IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v29y2014icp97-107.html
   My bibliography  Save this article

Antidumping duties and price undertakings: A welfare analysis

Author

Listed:
  • Wu, Shih-Jye
  • Chang, Yang-Ming
  • Chen, Hung-Yi

Abstract

In this paper we examine differences in welfare implications between two trade protection measures: antidumping (AD) duties and price undertakings. Based on a stylized model of duopolistic competition under an effective AD law, we first analyze the case where a foreign firm convicted of dumping is required to pay an AD duty. We then examine the case in which a convicted foreign firm has the option of (i) paying an AD duty or (ii) accepting an undertaking by raising product price to its “normal value.” Taking into account the GATT/WTO policy that an AD duty rate must not exceed the margin of dumping, we show conditions under which a foreign firm chooses to evade its AD fine by a price undertaking. We find that the welfare-maximizing AD duty rate for a dumped product depends crucially on its normal value. If the foreign product's normal value is “critically high,” the optimal AD rate is set to fully reflect the dumping margin. Otherwise, the optimal AD rate is set lower than the dumping margin. From the perspective of social welfare, these findings help to identify the economic conditions under which one policy instrument is chosen over the other against foreign dumping.

Suggested Citation

  • Wu, Shih-Jye & Chang, Yang-Ming & Chen, Hung-Yi, 2014. "Antidumping duties and price undertakings: A welfare analysis," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 97-107.
  • Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:97-107
    DOI: 10.1016/j.iref.2013.05.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056013000488
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. 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.
    3. Anderson, Simon P. & Schmitt, Nicolas & Thisse, Jacques-Francois, 1995. "Who benefits from antidumping legislation?," Journal of International Economics, Elsevier, vol. 38(3-4), pages 321-337, May.
    4. Niels, Gunnar, 2000. " What Is Antidumping Policy Really About?," Journal of Economic Surveys, Wiley Blackwell, vol. 14(4), pages 467-492, September.
    5. Dixit, Avinash, 1988. "Anti-dumping and countervailing duties under oligopoly," European Economic Review, Elsevier, vol. 32(1), pages 55-68, January.
    6. Miyagiwa, Kaz & Ohno, Yuka, 2007. "Dumping as a signal of innovation," Journal of International Economics, Elsevier, vol. 71(1), pages 221-240, March.
    7. Shih-Jye Wu & Yang-Ming Chang & Hung-Yi Chen, 2011. "Antidumping Petition: To File or Not To File," Economics Bulletin, AccessEcon, vol. 31(1), pages 631-643.
    8. Collie, David R. & Vandenbussche, Hylke, 2006. "Tariffs and the Byrd amendment," European Journal of Political Economy, Elsevier, vol. 22(3), pages 750-758, September.
    9. Blonigen, Bruce A. & Bown, Chad P., 2003. "Antidumping and retaliation threats," Journal of International Economics, Elsevier, vol. 60(2), pages 249-273, August.
    10. Wilfried Pauwels & Hylke Vandenbussche & Marcel Weverbergh, 2001. "Strategic Behaviour under European Antidumping Duties," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(1), pages 75-99.
    11. 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.
    12. Hillman, Arye L, 1990. "Protectionist Policies as the Regulation of International Industry," Public Choice, Springer, vol. 67(2), pages 101-110, November.
    13. Finger, J M & Hall, H Keith & Nelson, Douglas R, 1982. "The Political Economy of Administered Protection," American Economic Review, American Economic Association, vol. 72(3), pages 452-466, June.
    14. Nelson, Douglas, 2006. "The political economy of antidumping: A survey," European Journal of Political Economy, Elsevier, vol. 22(3), pages 554-590, September.
    15. Leonard K. Cheng & Larry D. Qiu & Kit Pong Wong, 2001. "Anti-dumping measures as a tool of protectionism: A mechanism design approach," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 639-660, August.
    16. Reitzes, James D, 1993. "Antidumping Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 745-763, November.
    17. Dinlersoz, Emin & Dogan, Can, 2010. "Tariffs versus anti-dumping duties," International Review of Economics & Finance, Elsevier, vol. 19(3), pages 436-451, June.
    18. Anderson, James E., 1993. "Domino dumping II: Anti-dumping," Journal of International Economics, Elsevier, vol. 35(1-2), pages 133-150, August.
    19. Anderson, James E, 1992. "Domino Dumping, I: Competitive Exporters," American Economic Review, American Economic Association, vol. 82(1), pages 65-83, March.
    20. Zanardi, Maurizio, 2006. "Antidumping: A problem in international trade," European Journal of Political Economy, Elsevier, vol. 22(3), pages 591-617, September.
    21. Prusa, Thomas J., 1992. "Why are so many antidumping petitions withdrawn?," Journal of International Economics, Elsevier, vol. 33(1-2), pages 1-20, August.
    22. Douglas Irwin, 2004. "The Rise of U.S. Antidumping Actions in Historical Perspective," NBER Working Papers 10582, National Bureau of Economic Research, Inc.
    23. Vandenbussche, Hylke & Wauthy, Xavier, 2001. "Inflicting injury through product quality: how European antidumping policy disadvantages European producers," European Journal of Political Economy, Elsevier, vol. 17(1), pages 101-116, March.
    24. Evenett, Simon J., 2006. "The simple analytics of U.S. antidumping orders: Bureaucratic discretion, anti-importer bias, and the Byrd amendment," European Journal of Political Economy, Elsevier, vol. 22(3), pages 732-749, September.
    25. Fischer, Ronald D., 1992. "Endogenous probability of protection and firm behavior," Journal of International Economics, Elsevier, vol. 32(1-2), pages 149-163, February.
    26. Laura ROVEGNO & Hylke VANDENBUSSCHE, 2011. "A comparative analysis of EU Antidumping rules and application," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    27. Yang-Ming Chang & Philip G. Gayle, 2006. "The Continued Dumping and Subsidy Offset Act: An Economic Analysis," Southern Economic Journal, Southern Economic Association, vol. 73(2), pages 530-545, October.
    28. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-745, September.
    29. Michael O. Moore, 2005. "VERs and Price Undertakings under the WTO," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 298-310, May.
    30. Xiwang Gao & Kaz Miyagiwa, 2005. "Antidumping protection and R&D competition," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 211-227, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liza Jabbour & Enrico Vanino & Zhigang Tao & Yan Zhang, 2016. "The good, the bad and the ugly: Chinese imports, EU anti-dumping measures and firm performance," Discussion Papers 2016-16, University of Nottingham, GEP.
    2. Kao, Kuo-Feng & Peng, Cheng-Hau, 2016. "Anti-dumping protection, price undertaking and product innovation," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 53-64.

    More about this item

    Keywords

    Antidumping duties; Dumping margin; Price undertakings;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:97-107. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.