Anti-dumping

Anti-dumping: Administration of Anti-dumping Rules

Anti-dumping: Supporters and Critics

Anti-dumping: Anti-dumping in Practice

Many countries reserve the right to impose import taxes on foreign products that have been found to be ‘‘dumped’’ into their domestic economies (that is, sold at less than their ‘‘normal’’ prices). These tariffs, known as anti-dumping duties, have become a critical but controversial part of the multilateral trading system that has developed first under the General Agreement on Tariffs and Trade (GATT) and then under its successor, the World Trade Organization (WTO). Anti-dumping duties are one of the few ways consistent with international obligations by which governmentsmay increase tariffs beyond levels negotiated in international trade talks.

WTO rules allow its members to impose these duties if the individual governments determine that foreign firms ‘‘dump’’ a product that damages a domestic industry producing a similar product. In common usage, anti-dumping duties are used to counteract ‘‘unfair’’ import pricing practices by foreign competitors.

Dumping is defined in two principal ways within the World Trade Organization system. The first is when a foreign firm sells in a domesticmarket at a price below the price it sets for the same good in its homemarket, known as ‘‘price-based’’ dumping. In others words, international price discrimination is an actionable practice under multilateral trade rules. The second basic definition, known as ‘‘cost-based’’ dumping, involves a foreign firm selling its product in the domestic market below its cost of production. In practice, this usually means that foreign firms are selling below the average total cost of producing the item. Anti-dumping duties may be imposed under WTO only if the dumping margin exceeds a de minimis level of 2 percent (i.e. the percentage difference between the ‘‘normal’’ value and the price charged in the export market); dumping below this level is not subject to duties.

It is important to note that dumping is based on the pricing practices of individual firms in specific countries. Consequently, anti-dumping duties may vary across firms within a particular exporting country. This means that customs officials in a country that has imposed anti-dumping dutiesmust pay very close attention to which particular foreign firm is exporting the product and from which country. This can impose important administrative burdens and in principle may provide incentives for foreign firms to try to circumvent the duties by mislabeling the product’s country of origin.

Anti-dumping duties are a recognized exception to a number of core WTO principles. For example, the ‘‘most-favored-nation’’ (MFN) principle means that a member commits to impose the same tariff on the same product for all World Trade Organization member countries. Anti-dumping duties, in contrast, can vary across countries for the same product. WTO rules also normally require governments not to raise duties beyond the tariff levels agreed to through multilateral negotiations. Members are freed from this obligation, however, if foreign firms are found to be dumping. Finally, WTO rules require ‘‘national treatment’’ so that foreign firms and domestic firms are treated in similar ways. Under anti-dumping rules, foreign firms selling below average total cost (i.e., total revenue is below total cost)may be subject to sanction while a domestic firmthat does not cover its costs will not face similar fines. The fact that antidumping is a WTO-allowed exception to these critical principles of the multilateral trading system suggests the importance that member governments place on discouraging this type of foreign pricing behavior. 

See also countervailing duties; nondiscrimination; nontariff measures; World Trade Organization

FURTHER READING

• Blonigen, Bruce, and Thomas Prusa. 2001. ‘‘Antidump ing.’’ In Handbook of International Trade, vol. 1, edited by Kwan Choi and James Hartigan. Oxford: Blackwell, 251 84. Provides a literature review of academic re search on anti dumping. 
• Finger, J. Michael, ed. 1993. Antidumping: How It Works and Who Gets Hurt. Ann Arbor: University ofMichigan Press. Details administrative practices of agencies re sponsible for anti dumping investigations. 
• Mastel, Greg. 1998. Antidumping Laws and the U.S. Econ omy. Amonk, NY: M. E. Sharpe. Analyzes some of the major arguments in favor of the use of anti dumping laws in the world trading system. 

MICHAEL O. MOORE