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The Heterogeneous Effects of Trade Protection: A Study of US Antidumping Duties on Portland Cement

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Abstract

For many traded products, high transportation and trade costs can lead to regionally segmented markets, which affect both the pattern of trade and the impact of trade policy. This paper studies the imposition of antidumping duties in the cement industry and finds striking regional variation in their impact on domestic prices, sales and imports. Duties that were imposed on Japanese producers that were shipping cement to the US West-Coast coastal markets led to imperfect substitution to other imports, which allowed domestic prices and production to increase. Imperfect substitution also occurred following duties that were imposed on Mexican producers that were shipping cement to the US Gulf of Mexico coastal markets. But in the US Southwest border markets, the same duties had no impact on the domestic prices of cement. I link the variation in responses across regions to hysteresis that was due to high exit costs.

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Notes

  1. Zanardi (2004), p. 409.

  2. A few examples of prominent studies on antidumping include Finger (1981), Herander and Schwartz (1984), Salvatore (1987), Harrison (1991), Staiger and Wolak (1994), Prusa (1997), Blonigen and Haynes (2002) and Blonigen and Park (2004).

  3. Many studies actually use 4-digit Standard International Trade Classification (SITC) codes, which aggravate the problem since they aggregate over several product categories (e.g. SITC 3279 includes: abrasive products; cut stone and stone products; ground or treated mineral and earth; mineral wool and glass fibers; and all other miscellaneous nonmetallic mineral products). Thus, a 4-digit SITC category may include some products that are subject to antidumping duties and others that are not, making the analysis of the duties’ impact even harder.

  4. For example, in the early 1970s the cost of inland shipments of cement by barge was 0.38 cent per ton-mile whereas the cost of shipments by truck was 8.25 cents per mile (USGS Minerals Yearbook of Cement). According to John Sweetland, formerly the owner of a major US cement import facility, transporting one ton of cement from Korea or Japan to Los Angeles in the 1980s would cost about \({\$}5\), while shipping it by land from Long Beach to San Fernando Valley (about 50 miles) would cost \({\$}6-\$7\).

  5. California is treated as a separate region for clarity, since it could potentially be affected by the imposition of antidumping duties on cement imports from both Mexico (by land or sea) and Japan (by sea). Texas is treated as part of the Gulf of Mexico region since the bulk of its cement import facilities are located there.

  6. See for example Dixit (1989), Feinberg (1992), and Baldwin and Krugman (1989). Most of the empirical studies of hysteresis focus on the impact of exchange rates on exporter entry and exit decisions: e.g., Campa (1993), Roberts et al. (2001), Roberts and Tybout (1997) and Campa (2004).

  7. 19 CFR §.

  8. 19 CFR 351.402.

  9. In fact, antidumping duty payments are adjusted retroactively following an administrative review. In particular, once antidumping duties are assessed, the importer usually deposits cash, a bond or another security to cover estimated duty payments on all subsequently imported merchandise. The deposit is based on the most recent duty rate. When an administrative review takes place, an updated duty rate is calculated retroactively, based on actual prices during the review period. The importer is then reimbursed or charged for the difference between past estimated payments and the payment due based on the review’s outcome.

  10. Lesley (1924).

  11. Source: USGS Historical Statistics for Mineral and Material Commodities in the United States Data Series 140, Cement.

  12. Cement clinker are solid lumps or nodules, typically of 3–25 mm diameter, produced by the cement kiln. When clinker is ground, it becomes Portland cement. Clinker imports are about one fifth of total cement imports, according to the USGS Minerals Yearbooks.

  13. In addition, countervailing duties (a duty that is imposed to counter unfair subsidies that are given to foreign producers by their governments) were imposed on Mexican producers of Portland cement and cement clinker in 1983. The duties were revoked completely in April 1991, effective from August 1986. The countervailing duties did not have much impact on Mexican imports. In fact, Mexican cement imports increased considerably between 1983 and 1989, before antidumping duties were imposed on Mexican cement in 1990.

  14. The full list of Customs districts that are used in the empirical analysis below is available on request from the author.

  15. The following Customs districts are excluded since there is no cement production in these states: Alaska, Connecticut-Massachusetts, Minnesota-North Dakota, Rhode Island, and Vermont. Hawaii is also excluded since its remote location and isolation make it fundamentally different from the continental US states that constitute the treatment and control groups for the analysis.

  16. California-Nevada is the only Customs-district that is part of the treatment group for both Japan and Mexico and that can import from Mexico both by land and sea.

  17. When Texas-Oklahoma is separated from other Gulf of Mexico Customs districts in the analysis, the hypothesis that the effect of the duties on Mexico-Oklahoma is the same as the effects on the rest of the Gulf of Mexico Customs districts cannot be rejected.

  18. Consumption is measured as total shipments to the Customs district. Both imports and shipments data are taken from USGS minerals yearbooks.

  19. I used data on cement prices per ton in eighteen US cities for 1986, 1989, 1991, and 1994, dividing the price difference between each pair of cities by the distance between them. The result is a measure of potential arbitrage profit per mile. I find that significant price differences exist across markets. For example, in August 1991 the average price of one ton of bulk cement was \({\$}67\) in Kansas City compared with \({\$}52\) in St. Louis (\(29\,\%\) difference; 260 miles away), and \({\$}81\) in Detroit compared with \({\$}68\) in Cleveland (\(19\,\%\) difference, 170 miles away). Comparing the measure of arbitrage profit per ton per mile with the average cost of transporting one ton of cement one mile by rail (obtained from the Carload Waybill Sample), I find that in almost all cases, the shipping cost per mile was higher than the arbitrage profit per mile, with the difference between the two ranging from one quarter to more than ten times the profit per mile.

  20. For both the quantity and the price regressions, the price of electricity (and, for the price regressions, the price of crushed stone) is statistically significant and negative. Arguably, both electricity and crushed stone are also inputs to the construction industry and hence their coefficients may capture both demand side and cost- side effects.

  21. For the border region, the coefficient is negative and statistically significant but so small in magnitude that the actual effect is negligible.

  22. “US recommends duties of up to 84.7 % on Japanese cement,” Wall Street Journal (Eastern Edition), March 19, 1991, p. A26.

  23. “Business Brief: Lone Star Industries Inc.,” Wall Street Journal (Eastern edition), January 5 1988, p. 1; and the http://www.fundinguniverse.com/company-histories/Taiheiyo-Cement-Corporation-Company-History.html Taiheiyo Cement Corporation company history.

  24. Imports and shipments data are taken from USGS minerals yearbooks. Implied production is the difference between shipments and imports.

  25. In a July 2002 interview, Cemex’s President of US Operations, Gilberto Perez, said: “In Houston, we’re bringing cement in from Korea, Denmark, and our operations in Venezuela.” (“A Conversation with Cemex’s president of US operations Gilberto Perez,” Cement Americas, July 1, 2002).

  26. Import costs data (net of duties) are taken from USGS minerals yearbooks.

  27. Imports and shipments data are taken from USGS minerals yearbooks. Implied production is the difference between shipments and imports.

    Fig. 4
    figure 4

    Mexican imports and production shares of consumption, border

    Full size image

  28. Hidalgo cement plant was also exporting to the United States, but experienced financial difficulties and one year after the duties’ imposition was acquired by Cemex.

  29. Since 1989 Cemex owned Sunbelt Cement in the Southern United States. Between 1986 and 1989, Cemex owned half of Sunbelt Cement.

  30. The information in this section is based on the firms’ own annual reports and on the Federal Register’s records.

  31. The duties that were imposed on Apasco were lower than the duties on GCC and Cemex during the first three years of the duties. Hence, its exit cannot be explained by a claim that it was subjected to higher duties.

  32. Baron and Adams (1994).

  33. According to the USGS Minerals Yearbook’s data for cement from that period, as well as construction demand data.

  34. Based on data from USGS Minerals Yearbooks for cement, which present annual cement imports by country of origin and entry port from the Bureau of Census data.

  35. Imports and shipments data are taken from USGS minerals yearbooks. Implied production is the difference between shipments and imports.

  36. Import costs data (net of duties) are taken from USGS minerals yearbooks.

  37. In a July 2002 interview, Cemex’s President of US operations, Gilberto Perez, said: “[We] buy cement from a lot of suppliers. In the case of the imports through California, we are buying cement from China, Taiwan, and our operation in Thailand.” (“A Conversation with Cemex’s president of US operations Gilberto Perez,” Cement Americas, July 1, 2002).

  38. I have calculated the average cost of imports for Cemex before and after the duties were imposed for San Diego and Los Angeles combined (Cemex’s main entry ports into California by land and sea), and for Houston (Cemex’s main importing terminal in Texas). Before the duties were imposed, I used the average cost of Mexican imports, respectively. After the duties were imposed, I used the average cost of imports from Mexico, Spain, China, Thailand and Taiwan for California; and from Korea, Denmark, Venezuela and Spain for Houston (based on Cemex’s main import sources into these states). A comparison of mean import costs before and after the duties for California finds no change in Cemex’s Import costs (\({\$}31.7\) before 1990, \({\$}32.0\) after). For Houston, I find a statistically significant increase in Cemex’s import costs after the duties were imposed (\({\$}19.0\) before 1990, \({\$}30.1\) after 1990, with the difference between the two being highly significant). It should be noted that all import value data exclude antidumping duty payments.

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Acknowledgments

I am grateful to Robert Staiger, Jon Levin, and Frank Wolak for their continuous guidance, invaluable advice, and encouragement. I am also indebted to Roger Noll for his feedback and assistance with obtaining essential data and to Susan Athey for her encouragement, advice and support. I am grateful to John Sweetland, George Barney, Luis Garcia, Benoit Pleska, and Hendrick G. Van Oss for sharing their extensive knowledge of the Portland cement industry.

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    Maya Cohen-Meidan

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Cohen-Meidan, M. The Heterogeneous Effects of Trade Protection: A Study of US Antidumping Duties on Portland Cement. Rev Ind Organ 42, 369–394 (2013). https://doi.org/10.1007/s11151-013-9383-y

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