Three essays in international trade theory and policy
The second essay uses a reciprocal-dumping model to examine the welfare effects of the Byrd Amendment (i.e., the Continued Dumping and Subsidy Offset Act, or CDSOA). It analyzes the differences in optimal tariffs set by the home and foreign governments when the home (i.e., the U.S.) government redistributes anti-dumping duties to its domestic firm under the new trade law, as compared to the traditional antidumping policy under which these duties are government revenues. We derive conditions under which the CDSOA may raise or lower the price of an import-competing good in the U.S. market. The results show that the CDSOA is an instrument of protectionism and strictly improves the home country welfare when markets are less competitive than in Cournot equilibrium. We find that under the same market characteristics, the new trade law strictly reduces foreign country welfare. The CDSOA's welfare effect is shown to be ambiguous, however, when markets are more competitive than Cournot.
The third essay modifies the model presented in Essay 2 to allow for the scenario in which the foreign country strategically responds to the home country's CDSOA law by adopting similar trade law. The results show that the foreign country is able to enhance its national welfare when the import-competing markets are less competitive than in the Cournot equilibrium. We also discuss whether it is welfare-improving for the U.S. to voluntarily repeal the Byrd Amendment and restore the traditional antidumping policy, considering that, otherwise, its trading partner may also adopt the CDSOA law. We find that it is still in the best interest to the U.S. not to revoke the Byrd Amendment when markets are less competitive than Cournot. When markets are more competitive than Cournot, however, repealing the Amendment may turn out to be socially welfare-improving.
School:Kansas State University
School Location:USA - Kansas
Source Type:Master's Thesis
Keywords:the byrd amendment optimal tariff and tax reforms economics general 0501 theory 0511
Date of Publication:01/01/2008