Dumping Of Imports example essay topic

Antidumping law and practice- USA and China. Among the trilogy of trade remedy regimes- countervailing duty, safeguard and anti dumping actions- anti dumping actions are by far the remedy of choice. It's a measure internationally adopted to stop unfair competition, regulate international market order and protect the security of the national industries. It's adopted by an increasing number of countries as it's playing an increasingly important role in international trade. It's perhaps the most controversial subject involving foreign trade.

The United States is the world's biggest user of anti dumping and has been for decades. China, on the other hand, has been the number-one target of anti dumping by most countries for the past decade. The first dumping lawsuit against china came in 1979 when Europeans accused Chinese saccharin manufacturers of dumping. 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. 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 "Antidumping Agreement" (The Agreement on Implementation of article VI of the General Agreement on Tariffs and Trade 1994).

Antidumping refers to a legal system under which the government of a country investigates the dumping of imports and take corresponding anti dumping measures in accordance with the law. 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 and show that the dumping is causing injury or threatening to do so. 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.

There are many different ways of calculating whether a particular product is being dumped. The agreement (AD Agreement) narrows down the range of possible options to three methods. 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 combination of the exporter's production costs, other expenses and normal profit margin. The agreement also specifies how a fair comparison can be made between the export price and what would be a normal price.

The AD agreement (Article 16) requires member countries (WTO members) to inform the Committee on Antidumping Practices about all preliminary and final anti dumping actions, promptly and in detail. Member countries must also report on all investigations twice a year. World Trade Organization makes statistics on anti dumping initiations available to everybody visiting its website. According to the data on "AD initiations by exporting country" for period from January 1st 1995 to June 30th 2003 there were the total of 324 AD cases initiated against China and 122 against the United States.

Which gives these countries first and third place, respectively. Republic of Korea takes second place with 174 anti dumping cases initiated against it during a period of 8.5 years. It's interesting to mention that from 1999 to 2002 number of initiated cases against China has a growing tendency (41, 43, 53, 51 cases), while an inverse tendency for the U.S. (14, 13, 15, 12). Antidumping has been called the "third rail of American trade politics" because politically powerful special interests enjoy the protection it provides. For years, American companies have taken advantage of the anti dumping law to punish foreign firms that give American consumers a bargain. In the U.S. the institutional responsibilities for determining "dumping" and "material" injury are in hands of two organizations: the International Trade Administration of the Department of Commerce (DC) and the U.S. International Trade Commission (ITC).

The first of the two mentioned above makes determinations on whether or not "dumping" takes place. The ITC, on the other hand, is the body responsible for establishing the existence of actual or threatened material injury due to subsidized imports. The ITC's investigations are divided into a preliminary and a final phase. In the preliminary phase the ITC must determinate if there is a reasonable indication of injury.

Inconclusive or incomplete evidence related to the key elements may support an affirmative preliminary finding of injury but not be adequate to support a final determination of injury. With regard to the material injury determination to be performed by the USITC, there are no clearly defined guidelines for what constitutes material injury to a US industry. In practice, the USITC's actions will largely be based on each commissioner's individual standard of what constitutes a material injury. Appeals lie to the court of International Trade from both DC and ITC decisions and then to the Court of Appeals for the Federal District. The U.S. market share of Chinese made products has increased significantly in recent years and the US trade deficit with China has been growing as well. It's not possible to determine subsides in a non-market economy such as China, Chinese goods are not subject to countervailing duties.

As a result, China increasingly has been the subject of US anti dumping measures. And it's very likely that anti dumping duties will remain an American weapon of choice against China in the future. American anti dumping duty orders against China include: cotton shop towels, natural bristle paint brushes and brush heads, petroleum wax candles, silicon metal, paper clips, fresh garlic, honey, preserved mushrooms, folding metal tables and chairs, acid, industrial nitrocellulose etc. one argues that the high number of U.S. anti dumping cases initiated against other countries (including China) doesn't necessary indicate that U.S. activity is particularly aggressive. The United States is a large country with large quantities of imports, and one would expect such a country to encounter dumping more frequently than a country with small quantities of imports.

The People's Republic of China faces enormous pressures as it adapts to the more open international trading system mandated by the WTO. With the elimination of most import quotas and the reduction of many tariffs and non-tariff barriers, Chinese producers face increasing competition from foreign imports, particularly from chemical products and steel. Thus, Chinese industries have increasingly sought to strike back by invoking the country's anti dumping provisions (first promulgated in 1997). The Chinese anti dumping regulations contain very strict deadlines. Moreover, they raise a host of complex substantive and procedural issues. In light of China's limited experience with adversarial type legal proceedings, foreign firms caught up in Chinese anti dumping proceedings face significant challenges.

Chinese anti dumping actions proceed simultaneously through two different state agencies: the Ministry of Foreign Trade and Economics Cooperation (MOFTEC) and the State Economic and Trade Commission (SETC). MOFTEC is responsible for determining whether imported merchandise is being, or is likely to be, sold in China at less than its normal value (sold at "dumped" prices). SETC is responsible for determining whether dumped imports are currently causing or threatening to cause injury to domestic Chinese industry or to materially retard the establishment of such an industry. Under Chinese anti dumping regulations, once a petition is received, MOFTEC has 60 days to decide whether to initiate an investigation. If MOFTEC decides to open the investigation, a notice of initiation is published in the MOFTEC Gazette. Foreign interested parties then have only 20 days to register with MOFTEC and 30 days to do so with SETC.

If they fail to register in a timely manner, MOFTEC assigns them an adverse margin based on the "best information available". In practice, such margins are very unfavorable. Recently, two anti dumping cases have been initiated by the US. against China. The first one concerns Chinese bedroom furniture, the second one has been initiated against imports of certain frozen and canned, warm water shrimp from China (and other countries such as: Brazil, Ecuador, India and Thailand). An anti dumping petition was filed by a group of domestic furniture manufacturers to cut off access to Chinese bedroom furniture imports. The petition covers approximately $1 billion worth of wooden bedroom furniture form China.

Affected merchandise would include: wooden beds, headboards, night tables, dressers, writing tables etc. On January 9, 2004 the ITC announced that a reasonable indication had been found that the domestic industry of wooden bedroom furniture has been "materially" injured as a result of imports from China. Petitioners seek duties as high as 440%. The filed petition, however, isn't a voice of the whole furniture industry. In reply to the ITC announcement the Furniture Retailers of America coalition was formed in order to fight "the ill-conceived" and damaging petition.

Over 60 retail companies throughout the U.S. have recently joined the FRA, including JCPenny's, City Furniture, the Bombay Company and Rooms to Go). The FRA argues that anti dumping duties fro Chinese furniture will save American jobs. Instead, they claim that the short-term price disruption and product shortages are almost certain to adversely affect sales of bedroom furniture leading to job losses for retail company employees. On January 21, 2004 another anti dumping case was initiated against China. The investigations were initiated after having found that the petitions filed (on Dec 31, 2003) by the Ad Hoc Shrimp Trade Action Committee met the requirements. The Committee's members are located in Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Texas.

The products being subject of petition include warm water shrimp, whether frozen or canned, wild-caught or farm-raised, head-on or head-off, shell-on or peeled, tail-on or tail-off, cooked or raw. The U.S. International Trade Commission is scheduled to issue its preliminary injury determination on or before Feb. 17. if the ITC finds that there is a reasonable indication that the domestic industry is materially injured, or is threatened with material injury, the investigations would proceed and the Department of Commerce would be scheduled to make its preliminary determinations in June 2004. Both quoted above cases show how controversial anti dumping cases are and how commonly AD law is used. It also shows how subjective it is to determine whether injury to the competing domestic industry takes place when even within the American furniture retailers there is a split. Moreover, there is no specific guideline for ITA of the Department of commerce and everything is left in hands and opinions of each individual commissioner. Unlike AD initiations's up porters, the opponents see the U.S. anti dumping law as one of the greatest threats to trade liberalization and American consumers.

Defenders of anti dumping laws, including domestic producers and their representatives, claim that such laws are needed to combat predatory practices of foreign companies. Without such laws U.S. firms would be forced to compete with unfairly low prices. Antidumping defenders also say that the laws ultimately protect consumers, who would otherwise be forced to pay high monopoly prices once U.S. firms are driven out of business and the foreign companies raise their prices in the absence of competition. Opponents, on the other hand, indicate that anti dumping laws are a form of protectionism that has been abused by certain U.S. companies with the support of the Commerce Department.

The United States has more anti dumping orders in place against more products from more countries than any other country in the world. This behavior is costly to import-using industries and consumers. The foreign products subjected to these extra duties, if entry into the U.S. market, are scarcer and more expensive than they should be. The Byrd amendment to the U.S. anti dumping law allows the revenues raised from these tariffs to be transferred from the U.S. Treasury to the firms that requested the protection. The windfall in revenue American firms will receive from the new protection, estimated to be about $200 million each year, will encourage them to seek the additional protection. William Baldwin in one of his articles in Forbes stands against anti dumping activities and ITC decisions.

He argues that this protectionist tool causes American consumers to pay more for certain goods than they would have paid if anti dumping duties hadn't been imposed. He expresses his opinion analyzing two examples of U.S. anti dumping initiations against imports from China and Canada. Chinese coat hangers would be available at a bargain price and thanks to cheaper lumber from Canada, houses in the Unites States would be more affordable. He claims that for a long run, damages to American economy as a whole are hard to prove. For Baldwin, the ITC work is useless and harming for an average American consumer.

Antidumping is a widely used remedy in international trade. Some countries use it more commonly than others. Some initiate a lot of anti dumping cases, other are targets of these initiations. There are as many defenders as opponents nation and worldwide.

Antidumping actions are to some extent very subjective and it makes it, among other arguments, a very controversial tool. Some even find it a threat to the international trade and prove that it is against free trade. Antidumping involves too many emotions and political influence. In many cases it's a very short-term remedy for a difficult situation. However, it makes life more difficult for those thinking about predatory entrance and unfair competition. Both are against market order and fair competition with equal opportunities for everybody.

It's unethical and harmful to win a market with forbidden actions. Antidumping will still arouse emotions and protests: as long as there will be countries which anti dumping institutions are under political pressure to protect particular sectors / industries and as long as there will countries willing to win foreign markets no matter what price.