Essays on Strategic Trade Policy
Date Issued
2008
Date
2008
Author(s)
Peng, Cheng-Hau
Abstract
This dissertation, applying these most commonly used strategic trade models, explores issues on antidumping policy, foreign direct investment (FDI), tariffs and quotas equivalence and the effective rate of protection (ERP).n Chapter 2, we employ a spatial competition model with one foreign firm competing with one domestic firm in the domestic market to examine how a domestic antidumping law affects the FDI-jumping decision of the foreign firm. It goes beyond previous studies by treating the FDI decision (i.e., the location of the foreign firm) as an endogenous and continuous variable which allows us to examine thoroughly the location pattern of the foreign firm. In this chapter, our major findings are: (i) The optimal location of the foreign firm is of corner solution under free trade, but it has an interior solution when it is subject to an antidumping law. (ii) The border of the nations is crucial to the FDI decision. FDI is more likely to take place if the border of the nations is closer to the foreign country. (iii) If the foreign firm has a cost advantage over the domestic firm, it is more likely for the foreign firm to engage in FDI which supports the empirical finding of Blonigen (2002).n Chapter 3, we add an upstream firm to the Cournot model a la Hwang and Mai (1988) and examine the issue of tariffs and quotas equivalence under three different pricing strategies adopted by the upstream firm which include two-part tariff, discriminating pricing and uniform pricing. We find that the market price for the final good under a tariff is higher (lower) than that under the equivalent quota (i.e., the quota is set at the level of import under the tariff), if the upstream firm adopts two-part tariff pricing (discriminating pricing or uniform pricing). This result is in sharp contrast to the finding of Hwang and Mai (1988). We also compare the social welfare under free trade and that under the equivalent quota (i.e., the quota is set at the level of import under free trade). Surprisingly, the social welfare under free trade is necessarily lower than that under the equivalent quota. In addition to the case of two-part tariffs, we also study the cases in which the upstream firm adopts either discriminatory or uniform pricing.hapter 4 utilizes the ERP definition a la Anderson (1998) to highlight the impacts of FDI on ERP. Our major findings are as follows: First, when FDI is taken into account, the measurement of the ERP can not be determined solely by tariff rates on the final product and the intermediate good in the model. Second, FDI greenfield costs also play an important role in measuring the ERP. Moreover, it is impossible to have a positive ERP if the greenfield cost is zero. Finally, in this model, the impact of the FDI on ERP à la Anderson can also be applied to that of Corden. hpater 5 concludes the dissertation and provides some extensions from this research.
Subjects
Strategic Trade Policy
Antidumping
Price Undertaking
Foreign Direct Investment
Tariffs and Quotas Equivalence
Vertically Related Markets
Effective Rate of Protection
SDGs
Type
thesis
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