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WTO's Anti-dumping Rule and the Protection of Incumbents

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  • Uwe Dulleck

Abstract

Article VI of the GATT allows counter measures if goods are sold in a foreign market at a price below average production plus transportation costs. The present article analyses Article VI based on a simple game theoretic model with two countries and economies of scale in the production of one homogeneous good. It is shown that multiple equilibria exist under the WTO rule for some parameter values that do not exist without the rule. In some equilibria, the incumbent serves the entire market even if the entrant can produce at lower costs. The model supports the criticism of the anti-dumping rule as an instrument of protection by industrialized countries against competition from developing countries.

Suggested Citation

  • Uwe Dulleck, 2005. "WTO's Anti-dumping Rule and the Protection of Incumbents," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(2), pages 229-239.
    • Handle: RePEc:taf:jitecd:v:14:y:2005:i:2:p:229-239
    DOI: 10.1080/09638190500093471
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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