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Steel Safeguards and the Welfare of U.S. Steel Firms and Downstream Consumers of Steel:
A Shareholder Wealth Perspective

Benjamin H. Liebman and Kasaundra M. Tomlin
IIIS Discussion Paper No. 144


This paper analyzes the steel safeguards implemented and subsequently removed during 2001-2003. Our results reveal that for shareholders of U.S. steel companies, safeguards generated positive “abnormal” returns of approximately 6%; and the cancellation of the safeguards resulted in wealth gains of about 5%. Steel shareholders experienced negative abnormal returns of -5% in response to the WTO ruling that the U.S. violated WTO law. The results here are consistent with the neoclassical view that producers gain at the expense of consumers. Downstream consumers in transportation equipment and electrical equipment showed the clearest negative reaction to the safeguards. Moreover, steel firms that received larger cash disbursements under the Byrd amendment received additional wealth gains when the safeguard duties were imposed. Finally, empirical results indicate that U.S. downstreamconsuming firms that diversify production in NAFTA countries avert some trade policy risk associated with the initiation of the safeguard investigation and the imposition of the safeguard duties. Key Words: Antidumping Policy; Welfare
JEL Codes: F13-Commerical Policy; Protection; Promotion; Trade Negotiations;
F23-Multinational Firms; International Business

Last updated 28 August 2014 by IIIS (Email).