Case Study-2

International trade theories argue that nations should opentheir doors to trade Conventional free trade wisdom says that bytrading with others, a country can offer its citizens a greatervolume and selection of goods at cheaper prices than it could inthe absence of it. Nevertheless, truly free trade still does notexist because national governments intervene. Despite the effortsof WTO (World Trade Organization) and smaller groups of nations,government seems to be crying foul in the trade game now more thanever before.

We see efforts at protectionism in the rising trends ingovernments charging foreign producers for \"dumping\" their goods onthe world market. Worldwide, the number of anti-dumping cases thatwere initiated stood at about 150 in 2014, 225 in 2015, 230 in2016, and 300 in 2017.

There is no shortage of similar examples. The US charges Brazil,Japan, and Russia with dumping their products in the US market as away out of tough economic times. The US steel industry wants thegovernment to slap a 200 percent tariff on certain types of steel.But car makers in US are not complaining, and General Motors evenspoke out against the anti-dumping charges — as it is enjoying thebenefits of low cost steel for the use in its auto production.Canadian steel makers followed the lead of the US and are pushingfor anti-dumping actions against four nations.

Emerging markets too, are jumping into the fray. Mexico recentlyexpanded coverage of its Automatic Import Advice System. The systemrequires importers (from a selected list of countries) to notifyMexican officials of the amount and price of the shipment 10 daysprior to its expected arrivals in Mexico. The ten day notice givesdomestic producers advance warning of incoming low priced productsso they can complain of dumping before the product clear customsand enter the market place. India is also getting onboard bysetting up a new government agency to handle anti-dumpingcases.

Why dumping is on the rise for the first place? The WTO has mademajor inroads on the use of tariffs, slashing them across everyproduct category in recent years. But the WTO does not have theauthority to punish companies, but only governments. Thus the WTOcannot pass judgments against individual companies that are dumpingtheir products in other markets. It can only pass the rulingsagainst the governments of the country that imposes anti-dumpingduty. But the WTO allows countries to retaliate against nationswhose producers are suspected of dumping when it can be shownthat:

i) The alleged offenders are significantly hurting the domesticproducers.

ii) The export price is lower than the cost of production orlower than the home market price.

Supporters of anti-dumping tariff claim that they preventdumpers from undercutting the price charged by the producers in atarget market and driving them about of business. Another claim insupport of anti-dumping is that it is an excellent way of retainingsome protection against the potential dangers of totally freetrade. Detractors of anti-dumping tariffs charge that once thetariffs are imposed they are rarely removed. They also claim thatthey cost companies and governments a great deal of time and moneyto file and argue their cases. It is argued that the fear of beingcharged with dumping causes international competitors to keep theirprice higher in the target market than would have otherwise be thecase. This would allow domestic companies to charge higher pricesand not loose market shares forcing consumers to pay more for theirgoods.

Required Question

Questions 01: Based on the above case study, evaluatethe effects of dumping on domestic business and also on theconsumers

Question 02: As we have seen WTO cannot currently getinvolved in punishing individual companies for dumping. Its actioncan be only directed towards governments of countries. Do you thinkthis is a wise policy? Justify your answer.