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

30 Pages Posted: 12 Jul 2007

See all articles by Jota Ishikawa

Jota Ishikawa

Hitotsubashi University-Faculty of Economics

Kaz Miyagiwa

Emory University - Department of Economics; Osaka University - Institute of Social and Economic Research (ISER); Florida International University (FIU) - Department of Economics

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Date Written: July 2007

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Antidumping (AD) petitions are often withdrawn in favor of VERs and price undertakings.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

Keywords: FDI, price undertakings, antidumping, VER, WTO

JEL Classification: F1

Suggested Citation

Ishikawa, Jota and Miyagiwa, Kaz, Price Undertakings, VERs, and Foreign Direct Investment: The Case of Foreign Rivalry (July 2007). ISER Discussion Paper No. 693. Available at SSRN: https://ssrn.com/abstract=1000102 or http://dx.doi.org/10.2139/ssrn.1000102

Jota Ishikawa

Hitotsubashi University-Faculty of Economics ( email )

2-1 Naka, Kunitachi
Tokyo, Tokyo 186-8601
Japan
+81425808794 (Phone)

Kaz Miyagiwa (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki Osaka 567-0047
Japan

Florida International University (FIU) - Department of Economics ( email )

Miami, FL 33199
United States

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