Tariff-jumping FDI and Domestic Firms’ Profits

Bruce A. Blonigen (), KaSaundra Tomlin and Wesley W. Wilson ()
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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

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: 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.

JEL-codes: F13 F23 L11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: 2002-06-01
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