Why Do Firms Pay Antidumping Duty?

With the virtual elimination of tariffs and quotas under GATT, antidumping measures emerged as a key instrument of protection. Under antidumping actions exporters can either raise the price to eliminate the dumping margin or pay an antidumping duty. This paper analyzes the incentives to exporters to choose between duty or settlement outcomes and finds that due to the smaller loss in market share exporters may prefer an antidumping duty over voluntary settlement. The paper analyzes the welfare implications of these outcomes and finds that they are ambiguous.
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Volume/Issue: Volume 1999 Issue 166
Publication date: December 1999
ISBN: 9781451858082
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Business and Economics , Exports and Imports , Inflation , Taxation - General , WP , Antidumping duty , price negotiation , foreign firm , dumping margin , Home firm , monopoly power , welfare effect , cost parameter , profit function , Foreign corporations , Antidumping , Duties , Trade liberalization , Inflation

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Summary

With the virtual elimination of tariffs and quotas under GATT, antidumping measures emerged as a key instrument of protection. Under antidumping actions exporters can either raise the price to eliminate the dumping margin or pay an antidumping duty. This paper analyzes the incentives to exporters to choose between duty or settlement outcomes and finds that due to the smaller loss in market share exporters may prefer an antidumping duty over voluntary settlement. The paper analyzes the welfare implications of these outcomes and finds that they are ambiguous.

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