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

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Abstract

Article VI of the GATT allows counter measures of goods are sold on a foreign market at a price below average production plus transportation costs. The present article analyzes 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 which do not exist without the rule. In some equilibria the incumbent serves the entire market even if the entrant can porduce 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.

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  • Uwe Dulleck, 2004. "WTO´s Anti-dumping Rule and the Protection of Incumbents," Vienna Economics Papers 0407, University of Vienna, Department of Economics.
  • Handle: RePEc:vie:viennp:0407
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    1. Kenen,Peter B., 2000. "The International Economy," Cambridge Books, Cambridge University Press, number 9780521644358, March.
    2. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    3. Bagwell, Kyle & Staiger, Robert W., 1997. "Strategic export subsidies and reciprocal trade agreements: The natural monopoly case," Japan and the World Economy, Elsevier, pages 491-510.
    4. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, pages 83-100.
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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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