Working Paper: NBER ID: w9027
Authors: Bruce A. Blonigen; Kasaundra Tomlin; Wesley W. Wilson
Abstract: Studies of the welfare implications of trade policy often do not take account of the potential for tariff-jumping FDI to mitigate positive gains to domestic producers. We use event study methodology to examine the market effects for U.S. domestic firms that petitioned for antidumping (AD) relief, as well as the effect of announcements of FDI by their foreign rivals in the U.S. market on these U.S. petitioning firms. On average, affirmative U.S. AD decisions are associated with 3% abnormal gains to a petitioning firm when there is no tariff-jumping FDI, but no abnormal gains if there is tariff-jumping FDI. The evidence for this mitigating effect is strongest when announcements of the intended tariff-jumping FDI have already occurred before an AD decision takes place, which happened in a fair number of cases. We also find evidence that the announcements of plant expansions (and, to some extent, new plants) have significantly larger negative effects on U.S. domestic firms' profits than other types of FDI, including acquisitions and joint ventures.
Keywords: No keywords provided
JEL Codes: F13; F23; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Affirmative U.S. AD decisions (J78) | 3% abnormal gains for petitioning firms (F23) |
| Presence of tariff-jumping FDI (F23) | no abnormal gains for petitioning firms (K37) |
| Tariff-jumping FDI precedes AD decisions (F23) | mitigating effect on abnormal gains (G41) |
| Announcements of plant expansions by foreign rivals (tariff-jumping FDI) (F23) | larger negative effects on U.S. domestic firms' profits (F69) |
| Other types of FDI (acquisitions or joint ventures) (F23) | smaller negative effects on U.S. domestic firms' profits (F69) |