Anti-Dumping Actions: Predatory Pricing International Trade

In economics, "dumping" can refer to any kind of predatory pricing.
However, the word

is now generally used only in the context of international trade law, where dumping is
defined as the act of a manufacturer in one country exporting a product to another
country at a price which is either below the price it charges in its home market or is
below its costs of production. The term has a negative connotation, but advocates of free
markets see "dumping" as beneficial for consumers and believe that protectionism to
prevent it would have net negative consequences. Advocates for workers and laborers
however, believe that safeguarding businesses against predatory practices, such as
dumping, help alleviate some of the harsher consequences of free trade between
economies at different stages of development (see protectionism)
A standard technical definition of dumping is the act of charging a lower price for a good
in a foreign market than one charges for the same good in a domestic market. This is
often referred to as selling at less than "fair value". Under the World Trade Organization
(WTO) Agreement, dumping is condemned (but is not prohibited) if it causes or threatens
to cause material injury to a domestic industry in the importing country.
In the United States, domestic firms can file an antidumping petition under the
regulations determined by the United States Department of Commerce, which determines
"less than fair value" and the International Trade Commission, which determines
"injury". These proceedings operate on a timetable governed by U.S. law. The
Department of Commerce has regularly found that products have been sold at less than
fair value in U.S. markets. If the domestic industry is able to establish that it is being
injured by the dumping, then antidumping duties are imposed on goods imported from
the dumpers' country at a percentage rate calculated to counteract the dumping margin.
Anti-dumping actions
[edit] Legal issues
If a company exports a product at a price lower than the price it normally charges on its
own home market, it is said to be "dumping" the product. Opinions differ as to whether or
not this is unfair competition, but many governments take action against dumping in
order to defend their domestic industries. The WTO agreement does not pass judgment.
Its focus is on how governments can or cannot react to dumping—it disciplines anti-
dumping actions, and it is often called the "Anti-Dumping Agreement". (This focuses
only on the reaction to dumping contrasts with the approach of the Subsidies &
Countervailing Measures Agreement.)
The legal definitions are more precise, but broadly speaking the WTO agreement allows
governments to act against dumping where there is genuine ("material") injury to the
competing domestic industry. In order to do that the government has to be able to show
that dumping is taking place, calculate the extent of dumping (how much lower the
export price is compared to the exporter’s home market price), and show that the
dumping is causing injury or threatening to do so.
Definitions and extent
There are many different ways of calculating whether a particular product is being
dumped heavily or only lightly. The agreement narrows down the range of possible
options. It provides three methods to calculate a product’s “normal value”. The main one
is based on the price in the exporter’s domestic market. When this cannot be used, two
alternatives are available—the price charged by the exporter in another country, or a
calculation based on the combination of the exporter’s production costs, other expenses
and normal profit margins. And the agreement also specifies how a fair comparison can
be made between the export price and what would be a normal price.
Calculating the extent of dumping on a product is not enough. Anti-dumping measures

can only be applied if the dumping is hurting the industry in the importing country.
Therefore, a detailed investigation has to be conducted according to specified rules first.
The investigation must evaluate all relevant economic factors that have a bearing on the
state of the industry in question. If the investigation shows dumping is taking place and
domestic industry is being hurt, the exporting company can undertake to raise its price to
an agreed level in order to avoid anti-dumping import duty
Procedures in investigation and litigation
Detailed procedures are set out on how anti-dumping cases are to be initiated, how the
investigations are to be conducted, and the conditions for ensuring that all interested
parties are given an opportunity to present evidence. Anti-dumping measures must expire
five years after the date of imposition, unless a review shows that ending the measure
would lead to injury.
Anti-dumping investigations are to end immediately in cases where the authorities

determine that the margin of dumping is, de minimis, or insignificantly small (defined as
less than 2% of the export price of the product). Other conditions are also set. For
example, the investigations also have to end if the volume of dumped imports is
negligible (i.e., if the volume from one country is less than 3% of total imports of that
product—although investigations can proceed if several countries, each supplying less
than 3% of the imports, together account for 7% or more of total imports). The agreement
says member countries must inform the Committee on Anti-Dumping Practices about all
preliminary and final anti-dumping actions, promptly and in detail. They must also report
on all investigations twice a year. When differences arise, members are encouraged to
consult each other. They can also use the WTO’s dispute settlement procedure.
Many governments already take action
against ‘dumping’ – the export of products at
prices lower than those charged in a home mar-
ket – to defend their domestic industries (see
Box 1 for the process). A country that is subject
to anti-dumping investigations is classified
as either a ‘market economy’ (ME) or a ‘non-
market economy’ (NME). A total of 18 countries
have been designated as NMEs by both the
US Department of Commerce (DoC) and the
European Commission (EC).
The consequence of being classified as a
NME is that ‘constructed prices’, or the prices
from so-called ‘analogue’ countries, are used
to determine whether or not dumping has
occurred and the appropriate dumping duties
to be applied. The use of analogue country data
often leads to higher dumping duties, and the choice
of analogue country is a significant source of bias.
The US DoC reports that the choice of ana-
logue country is based on identifying one or
more market economies ‘that are (i) at a level
of economic development comparable to that
of the NME country; and (ii) significant produc-
ers of comparable merchandise’. The European
Commission has no detailed rules governing
analogue country selection, beyond saying that
that the country should be ‘appropriate’ and
selected in a ‘not unreasonable manner’. In
practice, lack of EC criteria often seems to lead to
selection of EU countries or the USA as the ana-
logues. Detlof and Fridth (2006) report that 14 of
the 35 EU cases they examined used the USA as
the surrogate country.
Nine countries have ‘graduated’ from NME
to ME status according to both the US DoC and
EC, including Russia in 2002. But a number of
transition, emerging and developing countries
remain classified as NMEs by both the US DoC
and the EC, including Albania, Cambodia,
China, Kazakhstan and Vietnam. Cambodia
and Laos are both classified as NMEs by the US
DoC, but not by the EC.

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In economics, "dumping" can refer to any kind of predatory pricing.

However, the word

Definitions and extent

Calculating the extent of dumping on a product is not enough. Anti-dumping measures

Procedures in investigation and litigation

Anti-dumping investigations are to end immediately in cases where the authorities

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