Dumping and double crossing: The (in)effectiveness of cost-based trade policy under incomplete information
Year: 2021
Type: book-chapter
Abstract: We argue that the rise of antidumping protection and the proliferation of voluntary export restraints are fundamentally inter-related. We show that both can be explained by a cost-based definition of dumping when the domestic government has incomplete information about the foreign firm's costs. Given that its costs are only imperfectly observed and knowing the government's desire to offer greater protection against competitively priced imports, efficient foreign firms will voluntarily restrain their exports prior to the antidumping investigation. In turn, the VER distorts the government's perception of the foreign firm's efficiency and often leads to undesirably high duties regardless of the foreign firm's efficiency. The clumsy way that duties are levied benefits domestic firms, which explains the popularity of cost-based complaints.
Authors: DOBRIN R. KOLEV, THOMAS J. PRUSA
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W1604248202