Dumping Eco

8/2/2019 Dumping Eco

1/11

In economics, "dumping" is any kind ofpredatory pricing, especially in the context

ofinternational trade. It occurs when manufacturers export a product to another country at a

price either below the price charged in its home market, or in quantities that cannot be

explained through normal market competition. Dumping can force established domestic

producers out of a market and lead to monopolistic positions by the exporting nation. Forexample, a glut of Chinese garlic exports in the mid 2000's forced many North American

producers to switch crops and leave the market. When the price of Chinese garlic soared in

2009, the shuttered North American businesses were unable to quickly re-enter the local

market due to barriers to entry. 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.

The term has a negative connotation as advocates offree markets see "dumping" as a form of

protectionism. Furthermore, advocates for workers and laborers believe that safeguarding

businesses against predatory practices, such as dumping, help alleviate some of the harsher

consequences of such practices between economies at different stages of development .While

there are very few examples of a national scale dumping that succeeded in producing a

national-level monopoly, there are several examples of dumping that produced a monopoly in

regional markets for certain industries.

Legal issues

If a company exports a product at a price lower than the price it normally charges in its own

home market, it is said to be "dumping" the product. Opinions differ as to whether or not

such practice constitutes unfair competition, but many governments take action against

dumping to protect domestic industry. The WTO agreement does not pass judgment. Its focus

is on how governments can or cannot react to dumpingit disciplines anti-dumping actions,

and it is often called the "anti-dumping agreement. The WTO agreement allows governments

to act against dumping where there is genuine ("material") injury to the competing domestic

industry. To do so, the government has to show that dumping is taking place, calculate the

extent of dumping (how much lower the export price is compared to the exporters home

market price), and show that the dumping is causing injury or threatening to cause injury.

Definitions and extent

While permitted by the WTO, General Agreement on Tariffs and Trade (GATT) (Article VI)

allows countries the option of taking 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 partnerstypically 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 productis being dumped heavily or only lightly. The agreement narrows down the range of possible
http://en.wikipedia.org/wiki/Predatory_pricinghttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Barriers_to_entryhttp://en.wikipedia.org/wiki/Fair_valuehttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/Exportshttp://en.wikipedia.org/wiki/Unfair_competitionhttp://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Tradehttp://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Tradehttp://en.wikipedia.org/wiki/Unfair_competitionhttp://en.wikipedia.org/wiki/Exportshttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/Fair_valuehttp://en.wikipedia.org/wiki/Barriers_to_entryhttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Predatory_pricing


2/11

options. It provides three methods to calculate a products normal value. The main one is

based on the price in the exporters domestic market. When this cannot be used, two

alternatives are availablethe price charged by the exporter in another country, or a

calculation based on the combination of the exporters production costs, other expenses and

normal profit margins. And the agreement also specifies how a fair comparison can be madebetween 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.

The Economic And Legal Analysis Of Dumping

One of the main reasons behind distortion of international trade and fair competition is that

though increasing returns in a monopolistic market promote international trade this situation

ignores many of the detrimental effects that can arise due to imperfect competition, such as a

disparity in the prices a firm charges for its goods that are exported and the ones that are sold

in their respective domestic markets, constituting price discrimination. The most common

form of price discrimination is dumping, defined as a situation where, the price of a product

when sold in the importing country is less than the price of that product in the market of the

exporting country.

The definition of dumping according to GATT2 is:

The sale of products for export at a price less than the normal value where normal value

means roughly the price for which those same products are sold on the home or exporting

market. The concept of dumping seems fair because it is recognized that producers may sell

their goods in different markets at different prices and that prices of a goods are influenced by

several market forces and may vary at different times. It may be a perfectly legitimised

business activity like discounts offered by airlines to students or senior citizens etc. There

may not seem anything intrinsically unethical or illegal about dumping. Adam Smith hasfamously quoted:

If a foreign country can supply us with commodity cheaper than we ourselves can make it,

better buy it of them with some part of the produce of our own industry, employed in a way

in which we have some advantage. Economists have emphasized that economic law and

policy should only be about economic efficiency. They rebuff any legal doctrine that

entrenches any economic rights at all on grounds of fairness, rather than efficiency.

According to them the whole purpose of competition is for consumer welfare. However,

dumping is regarded as an unfair trade practice as it may cause or threaten to cause material

injury to the importing markets and hence, anti-dumping measures are initiated. These


3/11

measures include imposition of anti-dumping duties that are imposed at the time of imports in

addition to other custom duties that are intended to off-set the supposed injury and price

undertaking, wherein the exporter himself undertakes to raise the price of the product and

then sell it in the importing country to avoid the anti-dumping duties. The credibility of these

measures has been debated upon since on one side anti-dumping measures aim at providingspeedy relief to the domestic industry against the trade-distorting phenomenon of dumping

and on the other hand, it is argued that countries take advantage of anti-dumping laws

because of their economic and political manipulability and prove to be a threat to the free

market access that the GATT/WTO have strived to achieve in the past 50 years. According to

them, international price discrimination is objectionable. If left uncontested and

unchallenged, it confers a comparative advantage on exporters. Exporters exploit the market,

with considerable negative effects on domestic industry. The use of anti-dumping actions

therefore enables the domestic producers to offset, quantitatively the artificial advantages

received by the exporting countrys producers so that they are able to compete on an equal

footing with the exporting countrys producers. Anti-dumping measures largely provide this

level playing field.Dumping has two differing effects in the importing country. The low

prices of the imported products may harm the domestic industry which is producing like

products. At the same time, consumers and other industrial users of the importing country

may benefit from such low prices. However, these users and consumers are not well

organized and their voice is not as strong as the producer industries which are normally

backed by trade unions. Hence, pressure for acting against dumping is usually much stronger

than that of dumping.

IN DEFENSE OF DUMPING: ANTI-DUMPING FLAWSThe rhetoric of anti-dumping is that it disciplines unfair trade practices. The agreement

specifies that price discrimination is an unfair trade practice if it causes injury to domestic

industry.However, economists argue that without showing predatory intent, price

discrimination cannot be held to be an unfair trade practise. Since there is no such pre-

requisite of anti-dumping use, it itself is an unfair trade practise that blocks fair competition.

Benefits of dumping:

On the exporting country

1. It finds market for its surplus production

2. By exporting more, it is able to strengthen its balance of payments position

3. Consumers in the importing country benefit as they have to pay lower prices for whatever

they purchase of the commodity dumped.

Dumping benefits the consumers in the importing country who can buy the products at

cheaper rates. The losers are the consumers in the exporting country.Dumping may also be

caused by what is known as transitional dumping. It occurs when an exporter needs to price

below marginal cost in order to maximize sales and expand market share. In this case below

cost-pricing is a kind of investment in the marketing of the product to reap profits in the long

run. Because this may require fixing price below marginal cost, it may be treated as predatorypricing. Yet, clearly it is not. Originally designed as a weapon against predatory and powerful


4/11

companies, the role of anti-dumping measures has changed from ensuring fair competition to

protecting inefficient competitors. They are being increasingly used against efficient

producers, especially from developing countries. Confronted with such situations developing

countries like China are formulating their own anti-dumping legislations.The bias in the

definition of dumping favors the party imposing anti-dumping duties. Dumping is consideredto exist if the export price of a product is less than the comparable price of the product or

like-product in the domestic market in the ordinary course of trade.However, when the

average export and product prices of a product are calculated, domestic sales prices below

total cost are considered beyond the ordinary course of trade and therefore excluded, while all

export prices are included, thus artificially raising the level of domestic price. This is a

discrepancy in the calculation of dumping, and thus even in cases where there is no dumping,

according to the strict definition of dumping as per the GATT Anti-dumping agreement, it

will be considered as dumping and anti-dumping measures will be unfairly levied on the

producer; whilst in true cases of dumping, a producer might be exempted from the anti-

dumping measures. Thus this arbitrariness in the calculation of dumping makes anti-dumping

an unfair mechanism that randomly levies duties on innocent producers or exempts the real

dumping producers, due to non-uniformity in the application of the anti-dumping rule.

Also, if no home market price can be found, the sales price in a third countrysurrogate

countrycan be used for comparisons. Since different countries have varying levels of

economic development and comparative advantages in different sectors, the arbitrary choice

of a third country may easily lead to the definition of dumping. Furthermore, when neither

home country nor a third country price is available, a constructed value is used which is the

sum of material and labor costs of production plus administrative, selling and general costs

plus profit. As items such as administrative costs and profits vary greatly among countriesand companies, it is not difficult to see the inherent subjectivity of the approach.Sometimes,

selling below total cost is a normal business practice, and not necessarily dumping.

According to the theory of micro-economics, so long as the price is above average variable

cost of production, a firm has incentives to continue production in the short run, in order to

minimize losses on fixed investment, in the hope that the market situation will improve later

to bring it back to profit. The duration of these short periods may vary from firm to

firm.When a product enters a foreign market the exporting firm may have to sell below total

cost of production to attract consumers or to meet the existing competition without any

intention to dominate the market, especially if the product does not enjoy the same

established reputation as similar products in the market. It is unreasonable to subject such

business practises which are normal within many countries to anti-dumping charges when

foreign companies are involved.

According to the Uruguay Round of anti-dumping code, an importing country can only apply

for anti-dumping duties when it is demonstrated that the dumped imports have indeed caused

injury to domestic industries.Yet too often in reality either due to the complexities of the

issues involved or to protectionist considerations, anti-dumping authorities determine

dumping without carefully considering whether the difficulties of domestic producers

resulted from their own efficiency or inefficiency or from the allegedly dumped products.

The consequent imposition of anti-dumping duties tends to penalize the most efficient foreign


5/11

producers.The problems associated with anti-dumping rules are also related to the rules of

origin. In a world with increasingly globalizing tendencies and production, a product may be

the result of production in many countries. As there is no substantive multilaterally agreed

rules of origin, the same product can be considered to have different origins by different

countries.Therefore even if dumping has been correctly determined it may be difficult to findwho the party at fault is.The application or abuse of lax anti-dumping rules penalizes foreign

producers who enjoy comparative advantages, to the benefit of inefficient domestic

producers. It also increases uncertainty in international trade, thus acting as a deterrent

against potential foreign competitors.But foreign producers are not the only victims. The

importers and industrial users of the product in the country imposing the anti-dumping duties

may become less competitive due to higher prices caused by such measures. Consumers have

to pay more for similar products. As anti-dumping rules vary for different countries, their

complaints may not be adequately represented. Even if some anti-dumping legislation

requires consideration of the views of these groups, the theory of political economy tells us

that it is unlikely for these diverse groups to be as vociferous as the concentrated producers of

an industry in lobbying activities.The abuse of anti-dumping rules hits the developing

countries harder whose exports are increasingly subject to such measures in recent years. Due

to their less diversified economies, the developing countries enjoy comparative advantage in

only a few sectors. If the export of their competitive products is obstructed by anti-dumping

measures, their foreign exchange earnings and even economic development may be

negatively affected.Furthermore, as they lack financial resources and experienced personnel

on anti-dumping law, the expenses that their exports have to pay for dealing with anti-

dumping cases increases. For developing or transitional economies undertaking economic

reforms, anti-dumping duties on exports already priced by market forces only serve to hindertheir painful process towards a full market economy and to create cynicism about the western

preaching of free trade.If an importing country finds that a trade partner subsidizes its

exports, it can invoke multilaterally agreed countervailing measures designed for this

purpose. If due to some unforeseen developments an industry of an importing country is

seriously injured with a flood of imports, the country can take measures to protect domestic

producers in accordance with WTO agreement on safeguards. Anti-dumping measures are not

an effective cure for difficult market access in another country either, because they do not

tackle the problem at its source.A number of economists argue for scrapping the anti-

dumping agreement altogether. They maintain that unless the anti-dumping laws seek to

check predatory pricing the application of the laws is welfare reducing. By seeking to protect

domestic producers who cannot face foreign competition the consumers are put to a loss.

They argue that domestic consumers benefit from low prices and if the import market is

perfectly competitive, the benefits to consumers outweigh the losses to domestic producers.

The current anti-dumping agreement imposes no substantive obligations on the authorities to

take the broader public interest into account. Many countries have recommended that

investigating authorities must consider public interest before imposing anti-dumping duties.

It is not fair that the consumers be asked to pay the price for no commitment on the part of

the domestic producers even in the future to be able to take care of their interests. However, it

must be noted that public interest is not consumer interest alone. It is a much wider term

which covers in its ambit the general social welfare taking into account the larger interest of


6/11

various stake holders.Sporadic dumping is when the producer intends to dispose of the casual

overstock of the producers. Sales in the specified period may not be as good as expected and

the producer finds himself with surplus stock. He finds it difficult to either dispose it off in

the domestic market or to hold it for the next season for various reasons. He therefore tries to

sell it in the foreign markets at lower prices to recover some cost, which results in dumping.Sporadic dumping may be unintentional. It could be due to currency fluctuations or due to

inexperience of the exporters.Also, in sporadic dumping there is an occasional sale of a

commodity at lower costs abroad to unload an unforeseen and temporary surplus of the

commodity without having to reduce domestic prices, and persistent dumping which may

prove to be benefit to a nation since if the producer faces different marginal cost and marginal

revenue lines in each market, then it pays to charge different prices in each market. Thus,

even though the foreign markets will not be monopolized, the anti-dumping duties will cause

severe losses of producer surplus.Also, in countries like USA, according to their Robinson-

Patman Act, selling of goods at unreasonably low prices to drive out competition is

prohibited and anti-dumping duties are slapped on firms even if the impact on these

competing firms is negligent and temporary. Thus, even though antitrust laws are meant to

protect competition, anti-dumping laws are wrongly used for the same purpose because of the

simple reason that any firm would be better off without competition. An important reason

why anti-dumping laws are abused is to obtain protectionist outcomes is the definition often

used to label acts as acts of dumping. According to this definition, a firm is dumping if it sells

its products abroad below fair market value i.e. the average price of the product in its home

market. Thus, even if it charges a competitive price for its products in the foreign country,

just because they may be lower than their home market prices because of several price

determining factors such as markets, demand, tariffs, advertising and selling costs, domestictaxes, skewed market functioning and corruption amongst producers leading to artificial

deviances in prices or the company simply having lower cost of production than its foreign

counterparts, a company is allegedly dumping. The principal argument against this practice is

that if price discrimination is accepted as a valid measure domestically, how can it be called

dumping merely because it is done internationally?Also, the definition of dumping doesnt

consider the fact that normal values of goods may differ from time to time. Thus, one cannot

just compare the face value of the prices of the good in the two countries to determine the

dumping margin and impose a similar anti-dumping duty on the imports. Additionally,

because it is often difficult to prove that foreign firms charge higher prices to domestic than

export customers, many a times a supposedly fair price based on estimates of foreign

production costs is used to calculate the dumping margins. This fair price can interfere with

perfectly legal business practices such firms willingly incurring losses to sell its goods and

simultaneously reducing its costs through experience or making an entry into a new

market.The WTO rules do not define market economy conditions. Thus, each member has

broad discretion in setting the conditions in antidumping allegations and taking advantage of

these loopholes to demand protection.Since, anti-dumping duties are discriminatory, it

implies that the domestic industry can use this instrument to their benefit and target only

those foreign firms it views as market rivals. Also, in case of multinational firms, the

definitions of domestic and foreign firms are often blurred. Since they produce diverse

products, one company may be treated as a domestic firm that seeks protection from


7/11

dumping, while for another product it may be treated as a foreign firm.The WTO does

mandate that the above factors be taken into consideration when determining whether or not

dumping is occurring. However, many developing nations and some industrialized nations

believe that the most nations do not carry out this obligation in order to gain or keep the

political favor of specific groups of voters.There is still much confusion as to whethercountries are actually using WTOs standards or not in their dumping investigations. There

are many theoretical problems with some anti-dumping procedures. Allegations of unfair

investigations abound. The WTO's Antidumping Agreement was made very complex to help

to deal with these problems. However, it has become too opaque to be able to correctly

determine the validity of some anti-dumping measures; thus arbitrarily imposing anti-

dumping charges on efficient and innocent producers, posing to be a serious threat to the

international market and jeopardizing the concept of free trade.

RATIONALE BEHIND ANTI-DUMPING LAWS

The purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-

establish fair trade. The use of anti dumping measure as an instrument of fair competition is

permitted by the WTO. In fact, anti dumping is an instrument for ensuring fair trade and is

not a measure of protection for the domestic industry. It provides relief to the domestic

industry against the injury caused by dumping.Adam Smith noted that by restraining, either

by high duties, or by absolute prohibitions, the importation of such goods from foreign

countries as can be produced at home, the monopoly of the home market is more or less

secured to the domestic industry employed in producing them. It can be inferred from his

writings generally that he was of the view that by imposing duties, imports that harm

domestic industries should be discouraged.Anti-Dumping is a reactionary measure to thedumping of goods into a foreign market. When a country feels that another country is

dumping goods into its economy it may institute anti-dumping measures to protect the

interests of the domestic producers of that good. The exponents of anti-dumping justify it on

the ground that it is a defense mechanism in the hands of the importing country to safeguard

their domestic producers.The primary justification for anti-dumping measures is the

perceived threat of predatory dumping. In an imperfectly competitive and segmented market

i.e. where the prices of goods are controlled by firms and not by the market forces, and

consumers have minimum access to goods meant for export purposes, respectively, dumping

can prove to be profit-maximising strategy for a monopolist firm.Firms may indulge in

predatory dumping, wherein the prices of their goods in the foreign markets are reduced

temporarily.The lower price imports could decrease the amount of domestic products

purchased, and domestic companies may not be able to lower their prices in order to compete

with these imports, driving these local firms out of business. These foreign firms then

command the prices, taking advantage of their newly acquired monopolistic status and cause

material injuryin the form of economic retardations of the locally established industries.The

cumulative effect of these injuries, it is contended, will finally lead to job losses, slowdown

of economic growth and spread of non-competitiveness.In such cases it is argued that anti-

dumping measures are justified as they protect domestic industries from unfair competition

from abroad, help in restoring the domestic economies and may thus prove to be prudent

measures. By imposing anti-dumping duties, dumped imports are discouraged and domestic


8/11

firms maximize their own production and profits.It must be recorded however, that predatory

dumping is a rarity because it assumes capital market imperfection and an irregularity in

financial resources that favor foreign producers. It also assumes an impossible coordination

between firms to precisely calculate when and how much to dump to drive domestic

industries out of business. Additionally, since it is difficult to determine whether dumping ispredatory or not, domestic producers demand protection against any form of dumping even if

it actually not harmful.From a petitioners point of view, anti-dumping stand out since it is a

good instrument to obtain protection because imposing other restrictions like import tariffs or

voluntary export restraints are inconsistent with the norms of the WTO and most

governments are not open to help domestic producers with protection. Also, anti-dumping

producers can disguise their fear of being destroyed by gigantic foreign rivals by asking for

protection and accusing these foreign competitors of unfair trade practice. The main

argument advanced for taking an anti-dumping measure against foreign producers is that such

a step ensures that national producers get better experience than the foreign firms. It is

frequently argued that such industries bring special advantages to a country, either because

they enable domestic factors of production to earn higher returns than in other sectors of the

economy or because they generate externalities or spill over benefits for the rest of the

economy. Anti-dumping policy is the best instrument for achieving these objectives.

According to them, anti-dumping is an instrument that is necessary as it acts as a safety valve

that ensures domestic political support to trade liberalizing initiative. Anti-dumping in their

view is the price paid for the maintenance of an open trading system among nations. Anti-

dumping is a trade remedy for domestic producers injured by cheap imports.It is a tool that

discourages predatory dumping. Anti-dumping is a GATT/WTO legal tool that is used to

grant protection to the import competing domestic industry, which is adversely affected byfree trade.Government imposed trade barriers and government-tolerated anti-competitive

practices permit domestic producers to create monopolies in their home market. This enables

them to charge a low price in export markets and compensate the loss by charging higher

process in the domestic market without attracting foreign entry.Producers in the importing

countries fail to expand capacity, to improve productivity and to use all resources efficiently.

The distorted price signals in the market thus stimulate overproduction of the exportable

goods and underproduction of importable goods. This in turn leads to a chronic oversupply

by inefficient producers on one hand and the closure of otherwise competitive facilities on the

other, reducing worldwide efficiency. Anti-dumping duties restore relative pricing to

prevailing world market conditions and hence efficient resource allocation.The main reason

why international price discrimination is usually considered unfair is that a dominant firm,

exporting its surplus over domestic profit-maximizing sales at lower prices, can benefit from

economies of scale in production which its competitors abroad are not able to achieve. Such a

system could be sustained as long as its home market remains protected. However, such

conduct enhances competition in the export market as long as the firm sets export prices at or

above cost. Selling abroad at a loss could only be rational for predatory purposes.

Objectives of dumping


9/11

1. To enter into a foreign marketdumping may be resorted to make an entry in a foreign

market with subsidies being provided by the government

2. To dispose of occasional surplus at a lower price in foreign markets

3. To develop a market in foreign countries by selling at a lower price in the initial stages just

as new markets van be developed in the country itself by selling at lower prices.

Effects of dumping:-

On the importing country

1. Domestic industry might be affected adversely by a decline in sales and profits. Indian

steel industry was affected by Chinese dumping of steel.

2. If dumping is continued for a longer period, survival of the domestic industry may bethreatened.

3. Dumping may create balance of payments problems for the country subjected dumping.

Predatory dumping is when there are exports at low prices to drive out rivals and establish

monopoly power in the importing market. There is an elimination of competition in the

importing markets with the intent of recouping the loss at a later date. This type of dumping

creates monopolies and damages productive capacity of the importing country. It harms

consumers and producers in the long run.Permanent dumping is continuous and for many

years. It occurs when a producer intends to obtain full production from the existing capacity

without cutting the domestic prices or he intends to obtain various economies of larger scale

of production without cutting the domestic prices. In sectors where scale economies are

important, firms can limit the domestic supply to charge higher prices to maximise profits.

For operating at full capacity or to avail of full economies of scale advantages, they look for

export markets and charge lower prices because market power is less. Thus the firms produce

a surplus output with intent to dump on to export markets.Import competition adversely

affects domestic producers who are unable to compete with the low prices of foreign

competitors. Anti-dumping measures will help protect domestic producers and is the only

mechanism that countries currently have against foreign producers, in order to survive in a

world market.

CONCLUSION

The use of anti-dumping measures as a trade protection tool has increased phenomenally

during the last decade. One significant aspect of this new trend is the increasing involvement

of developing countries. India is one such country which has emerged as a frequent user of

anti-dumping measures.Those in favor of anti-dumping duties argue that it is a tool of

protection in the hands of the domestic producers against the cheaper foreign imports. Critics

of anti-dumping duties though find it difficult to prove the fact that the imposition of anti-dumping duties results in economic benefits to the domestic industry. Consumers are


10/11

aggrieved as well, as they feel deprived of the lower costs and availability of variety of

goods. The role of the government in tackling the problem of anti-dumping should be to

protect the smaller industries rather than concentrating on the major industries. This is

because, it is these small scale industries which suffer the most as a result of imposition of

anti-dumping duties.However, safeguarding competition in domestic industry is not the onlypurpose that anti-dumping laws serve and in the present situation, they are acting as barriers

for free trade and domestic producers are concerned about avoiding competition.In case of

allegations and anti-dumping duties slapped on economically weaker nations, it could result

in a stunt of economic growth for these developing countries, as they are unable to develop

secure and stable long term industries. Even the threat of imposition of anti-dumping duties

has a serious adverse effect on the functioning of small and medium size firms, resulting in a

fall in production, heavy unemployment and declines in incomes and increases in poverty

levels.Anti-dumping duties were imposed by developed countries to protect their industries

against the low priced imports.Right from the beginning there was a clear division between

the fundamental aims of those countries whose exports were most commonly exposed to anti-

dumping action (developing countries) and those which took such action (mostly developed

countries). Developing countries wanted anti-dumping rules to be tight and explicit as

possible, allowing minimum transparency. Developed countries wanted to retain and even

expand their discretion to meet what they saw as being used by companies to get around the

present rules of anti-dumping code and thereby cause injury to domestic industry, their

proposals tended to be the most radical and controversial. The wage rate differs from country

to country, the economies differ and the demand levels are also different. It is a settled

economic fact that firms are guided by profit-maximizing motives. The profits keep

increasing till the time that marginal revenue is greater than marginal cost. To allow marginalcost based pricing to adversely affect industry in other countries cannot be justified on social

welfare grounds. The capital dumped in the concerned industry and the employment

generated by that industry cannot be allowed to go non-functional. This is not to say that the

industry should be protected at all costs. The negotiating stance of developing countries like

India should be for tightening the agreement. This is because India is a victim if the costs and

benefits to different industry segments are assessed at an aggregate level. Even though

abolishment of these anti-dumping laws will lead to increased competition, lower prices for

consumers, more efficient production, and higher national income, it is unrealistic to hope

that the WTO will remove this trade device in the near future. But before things worsen, an

immediate reform is necessary and the WTO anti-dumping rules need to be amended to allow

a more transparent process of investigation and to determine correctly whether the material

injury caused is because of dumping or higher competition only. The WTO rules need to be

formulated so as to target only predatory dumping and not persistent or sporadic dumping.

All countries need to have the uniform standards for determination of the dumping margins

so as to maintain fairness. While aiming at consumer welfare, it is necessary to justify the use

of anti-dumping laws as tools against unfair trade, to reconsider its definition and analyze as

to what is essentially fair and whats not and keeping in mind the gross abuse of anti-

dumping laws answer the very fundamental question of whether these laws are necessary at

all.As economics, anti-dumping action looks at only half of the economic impact on the

domestic economy. It gives standing to import competing domestic interests, but not to


11/11

domestic users, be they user enterprises or consumers. As politics, it undercuts rather than

supports a policy of openness; by giving voice to only the negative impact of trade on

domestic interests and by inviting such interests to blame their problems on the "unfairness"

of foreigners. The key characteristic of a sensible safeguard procedure is that it treats

domestic interests that would be harmed by an import restriction, equally with those domesticinterests that would benefit. The "morality" of the foreign interest is irrelevant - the issue is

the plus and minus on the domestic economy. Operationally, this suggestion means simply

that what is done in an "injury test," - identification of impact on import competing interests -

is repeated for users of imports.Some argue that there must be more rigorous anti-dumping

rules that must be formulated at the domestic and international level. The notion of predatory

pricing must be clearly incorporated in the definition of dumping. The burden of proof of

dumping must be placed squarely on the party initiating dumping cases. The implementation

of anti-dumping measures should be subject to the close inspection of the WTO. Countries

should more amply inform their public of the costs and benefits of anti-dumping measures so

as to promote an unbiased and fair public opinion on this matter. These measures would

ensure that anti-dumping laws are fairly applied and assist only those producers who suffer as

a result of the low prices, and not arbitrarily affect the production of efficient producers who

are not in error

Competition Law in India

Competition law is a specific law which has the objective of promoting/ maintaining

competition in the markets by regulating anti-competitive conduct. It is also known as

antitrust law in the United States. The history of competition law reaches back to the Roman

Empire. Since the 20th century, competition law has become global. Now, more than hundred

countries have adopted competition law as a natural corollary to embracing economic reforms

and market economies.Indias earlier Competition related law - Monopolies and Restrictive

Practices Act, 1969 became outdated after liberalization of economy in 1991. Competition

Act, 2002 was passed in January 2003 with the objective ofpreventing practices having

adverse effect on competition, promoting and sustaining competition in markets, protecting

the interests of consumers and ensuring freedom of trade carried on market participant.

Competition Commission of India (CCI) was set up in October 2003 to implement the law.

However, legal challenge prevented full constitution and enforcement and only advocacy

function was notified. Law was amended in 2007. Law is being implemented by CompetitionCommission of India (CCI), which was constituted in 2009 as an autonomous independent

body comprising Chairperson and six members. Appeal lies to Competition Appellate

Tribunal also set up in 2009 with final appeal to Supreme Court of India. The Competition

Act, 2002 (as amended), [the Act] aims at protecting Indian markets against anti-competitive

practices by enterprises. The Act prohibits anti-competitive agreements, abuse of dominant

position by enterprises, and regulates entering into combinations with a view to ensure that

there is no adverse effect on competition in India.

Dumping Eco

Documents

Transcript of Dumping Eco