AntiDumping and Trade Protection

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Session 3

• Anti-Dumping and Trade Protection

September 8, 2003
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Dumping is selling in export markets below
normal value

• In the situation of the right dumping could be
  found in Country 2s market if
• Price AC lt Price AB
• Price AC lt Price AD
• Price AC lt Average Cost
• The real concern with dumping is predatory
  dumping whereby a local industry is undercut by
  an exporter who once the local industry
  collapses, then proceeds to exercise monopoly
  power

Country 1
Firm A
Firm B
Firm C
Firm D
Country 2
Country 3
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So what is anti-dumping all about?
What is it?
What are the requirements?

• Anti-dumping duties are taxes collected to
  protect against unfair dumping by foreign
  exporters
• The size of the tax is meant to correspond to the
  extent that the dumped price is less than the
  normal price

• Two requirements for dumping
• Evidence of dumping needs to be found
• Material injury to an important share of domestic
  industry

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Sounds reasonable, so whats the issue
Anti-dumping legislation casts a wide net
and proving dumping has been relatively easy

• Reasonable business practices can be interpreted
  as dumping, e.g. pricing differently for
  different market segments

• Vagueness in measuring dumping margins due to
• Price fluctuations
• Product definitions
• Price adjustments
• Simplistic means of measuring causation and injury

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The results
have important consequences
and are driven by protectionist motives

• Dumping often catches those simply engaging in
  fair trade. When duties are levied on these
  companies, the effect is a transfer of surplus
  from consumers to producers (plus a deadweight
  loss)
• Even if dumping is not proven, an exporter may
  still lose customers because of the retroactive
  nature of dumping legislation
• An example of these issues is contained in the
  Grey Cotton case

• Anti-dumping legislation has turned out to be
  protectionism dressed up as economic efficiency
  the effect of anti-dumping duties is generally
  duties 30 higher than Most Favoured Nation
  Tariffs

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So what do I really need to know
If you work as an exporter
If youre being besieged by importers

• Your normal business pricing strategies may have
  to be refined when entering new national markets
• The most price sensitive industries are the most
  dangerous for anti-dumping
• Be wary of accepting a price undertaking. If the
  case against your industry is not successful
  youll have already committed to maintaining high
  prices

• Anti-dumping legislation can be an effective way
  to screw people who are better than you at your
  business.
• Your arguments dont need to be very
  sophisticated, and at the end of the day youve
  got the emotional trump card of potential job
  losses in your favour