Chad P. Bown (The World Bank); Meredith A. Crowley (Federal Reserve Bank of Chicago)

Abstract

This paper empirically examines how governments make trade policy adjustments under a self-enforcing trade agreement in the presence of economic shocks. Using data from the United States between 1997-2006, we ?nd that US antidumping policy is often consistent with the time-varying “cooperative” tari increases modeled in the self-enforcing trade agreement theory of Bagwell and Staiger (1990). Estimates of an empirical model of US antidumping indicate that the likelihood of a US antidumping duty is increasing in the size of the unexpected import surge, decreasing in the volatility of imports and decreasing in the elasticities of import demand and export supply. This suggests that time-varying increases in US tari?rates under antidumping policy could be interpreted as the tari increases necessary to support a self-enforcing trade agreement in the face of unexpected import surges.