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Self-protection? Antidumping Duties, Collusion, and FDI

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  • Ronald B. Davies
  • Benjamin H. Liebman

Abstract

It is well established that the threat of antidumping duties can help sustain collusion between a foreign firm and its domestic counterpart. However, when the foreign firm is a multinational with a subsidiary in the domestic country, that subsidiary can undermine efforts for protection, thereby diminishing the threat of duties that would otherwise sustain collusion. Accordingly, we show that the multinational may choose to submit to a tariff even under collusion since evidence indicates that duties are more difficult to remove than initiate. In this way, it is possible to obtain a greater degree of commitment, although it comes at a cost. Nevertheless, we prove that this can be a more profitable strategy than those previously explored. Thus, a parent firm may instruct its subsidiary to support duties against the parent. In fact, we find several cases where subsidiaries of multinationals have indeed filed for protection from their own parents. Copyright � 2006 The Authors; Journal compilation � 2006 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 14 (2006)
Issue (Month): 5 (November)
Pages: 741-757

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Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:741-757

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