Antidumping as a signaling device under the WTO’s ADA non-disclosure clause

Under the WTO Antidumping Agreement (ADA) non-disclosure clause, the investigating AD authority cannot disclose the confidential information it obtains. This paper analyzes how non-disclosure of confidential information leads the government to use the magnitude of the AD duty to signal this information, in casu the costs of the firm under investigation, to the domestic industry. We obtain two main results. First the AD authority sets lower tariffs compared to the full disclosure scenario because it has an incentive to signal that the foreign firm is relatively inefficient. Second, adhering to the non-disclosure clause leads to lower domestic welfare relative to the full disclosure scenario. On the other hand, prices are lower and global welfare is higher under the non-disclosure clause, thus providing an economic rationale for the WTO’s ADA non-disclosure clause.