Price undertakings, VERs, and foreign direct investment: the case of foreign rivalry

Jota Ishikawa and Kaz Miyagiwa

Canadian Journal of Economics/Revue canadienne d'économique, 2008, vol. 41, issue 3, 954-970

Abstract: Abstract. Antidumping (AD) petitions are often withdrawn in favour of voluntary export restraints (VERs) and price undertakings. This paper compares these policy options in the presence of protection‐jumping foreign direct investment (FDI), with special emphasis on rivalry between foreign firms. We show that a VER is less likely to induce FDI than a price undertaking or AD. As a result, by settling AD cases with VER agreements, the importing country can pursue a more protectionist policy without triggering FDI. In this sense the GATT ban on VERs following the proliferation of AD uses was a sensible decision. Les plaintes anti‐dumping (AD) sont souvent retirées quand le pays étranger propose des AVP ou des RVE. Ce mémoire compare l'impact de ces différentes possibilités sur l'incitation des firmes étrangères à s'engager dans l'IDE, avec une attention particulière à la rivalité des firmes étrangères. On montre que les RVE sont moins susceptibles d'entraîner l'IDE que les AVP ou l'action AD. En conséquence, en résolvant les plaintes AD à l'aide de RVE, le pays importateur peut poursuivre une politique davantage protectionniste sans déclencher les IDE. En ce sens, la prohibition des RVE par le GATT, suite à la prolifération des plaintes AD, était une décision défendable.

Date: 2008
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https://doi.org/10.1111/j.1540-5982.2008.00492.x

Related works:
Journal Article: Price undertakings, VERs, and foreign direct investment: the case of foreign rivalry (2008)
Working Paper: Price Undertakings, VERs, and Foreign Direct Investment: The Case of Foreign Rivalry (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:canjec:v:41:y:2008:i:3:p:954-970

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