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Price Undertakings, VERs, and Foreign Direct Investment

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  • Jota Ishikawa
  • Kaz Miyagiwa

Abstract

We compare the relative effect of a voluntary export restraint (VER) and a price undertaking on foreign firms' incentive to engage in FDI. We emphasize foreign rivalry as a determinant of FDI. We show, in a model that has two foreign firms competing with a home firm in the home country, that a price undertaking induces more FDI than a VER. The home country government, operating under the constraint to protect the home firm, is generally better off settling an antidumping case with a VER than with a price undertaking.

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Bibliographic Info

Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0616.

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Date of creation: Nov 2006
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Handle: RePEc:emo:wp2003:0616

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  1. Kala Krishna, 1989. "Trade Restrictions as Facilitating Practices," NBER Working Papers 1546, National Bureau of Economic Research, Inc.
  2. Michael O. Moore, 2005. "VERs and Price Undertakings under the WTO," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 298-310, 05.
  3. Bruce A. Blonigen & KaSaundra Tomlin & Wesley W. Wilson, 2001. "Tariff-jumping FDI and Domestic Firms’ Profits," University of Oregon Economics Department Working Papers 2002-5, University of Oregon Economics Department, revised 01 Jun 2002.
  4. Thomas J. Prusa, 1999. "On the spread and impact of antidumping," Departmental Working Papers 199916, Rutgers University, Department of Economics.
  5. Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, vol. 36(8), pages 1557-1571, December.
  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.
  7. Ishikawa, Jota, 1998. "Who Benefits from Voluntary Export Restraints?," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 129-41, February.
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