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

Jota Ishikawa and Kaz Miyagiwa ()

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: Antidumping (AD) petitions are often withdrawn in favor of VERs and price undertakings.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

Date: 2007-07
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Related works:
Journal Article: Price undertakings, VERs, and foreign direct investment: the case of foreign rivalry (2008)
Journal Article: Price undertakings, VERs, and foreign direct investment: the case of foreign rivalry (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0693

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