Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information / Dobrin R. Kolev, Thomas J. Prusa.

Format:

Book

Author/Creator:

Kolev, Dobrin R.

Contributor:

National Bureau of Economic Research.

Prusa, Thomas J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6986.

NBER working paper series no. w6986

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Dumping and Double Crossing The

Dumping and Double Crossing

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

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.

Notes:

Print version record

February 1999.