Given the recent trend of falling traditional barriers to trade (tariffs, VERs and quotas), governments have begun to rely on antidumping policy as a form of protection. Thus it is important to develop a firm understanding of our antidumping duty laws. One literature has recently developed which argues that even if not actively applied, the mere presence of antidumping duty laws has a significant effect on trading outcomes. The theory we develop has some results with a similar flavor. The problem we study is to understand why non-filing domestic producers are sometimes will actively oppose an antidumping petition filed by other domestic producers. Since the filing firms incur the bulk of the cost of the dumping case, it is difficult to see why a non-filing firm would choose to oppose the petition. One potential theory is that a domestic producer that also exports may fear of retaliation abroad. A second theory is that the domestic producer also has significant imports and so gains from protection may outweigh the losses. However, these theories cannot explain opposition by a domestic producer with no significant export, imports or foreign affiliations. We propose that the most reasonable explanation in these cases is that opposition can act as a signal of private information. This signal is credible because in opposing the petition, the opposing firm(s) damages the credibility of the case, reducing the chances of gaining a prescriptive duty. Furthermore, we argue that through pre-filing communication between domestic producers, this signaling can affect a trading outcome even if a case is never filed.
"The Dynamics of Discriminatory Import Policy" has been completed and has been published at the Canadian Journal of Economics.