Dumping

Regent’s College London

International Economics

Assignment 1








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Module Code: ECO354

Module Title: International Economics

Academic Level: Level 3

Module Leader: Dr. Kofi Orleans Lindsay

Pupil: Stefanía Gigliotti
QUESTION 3:
“Each and every instance of dumping needs to be countered by antidumping duties”.Critically evaluate this statement.


Dumping


Dumping is the international commercial practice in which, in imperfect competition, companies sometimes charge a lower price to exported products than they do for the same products sold domestically. Dumping can only exist if the two conditions are given: the competition within the industry has to be imperfect and the markets should be segmented.Usually, the practice of charging different prices for different customers is called price discrimination and the most famous form of price discrimination is dumping.    

“Occurs when goods are exported at a price less than their normal value, generally meaning they are exported for less than they are sold in the domestic market or third-country markets, or at less than production cost, usuallywith the aim of driving competitors out of the market.” (WTO)

Reverse Dumping occurs when foreign buyers pay a higher price that domestic buyers.

 

The aggrieved party to the exercise of dumping is the industry or national industry, which is formed by all domestic producers of similar products or producers who account for 25% of the total production. The producer in the country ofdestination is hindered by the importation of products similar to those that they produce, as they are entered into the market at a lower price, and if the producer decides to match the price at which imported products are being sold the producers wouldn’t be able to cover their costs, clearly jeopardizing the national industry and its producers.

That being said, dumping is considered to be an unfairtrade practice and, as such, is prohibited under many national trade laws.


Article VI of the General Agreement on Tariffs and Trade (GATT) defines dumping as "the introduction of products of a country in another market at a price below its normal value.”
For members of the agreement, this practice is condemned if it causes or threatens to cause significant prejudice to an existing productionor retards the creation of a domestic industry.

Damage and causation:

Anti-dumping duties shall not apply if dumping is caused by imports of products already under investigation.

Injury means:
- Damage or serious injury to a domestic industry.
- A threat of injury to a domestic industry.
- A retardation of the establishment of a domestic industry.

 

The determination of materialinjury caused to domestic production will be based on positive evidence and involve a positive test:
- The volume of dumped imports, the enforcement authority shall consider whether there has been a considerable increase in imports in absolute terms or relative to production or consumption in the importing country
- Its effect on prices of similar products in the domestic market: they take intoaccount whether it has made imports a lower price than a similar product in the importing country.

The investigation must show that:

1. There is dumping by the exporting producers in the country/countries concerned
2. Material injury has been suffered by the Community industry concerned
3. There is a causal link between the dumping and injury found
4. The imposition ofmeasures is not against the Community interest.


(European Commission Trade, 2010)
The enforcement authority means that there is a threat of injury to a domestic industry when such threat is real and true and the damage is imminent. To be taken into account:
- The increase in the share of subject imports on the domestic market, even though there was no significant damage.
- Overproduction,...