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Trade Diversion as Firm Adjustment to Trade Policy: Evidence from EU Anti‐dumping Duties on Vietnamese Footwear
Author(s) -
Hoai Nguyen Trong,
Toan Nguyen Truong,
Van Pham Hoang
Publication year - 2017
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12421
Subject(s) - vietnamese , spillover effect , international economics , economics , european union , trade diversion , international trade , trade barrier , dumping , value (mathematics) , difference in differences , business , international free trade agreement , macroeconomics , philosophy , linguistics , econometrics , machine learning , computer science
This paper evaluates the impact of the 2006 European Union anti‐dumping (AD) action on Vietnamese footwear in three markets: imports to the EU, footwear producers in Vietnam, and the trade diversionary adjustment of Vietnamese firms in the US market. We find that the AD action reduced Vietnamese imports to the EU by as much as 65 per cent. Given that the EU makes up almost two‐thirds of Vietnam's footwear exports and footwear is among the top four export industries for Vietnam, this reduction is economically significant. Consistent with predictions of our model, we find evidence of trade diversion by Vietnamese producers from the EU to the US market. Our difference‐in‐difference estimates of the AD actions on the value of Vietnamese footwear imports to the United States ranged from 69 to 71 per cent over the period 2004–07 and 69 to 72 per cent in terms of quantity. These results highlight the spillover effects of trade policy in third markets when firms adjust to trade barriers. Our results are robust to triple‐difference specifications where we adjust for trend differences and a series of placebo specifications.