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Tariff-jumping FDI and Domestic Firms’ Profits

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Author Info
Bruce A. Blonigen () (University of Oregon Economics Department)
KaSaundra Tomlin (Howard University Economics Department)
Wesley W. Wilson (wwilson@oregon.uoregon.edu)
Abstract

Studies of the welfare implications of trade policy often do not take account of the potential for tariff-jumping FDI to mitigate positive gains to domestic producers. We use event study methodology to examine the market effects for U.S. domestic firms that petitioned for antidumping (AD) relief, as well as the effect of announcements of FDI by their foreign rivals in the U.S. market on these U.S. petitioning firms. On average, affirmative U.S. AD decisions are associated with 3% abnormal gains to a petitioning firm when there is no tariff-jumping FDI, but no abnormal gains if there is tariff-jumping FDI. The evidence for this mitigating effect is strongest when announcements of the intended tariff-jumping FDI have already occurred before an AD decision takes place, which happened in fair number of cases. We also find evidence that the announcements of plant expansions (and, to some extent, new plants) have significantly larger negative effects on U.S. domestic firms’ profits than other types of FDI, including acquisitions and joint ventures.

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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2002-5.

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Length: 32
Date of creation: 01 Jun 2001
Date of revision: 01 Jun 2002
Handle: RePEc:ore:uoecwp:2002-5

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Related research
Keywords: Tariff-jumping FDI; Antidumping Policy; Welfare.;

Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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