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WTO's Anti-dumping Rule and the Protection of Incumbents

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Abstract

Article VI of the GATT allows counter measures of goods are sold on a foreign market at a price below average production plus transportation costs. The present article analyzes Article VI based on a simple game theoretic model with two countries and economies of scale in the production of one homogeneous good. It is shown that multiple equilibria exist under the WTO rule for some parameter values which do not exist without the rule. In some equilibria the incumbent serves the entire market even if the entrant can porduce at lower costs. The model supports the criticism of the anti-dumping rule as an instrument of protection by industrialized countries against competition from developing countries.

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  • Uwe Dulleck, 2004. "WTO's Anti-dumping Rule and the Protection of Incumbents," Vienna Economics Papers vie0407, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie0407
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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