Are Subsidies More Dangerous Than Dumping? Evidence from Wealth Effects for the Steel Industry

Are Subsidies More Dangerous Than Dumping? Evidence from Wealth Effects for the Steel Industry

The GATT permits its members to protect their constituent firms from unfair trade practices, such as dumping and subsidies, on the part of foreign firms and governments. In the U.S., for example, the investigative procedures, injury standards, and remedies are the same for dumping and subsidies. International legal scholars have argued that there is no inherent reason why they have to be identical. The present paper uses an event study to determine if there is a significant difference in the reaction by the capital market to subsidy and dumping decisions for the U.S. steel industry. Because there is evidence that the reactions differ systematically in an efficient market, there is justification for permitting a weaker industry standard and stronger remedy for subsidy investigations.