Dumping, exchange rate uncertainty, and antidumping laws

Strategic firm responses to antidumping laws when firms face exchange rate uncertainty are investigated in both theoretical and empirical contexts. In Chapter I, the relationship between exchange rate changes and dumping is analyzed, as well as the effect of the imposition of a binding antidumping law on output, price, profits, and market share of a foreign and a domestic firm. Depreciation of the domestic currency is shown to exacerbate dumping, and imposition of the law results in an increased domestic price and a reduced foreign share of the market. Decision-making with respect to exchange rate uncertainty is introduced, and this is shown to increase the amount of exchange rate pass-through relative to the certainty case when the antidumping law is enforced. Chapter II contains a welfare analysis of the effects of imposing a binding antidumping law which are shown to be negative. A temporary penalty and the strategic behavior which it induces is also analyzed, and results are derived showing that the domestic price will increase and imports will fall, even if the penalty is not actually applied. The welfare effects of this law are also negative. A different model where current market share determines future profitability is investigated with respect to when dumping occurs and how the imposition of an antidumping law affects market outcomes. In Chapter III, the link between exchange rate changes in the 1980s and the increased use of U.S. antidumping statutes is empirically analyzed specifically for the U.S. chemical industry. Factors which influence the decision to file a petition are investigated, and import penetration and unit value data as well as domestic production data are analyzed to evaluate how firm behavior changes during the course of the antidumping investigation. Evidence that targeted importers lose market share to both competing importers and the domestic industry is strong in many cases. Each chapter includes a literature review of research relevant for the issues discussed, as well as suggestions for future research. Mathematical appendices appear after each chapter, and a full bibliography is included at the end of the thesis