This paper examines firms' choice between serving a foreign market through exports or foreign direct investment (FDI). We begin by unveiling a new empirical regularity: using a unique dataset that allows us to study the dynamics of firms' export and FDI choices in individual destination markets, we show that the overwhelming majority of firms serve a foreign market via exports before establishing affiliates in that market. To explain this pattern, we develop a simple dynamic model of export and FDI choices, in which a firm can only discover its ability to earn profits in a foreign market once it starts serving it. We show that uncertainty can lead to a gradual internationalization process, whereby the firm tests the foreign market via exports, before engaging in FDI. Consistent with the model's predictions, we find that most firms start serving a foreign market through exports; in the first years following export entry, many firms drop out of the foreign market, others survive and expand as exporters, some establish foreign affiliates. We show that a firm's export experience in a foreign market increases its probability of FDI entry; this effect decreases over time and increases with foreign market uncertainty. Our analysis suggests that exports and FDI, although substitutes from a static perspective, may be complements over time, since the knowledge acquired through export experimentation can lead firms to start investing abroad.JEL classifications: F10, D21, F13.

While tariff barriers have decreased worldwide through various GATT rounds, anti‐dumping has surged to play a crucial role as the most important non‐tariff barrier. After much debate and opposition, anti‐dumping is on the agenda of the Doha round of multilateral trade negotiations and it is one of the most important issues, especially for developing countries as they are the main targets of this policy instrument. With this prospect, it is important to assess the relevance of anti‐dumping not only by focusing on traditional users but by analysing the experience of new users, which are now major players in the field. This paper improves upon existing studies by providing a comprehensive assessment on the use of anti‐dumping. First, data on the time pattern of worldwide implementations of anti‐dumping laws are presented. This time profile shows interesting relationships with legal developments in GATT and WTO dispositions. Second, usual sources of data are complemented with various other sources. This allows the inclusion of recent heavy users like China, Russia, Taiwan and Ukraine, which are ignored in similar studies but important for their trade volumes. This enlarged and updated dataset shows that new users are even more important than previously thought, with implications for the Doha negotiations.

Many nations have undergone significant trade liberalization in the last twenty years even as they have increased their use of contingent protection measures. This raises the question of whether some of the trade liberalization efforts, at times accomplished through painful reforms, have been undone through a substitution from tariffs to nontariff barriers. Among the new forms of protection, antidumping is the most relevant, as its use has spread from few developed countries to a large set of developing countries that are now among the most intense users of this instrument. This paper uses a newly developed database to examine to what extent the use of antidumping in a large set of countries is systematically influenced by the reduction of applied sectoral tariffs. The data set includes information on 29 developing and 7 developed countries from 1991 through 2002. After controlling for time-varying sectoral information as well as macroeconomic conditions, we find evidence of a substitution effect only for heavy users of antidumping among developing countries. In particular, a one standard deviation increase in sectoral trade liberalization increases the probability of observing an antidumping initiation by 32 percent. There is no similar statistically significant result for other developing countries or developed countries. We also find robust evidence of retaliation and deflection effects as determinant of antidumping filings across all subsamples.

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Fast Track Authority (FTA) is the institutional procedure in the Unites States whereby Congress grants to the President the power to negotiate international trade agreements. Under FTA, Congress can only approve or reject negotiated trade deals, with no possibility of amending them. In this paper, we examine the determinants of FTA voting decisions and the implications of this institutional procedure for international trade negotiations. We describe a simple two-country trade model, in which industries are unevenly distributed across constituencies. In the foreign country, trade negotiating authority is delegated to the executive, while in the home country Congress can retain the power to amend trade agreements. We show that representatives of constituencies with higher stakes in import-competing industries tend to vote against FTA, while representatives of more export-oriented constituencies might vote in favor or against, depending on the degree of protectionism of the majority of Congress. Empirical analysis of the determinants of all FTA voting decisions taken by Congress provides strong support for the predictions of our model. We also show that lack of FTA tends to skew the outcomes of trade negotiations in favor of the home country. This might help to explain why other countries are reluctant to negotiate trade agreements with the United States in the absence of FTA. JEL classifications: D72, F13