In recent decades, global trade has undergone significant changes, particularly due to the rise of temporary trade barriers such as antidumping duties. These measures have become an important tool in the hands of countries striving to protect their markets from foreign competition. China, in particular, finds itself at the forefront of this battle, becoming the target of a significant number of antidumping investigations and measures, especially from the United States and the European Union. From 1995 to 2022, 766 antidumping measures were imposed on China, accounting for about 34% of global measures.
To assess the impact of antidumping measures on the quality of export products, a model based on demand residuals was used. This methodology allows for the assessment of product quality as part of its market share that is not explained by price. The approach involves the use of a discrete choice model for consumers, where the quality of each product position is determined through residuals obtained after evaluating the demand model for that product.
Within the demand model, the normalized logarithmic market shares of each product position are regressed on prices and other controlled variables such as product characteristics and macroeconomic factors of the importing country. Including a multitude of fixed effects (by firms, products, and countries) allows for isolating external influences and identifying the net effect of antidumping measures on quality.
The study found that Chinese manufacturers whose products were subjected to antidumping measures often reduce the quality of their products to remain competitive in affected markets. This is particularly noticeable in the case of exports to developing countries, where manufacturers may feel less pressure to maintain high quality standards due to lower consumer expectations and requirements.
In addition to lowering the quality of materials used and simplifying processes, companies have also adapted their pricing strategies to compensate for losses from reduced sales volumes. This change in strategy often leads to a reduction in investments in research and development of new products, which can weaken the long-term growth prospects of companies.
Antidumping measures directed against Chinese products have led to significant economic losses for consumers in the countries that apply these measures. Consumer surplus losses are estimated at 5.4%, underscoring the importance of antidumping measures not only as a means of protecting the domestic market but also as a factor affecting price levels and product quality on the international market.
These economic consequences include not only price increases for consumers but also broader socio-economic impacts such as reduced availability of quality goods and a narrower choice. This can lead to a decrease in economic efficiency as consumers are forced to switch to less preferred or more expensive alternatives. Moreover, long-term consequences may include a reduction in innovation, as companies may cut back on investments in the development of new and improved products due to decreased external market opportunities.
Furthermore, the introduction of antidumping measures can negatively affect trade relations between countries, increasing trade tensions and facilitating the introduction of retaliatory trade barriers. This can lead to an intensification of protectionism, a reduction in global trade, and consequently, a reduction in global economic growth.
The study emphasizes the need for a more thorough analysis of antidumping measures and their impact on international trade. It is important to develop measures that not only protect internal markets but also maintain a high level of innovation and quality in the global economy, ensuring fair competition and market stability.
Prepared by: Asel Bolatova, expert at Economy.kz portal
