Munich Personal RePEc Archive

Does Anti-dumping Enforcement Generate Threat?

Bagchi, Sagnik and Bhattacharyya, Surajit and Narayanan, Krishnan (2014): Does Anti-dumping Enforcement Generate Threat? Published in: Foreign Trade Review , Vol. 49, No. 1 (10. February 2014): pp. 31-44.

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Abstract

The last two decades have witnessed that countries across the world are guided by the rules and regulations of multilateral trading institutions (for example, World Trade organization [WTO], International Monetary Fund [IMF]) in order to promote free and fair trade through gradual reduction in trade barriers. The World economy has noticed significant reduction in tariffs, yet we find a rise in non-tariff barriers (NTBs). However, we still find dumping and few other trade strategies of the exporting countries as a major hindrance to free and fair trade. Such behaviour has led to “contingent protection” as a tool of new-protectionism. Among the contingent protection measures, anti-dumping (AD) has evolved as the most popular choice of strategy for the trading nations. The AD policy invokes a threat to the exporter and thereby can change its strategic behaviour. We describe the phenomenon of dumping through a price-leadership model and thereby compute the optimal level of anti-dumping duty that can offset dumping. Using a sequential game, we conclude that the credible threat of an AD duty restricts dumping and thereby leads to a win-win situation for both the foreign and domestic firms.

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