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Down with Dumping
“Canada Launches WTO Challenge to U.S. . . . Mexico WidensAnti-dumping Measure . . . China to Begin Probe of Synthetic RubberImports . . . Rough Road Ahead for U.S.-China Trade . . . It MustBe Stopped,” are just a sampling of headlines from around theworld.
International trade theories argue that nations should open theirdoors to trade. Conventional free-trade wisdom says that by tradingwith others, a country can offer its citizens a greater quantityand selection of goods at cheaper prices than it could in theabsence of trade. Nevertheless, truly free trade still does notexist because national governments intervene. Despite the effortsof the World Trade Organization (WTO) and smaller groups ofnations, governments still cry foul in the trade game. On average,234 antidumping cases are initiated each year.
In the past, the world’s richest nations would typically charge adeveloping nation with dumping. But today, emerging markets, too,are jumping into the fray. China recently launched an inquiry todetermine whether synthetic rubber imports (used in auto tires andfootwear) from Japan, South Korea, and Russia are being dumped inthe country. Mexico expanded coverage of its Automatic ImportAdvice System. The system requires importers (from aselect list of countries) to notify Mexican officials of the amountand price of a shipment 10 days prior to its expected arrival inMexico. The 10-day notice gives domestic producers advanced warningof low- priced products so they can report dumping before theproducts clear customs and enter the marketplace. India set up anew government agency to handle antidumping cases. Even Argentina,Indonesia, South Africa, South Korea, and Thailand are using thisrecently popular tool of protectionism.
Why is dumping so popular? Oddly enough, the WTO allows it. TheWTO has made major inroads on the use of tariffs, slashing themacross almost every product category in recent years. But it doesnot have authority to punish companies, only governments. Thus theWTO cannot make judgments against individual companies that aredumping products in other markets. It can only pass rulings againstthe government of the country that imposes an antidumping duty. Butthe WTO allows countries to retaliate against nations whoseproducers 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 lowerthan the home market price.
Alternatives to bringing antidumping cases before the WTO doexist. U.S. President George W. Bush relied on a Section 201 or“global safeguard” investigation under U.S. trade law to slaptariffs of up to 30 percent on steel imports. The U.S. steelindustry had been suffering under an onslaught of steel importsfrom Brazil, the European Union, Japan, and South Korea. Yetnations still brought complaints about the action before the WTO.Similarly, in 2004 the U.S. government slapped around 100 percenttariffs on shrimp imported from China and Vietnam, charging thosenations with dumping their crustaceans on U.S. shores.
Supporters of antidumping tariffs claim that they preventdumpers from undercutting the prices charged by producers in atarget market, driving them out of business. Another claim insupport of antidumping is that it is an excellent way of retainingsome protection against the potential dangers of totally freetrade. Detractors of antidumping tariffs charge that once suchtariffs are imposed they are rarely removed. They also claim thatit costs companies and governments a great deal of time and moneyto file and argue their cases. It is also argued that the fear ofbeing charged with dumping causes international competitors to keeptheir prices higher in a target market than would otherwise be thecase. This would allow domestic companies to charge higher pricesand not lose market share— forcing consumers to pay more for theirgoods.
- "Identify a recent antidumping case that wasbrought before the WTO. Locate articles in the press in Chinese orEnglish to help you discuss the case. Identify the nations,product(s), and potential punitive measures involved. If you wereon the WTO dispute settlement body, would you vote in favor of themeasures taken by the retaliating nation? Why or whynot?"
