9810706 Blonigen With the latest GATT Uruguay Round reductions and eliminations of most major tariffs and quotas across World Trade Organization countries, antidumping and countervailing duty (AD/CVD) laws are poised to become the most significant trade policy remaining in the world economy. While a significant body of literature has examined the trade and price effects of AD/CVD investigations and duties, little attention has been given to the role of foreign direct investment (FDI) in the occurrence, administration and effects of AD investigations. This project will generate a database matching FDI occurrences by foreign firms investigated in U.S. AD investigations to the firm-specific duties received by these firms. This new firm-level database will allow analysis of the following previously-unexplored issues which have obvious policy implications for the structure of AD protection. 1) To what extent do foreign firms locate production in the United States to avoid AD duties and are there features of U.S. AD law that encourage or discourage this tariff- jumping? The possibility of tariff-jumping AD protection has largely been ignored, but has obvious impacts on the actual "protection" the domestic firms receive, FDI levels in the U.S., prices, employment, and welfare costs of AD protection. This project will analyze at the firm level the extent of tariff-jumping FDI in U.S. AD cases and the effect of annual AD duty reviews on the incentives for foreign firms to tariff-jump. A foreign firm can achieve lower duties in future annual reviews by discontinuing its "dumping." The theory and empirical work will determine to what extent this feature of U.S. AD law discourages tariff-jumping FDI. 2) Do firms locating (or located) in the United States receive different outcomes when named in AD investigations than foreign rivals that are not invested in the United States? Quid pro quo FDI theory suggests that foreign firms may locate in the U.S. to appease protectionist sentiments and receive lowe r expected probabilities of future protection. On the other hand, a theoretical result by Blonigen and Ohno (forthcoming) suggests that firms investing in a market may aggressively export to trigger an AD investigation to generate duties on rivals that are not likely to be able to tariff-jump protection. These two hypotheses have opposite predictions for differences in duties received by foreign firms already invested in the U.S. market and those that are not. This project will estimate the extent and nature of strategic reaction by invested foreign firms to U.S. AD law. 3) To what extent does the domestic industry consider the possibility of tariff-jumping by foreign rivals when deciding whether to petition for relief through AD protection ? Casual empiricism shows that the majority of AD cases are named against firms from countries that rarely invest in the United States. When countries that often engage in FDI in the U.S. are named, the investigated product is often in an industry, such as steel, where the fixed costs of investment are relatively high. This project will theoretically and empirically investigate a domestic industry's likelihood of petitioning for costly relief given that industries and countries vary in their ability to tariff-jump AD protection. ??
