Down with Dumping

“Who to Agree to Probe EU Duties on Chinese Footwear. Canada launches

WTO Challenge to U.S. Mexico Widens Anti-dumping Measures. Rough Road Ahead
for U.S China Trade, It Must Be Stopped,” is just a sampling of headlines from around
the world.
International trade theories argue that nation should open their doors to trade.
Conventional free-trade wisdom says that, by trading with others, a country can offer its
citizens a greater quantity and selection of goods at cheaper prices than it could in the
absence of trade. Nevertheless, truly free trade still does not exist because national
government intervene. Despite the efforts of the World Trade Organization (WTO) and
smaller groups of nations, government still cry foul in the trade game. On average, 234
antidumping cases are initiated each year with nearly 70 percent of disputes being
settled by negotiation. And whereas the United States and the European Union initiated
half of all WTO cases in prior years, they now initiate only about a quarter of all cases
more than half are now brought by developing countries.
  In the past, the worlds riches nation would typically charge a developing nation
with dumping. But today, emerging markets, too, are jumping into the fray. China
recently launched an inquiry to determine whether synthetic rubber imports (used in
auto tires and footwear) from Japan, South Korea and Russia are being dumped in the
country. Mexico expanded coverage of its Automatic Imports Advised System. The
system requires exporters (from a select list of countries) to notify Mexican officials of
the amount and price of a shipment 10 days prior to its expected arrival in Mexico. The
10-day notice gives domestic producer advance warning of low-priced products so they
can report dumping before the products clear customs and enter the market place. India
set up a new government agency to handle antidumping cases. Even Argentina,
Indonesia, South Africa, South Korea and Thailand are using this recently popular tool
of protectionism.
Why dumping so popular? Oddly enough, the WTO allows it. The WTO has
made major inroads on the use of tariffs, slashing them across almost every product
category in recent years, but it does not have authority to punish companies, only
governments. Thus, the WTO cannot make judgements against individual companies
that are dumping products in other markets. It can only pass rulings against the
government of the country that imposes antidumping duty. But the WTO allows
countries to retaliate against nations whose producers are suspected of dumping when
it can be shown that (1) alleged offenders are significantly hurting domestic producers
and (2) the export price is lower than the cost of production or lower home market price.
Alternatives to bringing antidumping cases before the WTO do exist. U.S
President George W. Bush relied on a Section 201, or “global safeguard”. Investigation
under U.S trade law to slap tariffs of up to 30 percent on steel imports. The U.S steel
industry had been suffering under onslaught of steel imports from Brazil, the European
Union, Japan and South Korea. Yet nations still brought complaints about the action
before the WTO. Similarly, in 2004 the U.S government slapped around 100 percent
tariffs on shrimp imported from China and Vietnam, charging those nations with
dumping their crustaceans on U.S shores.
Supporters of antidumping tariffs claim that they prevent dumpers from
undercutting the prices charge by the producers in a target market, driving them out of
business. Another claim in support of antidumping is that it is an excellent way of
retaining some protection against potential dangers of totally free trade. Detractors of
antidumping tariffs charge that once such tariffs are imposed, they are rarely removed.
They also claim that it cost companies and governments a great deal of time and money
to file and argue their cases. It is also argued that the fear of being charge with dumping
causes international competitors to keep their prices higher in a target market than
would otherwise be the case. This would allow domestic companies to charge higher
prices and not lose markets share forcing consumers to pay more for their goods.

DOWN with DUMPING

Thinking Globally
1. “You can’t tell consumers that the low price they are paying for that fax machine
or automobile is somehow unfair. They’re not concerned with the profits of some
company. To them, it’s just a great bargain, and they want it to continue.” Do you
agree with the statement? Do you think that people from different cultures would
respond differently to his statement? Explain your answers.

2. As we have seen, currently the WTO cannot get involved in punishing individual
companies; its actions can only be directed towards governments of countries.
Do you think this is a wise policy? Why or why not? Why do you think the WTO
was not given authority to charge individual companies with dumping? Explain.

3. Identify a recent antidumping case that was brought before the WTO. Locate as
many articles in the press as you can that discuss the case. Identify the nations,
products and potential punitive measures involved. If you were part of WTO
dispute settlement body, would you vote in favor of the measures taken by the
retaliating nation? Why or why not?