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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Antidumping (AD) petitions are often withdrawn in favour of voluntary export restraints (VERs) and price undertakings.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.

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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, Canadian Economics Association, vol. 41(3), pages 954-970, August.
    • Handle: RePEc:cje:issued: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:

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    4. Chang, Yang-Ming & Raza, Mian F., 2023. "Dumping, antidumping duties, and price undertakings," Research in Economics, Elsevier, vol. 77(1), pages 131-151.
    5. 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.

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