Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information

Dobrin R. Kolev and Thomas Prusa

No 6986, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D82 F13 (search for similar items in EconPapers)
Date: 1999-02
New Economics Papers: this item is included in nep-mic and nep-pke
Note: ITI
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Citations: View citations in EconPapers (3)

Published as Kolev, Dobrin R. and Thomas J. Prusa. "Dumping And Double Crossing: The (In)Effectiveness Of Cost-Based Trade Policy," International Economic Review, 2002, v43(3,Aug), 895-918.

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Journal Article: Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy under Incomplete Information (2002)
Working Paper: Dumping and Double Crossing: The (In)Effectiveness Of Cost-Based Trade Policy Under Incomplete Information (1999)
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