Labor Union and Antidumping
Protection.
Ching Hsu and Chen-Hau Peng
1. Introduction:
While the regulation of the World Trade Organization (WTO)
disapproves the trade barriers, tariffs, quotas and voluntary export
restraints (VERs), antidumping policies become very important tools,
i.e. antidumping duty or price undertaking, to protect domestic firms
from the threats of competitions of foreign firms. With the economy
exploration and trade liberalization, markets frequently compete with
each other.
2. Benchmark Model
3. Antidumping Policies
3.1 Antidumping duty
3.2 Price Undertaking
Proposition 1
When the antidumping policy is imposed, instead of free trade,
(i) Firm F decreases its output to the domestic market and
increases the output to the foreign market. Firms H also
increase the sales to the domestic market. (ii) The price in the
domestic market under antidumping duty or price undertaking
is indifferent, and it is higher than the price under free trade.
Proposition 2
Assume the demand functions are symmetric and linear. The
protection of antidumping duty and price undertaking is
indifferent
Proposition 3
Given the protection of antidumping policies is indifferent,
the antidumping policy is always better than price
undertaking through the domestic welfare under
antidumping is higher.
4. Model in the presence of labor
union
4.1 Free Trade
Now we shall examine how the dumping margin changes in the presence of
labor union. Because the price of foreign market is unaltered, we compare the
difference of dumping margin through the diversity of domestic prices. By
comparing the equations (7) and (34) we can derive the welfare difference
under the two antidumping policies as follows:
Proposition 4
When the labor union is potent, the
dumping margin is narrower against no
labor union.
4.2 Antidumping duty
4.3 Price Undertaking
Comparing equations (49) and (60), we specify the wage between
antidumping duty and price undertaking as follows
• Proposition 5 In the presence of labor union,
the wage is higher under antidumping duty
than price undertaking.
Equations (52) and (63) show that the profits under duty and undertaking and
we can examine the protection between antidumping duty and price
undertaking as follows:
Proposition 6
• In the presence of labor unions, the
protection of price undertaking is stronger
than antidumping duty.
Conclusion