Anti-dumping actions are now the trade policy of choice of developing and transition economies. To understand why these economies have increasingly applied anti-dumping laws, we build a simple theoretical model of vertical intra-industry trade and investigate the strategic incentives of exporting firms to undertake dumping. We show that the definition of dumping matters. Based on a comparison of low-quality and high-quality prices, only unilateral dumping by the low-quality firm obtains. By contrast, the standard WTO definition leads to either reciprocal or unilateral dumping by the high-quality firm, depending on cross-country differences in incomes, the height of tariff protection and on exchange rate changes.

anti-dumping, dumping, intra-industry trade, product quality
Trade (jel F1)
dx.doi.org/10.1111/j.1467-9701.2005.00699.x, hdl.handle.net/1765/12960
The World Economy
Erasmus School of Economics

Moraga-Gonzalez, J.L, & Viaene, J.M.A. (2005). Dumping in a Global World: Why Product Quality Matters. The World Economy, 28(5), 669–682. doi:10.1111/j.1467-9701.2005.00699.x