Michael O. Moore

Determinants of german manufacturing direct investment: 1980–1988

Determinants of German Manufacturing Direct Investment: 1980-88.- This paper examines what economic variables best explain the pattern of German foreign direct investment in five manufacturing sectors for the period 1980 through 1988. The statistical model also yields estimates of country-specific fixed effects. The results indicate that host-country size and labor costs may help explain German FDI. The data also suggest that substantial differences among the five sectors exist. The results indicate that geographical proximity to Germany may help systematically in attracting investment.ZusammenfassungBestimmungsgründe der deutschen Direktinvestitionen im Warenproduzierenden Gewerbe 1980-88. - In dem Aufsatz wird untersucht, welche ökonomischen Variablen am besten das Muster der deutschen direkten Auslandsinvestitionen in fünf Industriesektoren zwischen 1980 und 1988 erklären. Das statistische Material liefert auch Schätzungen länderspezifischer Effekte. Die Ergebnisse zeigen, daβ die Gröβe des Gastlandes und Arbeitskosten dazu beitragen können, die deutschen direkten Auslandsinvestitionen zu erklären. Die Daten deuten ferner auf beträchtliche Unterschiede zwischen den fünf Sektoren hin. Auβerdem zeigt sich, daβ die geographische Nähe zu Deutschland systematisch dabei mitwirken kann, deutsche Investoren anzulocken.

Trade Liberalization and Antidumping: Is There a Substitution Effect?

Many nations have undergone significant trade liberalization in the last twenty years even as they have increased their use of contingent protection measures. This raises the question of whether some of the trade liberalization efforts, at times accomplished through painful reforms, have been undone through a substitution from tariffs to nontariff barriers. Among the new forms of protection, antidumping is the most relevant, as its use has spread from few developed countries to a large set of developing countries that are now among the most intense users of this instrument. This paper uses a newly developed database to examine to what extent the use of antidumping in a large set of countries is systematically influenced by the reduction of applied sectoral tariffs. The data set includes information on 29 developing and 7 developed countries from 1991 through 2002. After controlling for time-varying sectoral information as well as macroeconomic conditions, we find evidence of a substitution effect only for heavy users of antidumping among developing countries. In particular, a one standard deviation increase in sectoral trade liberalization increases the probability of observing an antidumping initiation by 32 percent. There is no similar statistically significant result for other developing countries or developed countries. We also find robust evidence of retaliation and deflection effects as determinant of antidumping filings across all subsamples.

Does Antidumping Use Contribute to Trade Liberalization in Developing Countries

Some supporters of antidumping have argued that this procedure serves as a kind of “safety valve” for protectionist pressure. In this paper, we investigate whether there is empirical evidence that the use of antidumping actions has contributed to ongoing tariff reductions over the period 1988 to 2004 in a sample of 23 developing countries, some of which have become aggressive users of antidumping in recent years. The evidence is not supportive of the safety valve argument for these countries. Instead, evidence suggests that past use of antidumping may have led to less rather than more trade liberalization.

Implementing Carbon Tariffs: A Fool's Errand?

Some governments are considering taxes on imports based on carbon content from countries that have not introduced climate change policies. Such carbon border taxes appeal to domestic industries facing higher charges for their own carbon emissions. This research demonstrates that there are enormous practical difficulties surrounding such plans. Various policies are evaluated according to World Trade Organization compliance, administrative plausibility, help in meeting environmental goals, and ability to deal with domestic pressures. The steel industry is used as a case study in this analysis. All considered policies arguably fail to meet at least one of these constraints, bringing into question the plausibility that a carbon border tax can be practical policy.

Lobbying and Cournot-Nash competition : Implications for strategic trade policy

Abstract Arguments for strategic trade intervention with Cournot duopolists are reconsidered in a model where domestic firms can lobby for increased subsidies. An export subsidy may not improve national welfare if lobbying costs are included. Even if an optimal positive subsidy exists, the government needs information about lobbying effectiveness in order to correctly implement the program.

Lobbying vs. administered protection: Endogenous industry choice and national welfare

Abstract Import-competing industries in many democracies can pursue import relief via administered protection (AP) procedures or can lobby politicians directly. In this paper an industry chooses the option that maximizes expected profits. Both the AP and lobbying processes required a fixed resource cost and have an associated subjective probability of success. We show that policy reforms that decrease the probability of success under administered protection or lobbying may reduce expected national welfare when both processes are potentially profitable.

The Safeguard Clause, Asymmetric Information, and Endogenous Protection

When imports surge, governments often must seek simultaneously to satisfy protectionist pressures through increased tariffs, induce adjustment to foreign competition, and minimize consumer costs of protection. The WTOs safeguard clause can be viewed as an attempt to resolve these potentially conflicting goals since it allows governments to offer an implicit contract to protected industries to induce adjustment. In this paper, we show that with asymmetric information about costs, protected industries behave strategically which leads to under-adjustment. The safeguard clause therefore cannot optimally resolve the conflict among domestic political objectives. Copyright 2001 by Blackwell Publishing Ltd.

Why don’t foreign firms cooperate in US antidumping investigations? An empirical analysis

Foreign firms face punitive duties if they do not cooperate with the US Department of Commerce (DOC) in antidumping procedures. For example, 37% of all foreign firms involved in antidumping investigations in the US faced “facts available” margins for the 1995–2002 period, with average antidumping duties of 31% for cooperating foreign firms, compared to 87% for those who did not cooperate. The existing literature has focused on how DOC discretion has led to foreign firm non-cooperation. This paper instead examines individual foreign firm’s decisions about whether to cooperate during this same period. We find evidence that non-cooperation is consistent with a model of foreign firms rationally choosing not to cooperate, rather than solely as a result of investigating authority bias against imports.

Injury-Based Protection with Auditing under Imperfect Information

We analyze optimal protection when a benevolent government must maintain nonnegative domestic profits and when the domestic import-competing firm has private information about its costs. A costly audit mechanism can deter strategic manipulation of this private information. We show that a high penalty/low probability of investigation is optimal when the shadow price of the firm profit is low compared with the audit cost. A low penalty/high probability of investigation is optimal when there is a low investigation cost and a high shadow price of firm profit. In this latter case, the trade authority obtains truthful announcements by directly auditing the firm.

A welfare comparison between VERS and tariffs under the GATT

Economic theory suggests that tariffs are welfare-superior to voluntary export restraints in the presence of perfect competition. However, with perfectly competitive markets, some authors have found that voluntary export restraints may be welfare superior to tariffs. The authors reconsider the comparison between a voluntary export restraint and a tariff in the context of GATT-based constraints. Using a model of perfect competition, the authors show that a voluntary export restraint can welfare-dominate a tariff increase that is accompanied by a compensatory reduction in the tariff on another good or if the tariff is matched with a retaliatory tariff on domestic exports.