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

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  • Jota Ishikawa
  • Kaz Miyagiwa

Abstract

Antidumping (AD) petitions are often withdrawn in favor of VERs and price undertakings.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.

Suggested Citation

  • Jota Ishikawa & Kaz Miyagiwa, 2007. "Price Undertakings, VERs, and Foreign Direct Investment: The Case of Foreign Rivalry," ISER Discussion Paper 0693, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0693
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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2007/DP0693.pdf
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    Cited by:

    1. 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.

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    JEL classification:

    • F1 - International Economics - - Trade

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