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Why Do We Need Antidumping Rules?

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  • Ronald Fischer
  • Martín Osorio

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Abstract

We show that the inclusion of antidumping (AD) and countervailing subsidy (CVD) regulations can increase the range of feasible preferential trade agreements (PTA), given that governments are sensitive to pressure groups defending import competing industries. AD and CVD regulations serve as an "escape valve" for pressure groups affected by the PTA in some states of the world. If the preferences of government do not differ by much from those of a welfare maximizing planner, there exist PTAs with escape clauses that provide more welfare than PTAs without escape. AD and CVD differ from safeguards in not requiring compensation to exporting countries, so a feasible agreement requires testing for injury caused by imports. Cheating on trade agree-ments is likely unless the level of pressure for protection is verifiable, and this is the role of the World Trade Organization (WTO) injury tests. If the injury tests are weakened, and the level of political pressure is less observable than expected, agreements become less valuable or may collapse.

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Bibliographic Info

Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 134.

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Date of creation: 2002
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Handle: RePEc:edj:ceauch:134

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  1. James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc.
  2. Kyle Bagwell & Robert W. Staiger, 1988. "A Theory of Managed Trade," NBER Working Papers 2756, National Bureau of Economic Research, Inc.
  3. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
  4. Hoekman, Bernard, 1998. "Free trade and deep integration : antidumping and antitrust in regional agreements," Policy Research Working Paper Series 1950, The World Bank.
  5. Kyle Bagwell & Robert W. Staiger, 1999. "Multilateral Trade Negotiations, Bilateral Opportunism and the Rules of GATT," NBER Working Papers 7071, National Bureau of Economic Research, Inc.
  6. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
  7. Rosendorff, B. Peter & Milner, Helen V., 2001. "The Optimal Design of International Trade Institutions: Uncertainty and Escape," International Organization, Cambridge University Press, vol. 55(04), pages 829-857, September.
  8. Ronald D. Fischer & Thomas J. Prusa, 2003. "WTO Exceptions as Insurance," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 745-757, November.
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