This book, first published in 1995, analyses both theoretically and empirically the effects of a material injury clause of the type found in the Trade Act of 1979 on the behaviour of the dumping or subsidised foreign and import-competing domestic industries. The insight underlying the investigation is that the existence of such a material injury clause in an unfair trade law presents a moral hazard for representatives of the industry because it implies that tariff protection is more likely when the ITC perceives the injury to the US industry to be greater. Therefore, an incentive exists for the US industry to let itself be (or appear to be) injured today in order to benefit from tariff protection in the future.
1. Introduction 1.1. The US Countervailing Duty Mechanism 1.2. Literature Review 1.3. Countervailing Duty Proceedings Since 1980 2. Empirical Analysis of International Trade Commission Behavior 2.1. The US ITC Material Injury Investigation 2.2. An Econometric Model of ITC Behavior 2.3. Data Sources and Variable Construction 2.4. Estimation of the ITC Determination Function 3. The CVD Statute and the Material Injury Requirement 3.1. Effect of Foreign Subsidization on Cournot Duopoly 3.2. Modelling ITC Determination Behavior 3.3. Modelling a Domestic CVD Statute 3.4. Effects of Various ITC Determination Functions 3.5. An Example 3.6. Endogenous Subsidization 4. Empirical Analysis of Strategic Behavior 4.1. Strategic Behavior and the Empirical ITC Determination Function 4.2. An Empirical Model of Strategic Behavior 4.3. The Strategic Behavior Hypothesis 4.4. An Empirical Test of the Strategic Behavior Hypothesis 5. The ADD Statute and the Material Injury Requirement 5.1. A One-Period Dumping Model 5.2. Modelling a Domestic ADD Statute 5.3. The Equilibrium 5.4. The Effect of Various Forms of the ITC Determination Function