam, Footwear

JEL Classification: F13, F15, L6

Suggested Citation

Hoai, Nguyen Trong and Nguyen, Toan Truong and Pham, Van H., Trade Diversion as Firm Adjustment to Trade Policy: Evidence from EU Antidumping Duties on Vietnamese Footwear (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=2456479 or http://dx.doi.org/10.2139/ssrn.2456479

Nguyen Trong Hoai

University of Economics Ho Chi Minh City ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Toan Truong Nguyen

Curtin University ( email )

Bentley Campus, Perth WA 6845
Perth, WA Western Australia 6845
Australia

Van H. Pham (Contact Author)

Baylor University - Department of Economics ( email )

One Bear Place #98003
Waco, TX 76798
United States
(254) 710-3521 (Phone)
(254) 710-6142 (Fax)

HOME PAGE: http://www.baylor.edu/van_pham

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