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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). The Bolkestein directive, for example, was accused in Europe of being a form of "social dumping," as it favored competition between workers, as exemplified by the Polish Plumber stereotype. Predatory pricing is the practice of a dominant firm selling a product at a loss in order to drive some or all competitors out of the market, or create a barrier to entry into the market for potential new competitors. ...
International trade is the exchange of goods and services across international boundaries or territories. ...
In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. ...
A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy...
Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over...
The Directive on services in the internal market (commonly referred to as the Bolkestein Directive) is an initiative of the European Commission aimed at creating a single market for services within the European Union. ...
The poster featuring the so-called Polish Plumber Polish Plumber (French: Plombier Polonais) was a phrase first used by Philippe de Villiers and opponents of the European Constitution as a symbol of cheap labour coming in from Eastern Europe as a result of the Directive on services in the internal...
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 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. [1]
Remedies and penalties
In United States, domestic firms can file an antidumping petition under the regulations determined by the Department of Commerce, which determines "less than fair value" and the International Trade Commission, which determined "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. The United States Department of Commerce is a Cabinet department of the United States government concerned with promoting economic growth. ...
The United States International Trade Commission is a nonpartisan, quasi-judicial federal indepedent agency that provides trade expertise to both the legislative and executive branches of government, determines the impact of imports on U.S. industries, and directs actions against certain unfair trade practices, such as patent, trademark, and copyright...
Related to antidumping duties are "countervailing duties." The difference is that countervailing duties seek to offset injurious subsidization while antidumping duties offset injurious dumping. Countervailing duties are a means to restrict international trade in cases where imports are subsidized by a foreign country and hurt domestic producers. ...
Some commentators have noted that domestic protectionism, and lack of knowledge regarding foreign cost of production, lead to the unpredictable institutional process surrounding investigation. Members of the World Trade Organization can file complaints against anti-dumping measures. “WTO†redirects here. ...
Anti-dumping actions Image File history File links Wikitext. ...
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 and Countervailing Measures Agreement.) Antitrust is also the name for a movie, see Antitrust (movie) Antitrust or competition laws legislate against trade practices that undermine competitiveness or are considered to be unfair. ...
For other uses of the initials WTO, see WTO (disambiguation). ...
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 degrees of dumping GATT (Article VI) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article VI, and the two operate together. They allow countries to act in a way that would normally break the GATT principles of binding a tariff and not discriminating between trading partners—typically anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value” or to remove the injury to domestic industry in the importing country. General Agreement on Tariffs and Trade (usually abbreviated GATT) functions as the foundation of the WTO trading system, and remains in force, although the 1995 Agreement contains an updated version of it to replace the original 1947 one. ...
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 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.
Actions in the European Union European Union anti-dumping is a under the purview of the European Council. It is governed by European Council regulation 384/96. However, implementation of anti-dumping actions (trade defence actions) is taken after voting by various committees with member state representation. This article deals with the meeting of European Union leaders. ...
The bureaucratic entity responsible for advising member states on anti-dumping actions is the Directorate General Trade (DG Trade), based in Brussels. Community industry can apply to have an anti-dumping investigation begin. DG Trade first investigates the standing of the complainants. If they are found to represent at least 25% of community industry, the investigation will probably begin. The process is guided by quite specific guidance in the regulations. The DG Trade will make a recommendation to a committee known as the Anti-Dumping Advisory Committee, on which each member state has one vote. Member states abstaining will be treated as if they voted in favour of industrial protection, a voting system which has come under considerable criticism. [2] For other places with the same name, see Brussels (disambiguation). ...
As is implied by the criterion for beginning an investigation, EU anti-dumping actions are primarily considered part of a "trade defence" portfolio. Consumer interests and non-industry related interests ("community interests") are not emphasized during an investigation. An investigation typically looks for damage caused by dumping to community producers, and the level of tariff set is based on the damage done to community producers by dumping. Consumers refers to individuals or households that purchase and use goods and services generated within the economy. ...
Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank Money supply Fiscal policy Spending Deficit Debt Trade policy Tariff Trade agreement Finance Financial market Financial market participants Corporate Personal Public Banking Regulation For other uses of this word, see tariff (disambiguation). ...
If consensus is not found, the decision goes to the European Council.
If imposed, duties last for five years theoretically. In practice they last at least a year longer, because expiry reviews are usually initiated at the end of the five years, and during the review process the status-quo is maintained.
Chinese economic situation The dumping investigation essentially compares domestic prices of the accused dumping nation with prices of the imported product on the European market. However, several rules are applied to the data before the dumping margin is calculated. Most contentious is the concept of "analogue market". Some exporting nations are not granted "Market Economy Status" by the EU: China is a prime example. In such cases, the DG Trade is prevented from using domestic prices as the fair measure of the domestic price. A particular exporting industry may also lose market status if the DG Trade concludes that this industry receives government assistance. Other tests applied include the application of international accounting standards and bankruptcy laws.
The consequences of not being granted market economy status have a big impact on the investigation. For example, if China is accused of dumping widgets, the basic approach is to consider the price of widgets in China against the price of Chinese widgets in Europe. But China does not have market economy status, so Chinese domestic prices can not be used as the reference. Instead, the DG Trade must decide upon an analogue market: a market which does have market economy status, and which is similar enough to China. Brazil and Mexico have been used, but the USA is a popular analogue market. In this case, the price of widgets in the USA is regarded as the substitute for the price of widgets in China. This process of choosing an analogue market is subject to the influence of the complainant, which has led to some criticism that it is an inherent bias in the process.
Agricultural support and dumping
European Union and Common Agricultural Policy The Common Agricultural Policy of the European Union has often been accused of dumping though significant reforms were made as part of the Agreement on Agriculture at the Uruguay round of GATT negotiations in 1992 and in subsequent incremental reforms, notably the Luxembourg Agreement in 2003. Initially the CAP sought to increase European agricultural production and provide support to European farmers through a process of market intervention whereby a special fund - the European Agricultural Guidance and Guarantee Fund (EAGGF) - would buy up surplus agricultural produce if the price fell below a certain centrally determined level (the intervention level). Through this measure European farmers were given a 'guaranteed' price for their produce when sold in the European community. In addition to this internal measure a system of export reimbursements ensured that European produce sold outside of the European community would sell at or below world prices at no detriment to the European producer. This policy was heavily criticised as distorting world trade and since 1992 the policy has moved away from market intervention and towards direct payments to farmers regardless of production (a process of "decoupling"). Furthermore the payments are generally dependent on the farmer fulfilling certain environmental or animal welfare requirements so as to encourage responsible, sustainable farming in what is termed 'multifunctional' agricultural subsidies - that is, the social, environmental and other benefits from subsidies that do not include a simple increase in production. The Common Agricultural Policy (CAP) is a system of European Union agricultural subsidies and programmes. ...
The Agreement on Agriculture is an international treaty of the World Trade Organization. ...
The Uruguay Round was a trade negotiation lasting from September 1986 to April 1994 which transformed the General Agreement on Tariffs and Trade into the World Trade Organization. ...
General Agreement on Tariffs and Trade (usually abbreviated GATT) functions as the foundation of the WTO trading system, and remains in force, although the 1995 Agreement contains an updated version of it to replace the original 1947 one. ...
Year 1992 (MCMXCII) was a leap year starting on Wednesday (link will display full 1992 Gregorian calendar). ...
Year 2003 (MMIII) was a common year starting on Wednesday of the Gregorian calendar. ...
The European Agricultural Guidance and Guarantee Fund (EAGGF), set up by Regulation No 25 of 1962 on the financing of the common agricultural policy (as last amended by Regulation (EEC) No 728/70) consumes a large part of the general budget of the European Union. ...
See also “WTO†redirects here. ...
An import tariff or import duty is a schedule of duties imposed by a country on imported goods. ...
underwear is a tool used by a state to restrain international trade to protect a certain home industry from foreign competition. ...
External links
References - ^ Van den Bossche, Peter (2005). The Law and Policy of the World Trade Organization. Cambridge, UK: Cambridge University Press, 42. ISBN 978-0-511-12392-4. “Dumping, i.e. bringing a product onto the market of another country at a price less than the normal value of that product is condemned but not prohibited in WTO law.”
- ^ Eggert, J. Observations of the EU Anti-Dumping Regulation FTA Position for the Expert Meeting. Retrieved on 2007-07-23.
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