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Price Undertakings, VERs, and Foreign Direct Investment: The Case of Foreign Rivalry

  • Jota Ishikawa
  • Kaz Miyagiwa

Antidumping (AD) petitions are often withdrawn in favor of VERs and price undertakings. We compare foreign firms' incentive to engage in foreign direct investment (FDI) under a VER and a price undertaking, with special emphasis on foreign rivalry. We show that a VER is less likely to induce FDI than a price undertaking or AD. Thus, the importing country can increase the level of protection by replacing an AD duty with a VER. This may account for the GATT ban on VERs, given the proliferation of AD cases during the 1990s.

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0693.

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Date of creation: Jul 2007
Date of revision:
Handle: RePEc:dpr:wpaper:0693
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