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Tariff-jumping FDI and Domestic Firms’ Profits

  • Bruce A. Blonigen


    (Department of Economics, University of Oregon and NBER)

  • KaSaundra Tomlin

    (Department of Economics, Howard University)

  • Wesley W. Wilson


    (Department of Economics, University of Oregon)

Studies of the welfare implications of trade policy often do not take account of the potential for tariff-jumping FDI to mitigate positive gains to domestic producers. We use event study methodology to examine the market effects for U.S. domestic firms that petitioned for antidumping (AD) relief, as well as the effect of announcements of FDI by their foreign rivals in the U.S. market on these U.S. petitioning firms. On average, affirmative U.S. AD decisions are associated with 3% abnormal gains to a petitioning firm when there is no tariff-jumping FDI, but no abnormal gains if there is tariff-jumping FDI. The evidence for this mitigating effect is strongest when announcements of the intended tariff-jumping FDI have already occurred before an AD decision takes place, which happened in fair number of cases. We also find evidence that the announcements of plant expansions (and, to some extent, new plants) have significantly larger negative effects on U.S. domestic firms’ profits than other types of FDI, including acquisitions and joint ventures.

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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2003-23.

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Length: 32
Date of creation: 01 Jun 2002
Date of revision: 01 Jun 2002
Handle: RePEc:ore:uoecwp:2003-23
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  23. Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, vol. 36(8), pages 1557-1571, December.
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