False Friends? Empirical Evidence on Trade Policy Substitution in Regional Trade Agreements

Abstract

In this paper, we examine the interplay of regional economic integration and the use of bilateral antidumping (AD) measures. Our empirical analysis brings three central findings to light: (i) We find that regional trade agreements (RTAs) generally reduce the likelihood of AD activity among integration partners. (ii) In addition, an improvement in the tariff treatment between trading partners — regardless of whether expressed as the directly faced tariff or as a tariff margin — generally leads to a lower likelihood of bilateral AD activity. (iii) Regarding the interaction of both events, however, a reciprocally higher tariff margin between integration partners leads to a higher likelihood of bilateral AD activity than an equal tariff margin among non-integration trading partners. The latter effect seems to be primarily driven by those RTAs with a participation of “South” countries.

Keywords: Antidumping, trade liberalization, regional economic integration, tariff margin, panel data, probit

JEL Classification: F13, F14, F15