How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel

How do the trade impacts of a safeguard measure - which is statutorily designed to follow the most-favored-nation (MFN) principle - 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 1991-2003 and examine the potential discriminatory impact on foreign-produced steel of the 2002 “MFN†safeguard that used relatively new tools in 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 higher-frequency data to examine potential differences in the timing of the foreign export response to policies of differential treatment. Using quarterly data, we find that while developed country exporters respond more quickly when granted an exclusion, the developing-country exporters’ response is more persistent. Finally, while we find the full effect of the 2002 safeguard policy with country and product exclusions to be quite discriminatory, our results also highlight an important similarity between safeguards and preferential trade agreements (PTAs). 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 PTA, 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.