The Anatomy of Trade Deflection

This study employs a rich four dimensional export data of Brazilian firms to empirically examine the effect of past exporting relationships of the firms, whose products are targeted by antidumping duties, on their export flows to alternative markets. We show that, on the intensive margin, firms increase their export volumes to different countries that they were already exporting the targeted product when they suffer an AD duty in a particular country. On the extensive margin, our findings suggest that firms¡¯ probability of exporting in an export market resulting from an AD duty in a different market increases only if they have already an established trading relationship either for the targeted or a different product. In addition to making sense of existing puzzles in trade deflection, this paper makes an important contribution by demonstrating how much the fixed costs of developing an export destination matter in terms of trade deflection.