The Continued Dumping and Subsidy Offset Act: An Economic Analysis

Under the Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, the U.S. government distributes the revenue from anti-dumping and countervailing duties to domestic firms alleging harm. In this article, we develop a simple model to examine the economic effect of the CDSOA. For the case in which the “offset payments” to domestic firms are linked to the volume of foreign imports, the CDSOA may increase foreign imports when the domestic market is more competitive than in the Cournot equilibrium. This finding runs contrary to what the E.U. and some exporting countries have claimed. But if the market is less competitive than in Cournot, the CDSOA becomes an instrument of trade protectionism.