Title: Undertakings and antidumping jumping FDI in Europe
Authors: Veugelers, Reinhilde
Vandenbussche, Hylke
Belderbos, R
Issue Date: 1999
Publisher: Centre for Economic Policy Research
Series Title: CEPR Discussion Paper 2320 (Dec.)
Abstract: This paper studies the effects of EU antidumping policy when foreign firms have the possibility to 'jump' antidumping measures by engaging in foreign direct investment (FDI) in the EU. Using a multi-stage framework, we study the EU administration's choice between an antidumping duty and a price-undertaking, taking into account the effect of these measures on the location decision of the foreign firm and the subsequent price competition between local and foreign firms. Our findings suggest that the EU administration acting purely in the EU industry's interest prefers a price-undertaking to a duty, if the latter leads to 'duty jumping' FDI. FDI toughens price competition in the EU market and leaves local firms worse off. Antidumping jumping FDI will only occur if the EU administration has broader objectives than just protecting the profitability of EU industry, if fixed costs of FDI are not too high, and if the cost advantage of foreign firms are, at least partially, firm-specific and transferable abroad. If foreign firms are able to act strategically taking into account EU antidumping policy, the presence of antidumping law can also discourage FDI that would have taken place under free trade conditions.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Department of Managerial Economics, Strategy and Innovation (MSI), Leuven

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