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Steel Safeguards and the Welfare of U.S. Steel Firms and Downstream Consumers of Steel: A Shareholder Wealth Perspective

48 Pages Posted: 12 Aug 2006  

Benjamin H. Liebman

St. Joseph's University

Kasaundra Tomlin

Oakland University - School of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: May 2006

Abstract

This paper analyzes the steel safeguards implemented and subsequently removed during 2001-2003. Our results reveal that for shareholders of U.S. steel companies, safeguards generated positive "abnormal" returns of approximately 6%; and the cancellation of the safeguards resulted in wealth gains of about 5%. Steel shareholders experienced negative abnormal returns of -5% in response to the WTO ruling that the U.S. violated WTO law. The results here are consistent with the neoclassical view that producers gain at the expense of consumers. Downstream consumers in transportation equipment and electrical equipment showed the clearest negative reaction to the safeguards. Moreover, steel firms that received larger cash disbursements under the Byrd amendment received additional wealth gains when the safeguard duties were imposed. Finally, empirical results indicate that U.S. downstreamconsuming firms that diversify production in NAFTA countries avert some trade policy risk associated with the initiation of the safeguard investigation and the imposition of the safeguard duties.

Keywords: Antidumping Policy, Welfare

JEL Classification: F13, F23

Suggested Citation

Liebman, Benjamin H. and Tomlin, Kasaundra, Steel Safeguards and the Welfare of U.S. Steel Firms and Downstream Consumers of Steel: A Shareholder Wealth Perspective (May 2006). IIIS Discussion Paper No. 144. Available at SSRN: https://ssrn.com/abstract=923839 or http://dx.doi.org/10.2139/ssrn.923839

Benjamin H. Liebman (Contact Author)

St. Joseph's University ( email )

5600 City Avenue,
Philadelphia, PA 19131
United States

Kasaundra Tomlin

Oakland University - School of Business Administration ( email )

Rochester, MI 48309-4401
United States
248-370-4975 (Phone)

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