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Price undertakings, VERs, and foreign direct investment: the case of foreign rivalry

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  • Jota Ishikawa
  • Kaz Miyagiwa

Abstract

. Antidumping (AD) petitions are often withdrawn in favour of voluntary export restraints (VERs) and price undertakings. This paper compares these policy options in the presence of protection‐jumping foreign direct investment (FDI), with special emphasis on rivalry between foreign firms. We show that a VER is less likely to induce FDI than a price undertaking or AD. As a result, by settling AD cases with VER agreements, the importing country can pursue a more protectionist policy without triggering FDI. In this sense the GATT ban on VERs following the proliferation of AD uses was a sensible decision. Les plaintes anti‐dumping (AD) sont souvent retirées quand le pays étranger propose des AVP ou des RVE. Ce mémoire compare l'impact de ces différentes possibilités sur l'incitation des firmes étrangères à s'engager dans l'IDE, avec une attention particulière à la rivalité des firmes étrangères. On montre que les RVE sont moins susceptibles d'entraîner l'IDE que les AVP ou l'action AD. En conséquence, en résolvant les plaintes AD à l'aide de RVE, le pays importateur peut poursuivre une politique davantage protectionniste sans déclencher les IDE. En ce sens, la prohibition des RVE par le GATT, suite à la prolifération des plaintes AD, était une décision défendable.

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  • Jota Ishikawa & Kaz Miyagiwa, 2008. "Price undertakings, VERs, and foreign direct investment: the case of foreign rivalry," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 954-970, August.
    • Handle: RePEc:wly:canjec:v:41:y:2008:i:3:p:954-970
    DOI: 10.1111/j.1540-5982.2008.00492.x
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    1. Bruce A. Blonigen & KaSaundra Tomlin & Wesley W. Wilson, 2019. "Tariff-Jumping FDI and Domestic Firms’ Profits," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 14, pages 473-500, World Scientific Publishing Co. Pte. Ltd..
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    6. Belderbos, R. & Vandenbussche, H. & Veugelers, R., 2004. "Antidumping duties, undertakings, and foreign direct investment in the EU," European Economic Review, Elsevier, vol. 48(2), pages 429-453, April.
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    Cited by:

    1. Mukunoki, Hiroshi, 2021. "Trade liberalization and incentives to implement antidumping protection," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 422-437.
    2. Wu, Shih-Jye & Chang, Yang-Ming & Chen, Hung-Yi, 2014. "Antidumping duties and price undertakings: A welfare analysis," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 97-107.
    3. Ray-Yun Chang & Hong Hwang & Cheng-Hau Peng, 2020. "Antidumping protection and welfare in a differentiated duopoly," The Japanese Economic Review, Springer, vol. 71(3), pages 421-446, July.
    4. Cheng‐Hau Peng & Hong Hwang & Kuo‐Feng Kao, 2023. "Is price undertaking a more friendly protection policy than an anti‐dumping duty?," The World Economy, Wiley Blackwell, vol. 46(1), pages 120-134, January.
    5. Chang, Yang-Ming & Raza, Mian F., 2023. "Dumping, antidumping duties, and price undertakings," Research in Economics, Elsevier, vol. 77(1), pages 131-151.

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