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Antidumping (AD) petitions are often withdrawn in favor of VERs and price undertakings.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

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    1. Bruce A. Blonigen & KaSaundra Tomlin & Wesley W. Wilson, 2019. "Tariff-Jumping FDI and Domestic Firms’ Profits," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 14, pages 473-500, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

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    3. Cheng‐Hau Peng & Hong Hwang & Kuo‐Feng Kao, 2023. "Is price undertaking a more friendly protection policy than an anti‐dumping duty?," The World Economy, Wiley Blackwell, vol. 46(1), pages 120-134, January.
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    5. Ray-Yun Chang & Hong Hwang & Cheng-Hau Peng, 2020. "Antidumping protection and welfare in a differentiated duopoly," The Japanese Economic Review, Springer, vol. 71(3), pages 421-446, July.

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    JEL classification:

    • F1 - International Economics - - Trade

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