We thank David Haushalter, Van Kolpin, and Wes Wilson for helpful comments on an earlier draft. We gratefully thank Keith Head and John Ries for sharing their electronic version of the main database we use for this study. Any errors or omissions are the sole responsibility of the authors. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.

Abstract:Studies of the welfare implications of trade policy often do not take account of the potential for tariff-jumping FDI to mitigate positive gains to domestic producers. We use event study methodology to examine the market effects for U.S. domestic firms that petitioned for antidumping (AD) relief, as well as the effect of announcements of FDI by their foreign rivals in the U.S. market on these U.S. petitioning firms. On average, affirmative U.S. AD decisions are associated with 3% abnormal gains to a petitioning firm when there is no tariff-jumping FDI, but no abnormal gains if there is tariff-jumping FDI. The evidence for this mitigating effect is strongest when announcements of the intended tariff-jumping FDI have already occurred before an AD decision takes place, which happened in fair number of cases. We also find evidence that the announcements of plant expansions (and, to some extent, new plants) have significantly larger negative effects on U.S. domestic firms' profits than other types of FDI, including acquisitions and joint ventures.

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We thank David Haushalter, Van Kolpin, and Wes Wilson for helpful comments on an earlier draft. We gratefully thank Keith Head and John Ries for sharing their electronic version of the main database we use for this study. Any errors or omissions are the sole responsibility of the authors. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.