Analysis of Trade Remedy Action Determinants

Abstract

Korea has achieved successful development in its steel industry since 1970s. In the past, most of the steel products produced in Korea were consumed by domestic demand. However, the portion of steel export in Korean total steel production has been increased because of the fall in domestic demand and steel supply increase by the Korean steel company. At same time, countries use of trade remedy actions in the steel trade have proliferated globally, and Korea became the most frequently subjected country to AD/CVD investigations since 1990. The proliferated AD initiations toward Korean steel products became one of the main obstacles to Korean steel export. Many literatures analyzed whether the initiation of AD is motivated by other factors such as countries macroeconomic conditions or retaliatory purposes. However, theres limited studies about Korea(Korean steel industry). Therefore, it is important to investigate the determinants of trade remedy actions(especially AD cases) toward Korean steel products. This study examines the determinants of AD initiation to Korean Steel Products using the panel Probit analysis. AD initiation database includes 14 initiation countries against Korea during the year 1995~2011, and target products are limited in steel products(HS 7201~ 7326). For the analysis of countrys income-level effect, high income, upper-middle-income and lower-middle-income dummy variables are used for the analysis. The panel data analysis suggests that although steel price index and AD initiation shows negative relationship, price factor is not a significant determinant in AD initiation. Instead, fall in GDP growth and deterioration in trade specialization index(TSI) in the world steel trade leads to significant increase in AD initiation. Additionally, countries initiate AD investigation more when their steel over-supply increases. In terms of countries income-level analysis, upper-middle-income country group shows strong negative relations with AD initiation whereas hi-income country group has positive relations. Furthermore, it is observed that steel over-supply index is negatively related with AD initiation in the high-income country group.