How Different are Safeguards from Antidumping? 

Evidence from US Trade Policies Toward Steel

Chad P. Bown
Brandeis University

July 2004

Abstract

How do the trade impacts of a safeguard measure - which is statutorily designed to follow the most-favored- nation (MFN) principle of equal treatment - compare to explicitly discriminatory measures such as antidumping? We address this question empirically by examining the trade effects of the 2002 US safeguard on steel imports and comparing this with the impact of other US trade remedies on steel imports in the 1990s. We first estimate a fixed-effects model on a dynamic panel of product-level US steel imports over 1989-2003 and examine the potential discriminatory impact on foreign-produced steel of the 2002 “MFN” safeguard that used relatively new tools from the policymakers’ arsenal: country and product exclusions. A unique data set on the excluded products allows us to document the sizable impact on trade of both forms of preferential treatment. We also exploit higherfrequency (i.e., quarterly) data to examine potential differences in the timing of the foreign export response to policies of differential treatment. With respect to safeguard exclusions, we find that while developed country exporters have a quicker response to an exclusion, the developing-country export response is more persistent. Finally, relative to antidumping measures, country and product exclusions from a safeguard allow the protection-imposing country to target preferential treatment more effectively toward specific foreign countries, much like a preferential trade agreement, or even more narrowly toward a specific foreign firm. Thus costly trade diversion could be an even greater concern with a safeguard than with explicitly discriminatory protection such as antidumping.