Antidumping Petition, Foreign Direct Investment, and Strategic Exports

Abstract

We examine how the protection-seeking effort of an import-competing industry, in the form of an antidumping petition, is affected by the foreign firm’s FDI opportunity. In equilibrium, the protection-seeking effort is either blockading, deterring, or accommodating FDI. When FDI is deterred, the protection-seeking effort decreases as the antidumping duty increases, and the foreign firm can benefit from an increase in the duty. Therefore, when the future duty depends on current exports, the foreign firm may increase its exports in order to dampen protection seeking. Namely, antidumping policy can induce more “dumping” when the foreign firm has an FDI opportunity.