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

17 Pages Posted: 14 Jul 2008

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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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Antidumping (AD) petitions are often withdrawn in favour of voluntary export restraints (VERs) and price undertakings.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.

Suggested Citation

Ishikawa, Jota and Miyagiwa, Kaz, Price Undertakings, VERs, and Foreign Direct Investment: The Case of Foreign Rivalry. Canadian Journal of Economics/Revue canadienne d'économique, Vol. 41, Issue 3, pp. 954-970, August/août 2008. Available at SSRN: https://ssrn.com/abstract=1158673 or http://dx.doi.org/10.1111/j.1540-5982.2008.00492.x

Jota Ishikawa (Contact Author)

Hitotsubashi University-Faculty of Economics ( email )

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

Kaz Miyagiwa

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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