VOLUNTARY EXPORT RESTRAINTS, DUMPING AND EXCESS CAPACITY

This paper is a variation on Anderson (''Domino Dumping, I: Competitiv e Exporters'', American Economic Review, Vol. 82, March 1992, pp. 65-8 3), who asserts that the prospect of voluntary export restraint (VER) protection, inducing firms to dump, can create further protection. And erson's model, however, seems unable to explain some stylized facts co ncerning the VER-regulated trade in textiles and clothing. Our aim is to account for such stylized facts through the introduction of a cost of excess productive capacity attributed to dumping actions. This allo ws us to describe a new chain of effects related to dumping and VERs: the incentive to dump, induced by the expectation of a VER, can genera te the creation of productive excess capacity in the present period, w hich in turn can increase the incentive to dump in the future.