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Tariff-jumping FDI and Domestic Firms’ Profits

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  • Bruce A. Blonigen

    ()
    (Department of Economics, University of Oregon and NBER)

  • KaSaundra Tomlin

    (Department of Economics, Howard University)

  • Wesley W. Wilson

    ()
    (Department of Economics, University of Oregon)

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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Bibliographic Info

Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2003-23.

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Length: 32
Date of creation: 01 Jun 2002
Date of revision: 01 Jun 2002
Handle: RePEc:ore:uoecwp:2003-23

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Cited by:
  1. Henk Kox & Arjan Lejour & Raymond Montizaan, 2004. "The free movement of services within the EU," CPB Document 69, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Chiara Franco & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2008. "Why do firms invest abroad? An analysis of the motives underlying Foreign Direct Investments," Department of Economics Working Papers 0817, Department of Economics, University of Trento, Italia.
  3. Farshid Pourshahabi & Ehsan Salimi Soderjani & Davood Mahmoudinia, 2013. "Panel Causality Relationship among FDI and Trade (Evidence from 16 Advanced Europe Countries)," Iranian Economic Review, Economics faculty of Tehran university, vol. 18(1), pages 115-133, winter.
  4. Matthew T Cole & Ronald B Davies, 2009. "Optimal Tariffs, Tariff Jumping, and Heterogeneous Firms," Working Papers 200919, School Of Economics, University College Dublin.
  5. Gurun, Ayfer, 2013. "Business strategy and financial consequences: The case of antidumping filings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 24(C), pages 127-138.
  6. Anwar, Sajid & Nguyen, Lan Phi, 2011. "Foreign direct investment and trade: The case of Vietnam," Research in International Business and Finance, Elsevier, vol. 25(1), pages 39-52, January.
  7. Fung, K.C. & Korhonen, Iikka & Li, Ke & Ng, Francis, 2008. "China and Central and Eastern European Countries: Regional networks, global supply chain or international competitors?," BOFIT Discussion Papers 9/2008, Bank of Finland, Institute for Economies in Transition.
  8. Jota Ishikawa & Kaz Miyagiwa, 2006. "Price Undertakings, VERs, and Foreign Direct Investment," Emory Economics 0616, Department of Economics, Emory University (Atlanta).

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