rohitecotmpr

8/7/2019 rohitecotmpr

1/25

1

LOVELY FACULTY OF BUSINESS AND ARTS

TERM PAPER

ON

DUMPING: BOON OR BANE

Submitted to : submitted by:

Mr. Ashish sharma Name: Rohit kumar

Roll no.:-RS1002 B30

Sub: Managerial economics


2/25

2

PREFACE

As MBA Degree requires equal attention practical as well as theoretical aspect of the business,

various problems are to be dealt with in these courses, that is why research programs are there to

give deep as well as through knowledge of the subjects.

We have attempted to live up these requisites while preparing this term paper. It is part of

professional courses. With the help of term paper we can able to understand the deep knowledge

about the specific topic assign to us.

During our term paper I observed some of the cases behind the dumping :boon or bane. It is

hoped that this report meets the given expectations and various requirement of the research.


3/25

3

ACKNOWLEDGEMENT

It is our pride privilege to have an opportunity to carry out our term paper at Lovelyprofessional university. We received full co-operation from our college. We would like to

express our thanks and gratitude towards all those who helped to shape our efforts and mould itinto a masterpiece.

First and foremost, we would like to thank our Project guide for having the confidence on us to

give us the privilege of working on DUMPING: BOON OR BANE .The project was preparedofMr. ASHISH SHARMA (Faculty) Lovely faculty of business & arts, his guidance, helpful

comments and confidence on us which helped us for our important work in this field .

To conclude, we would thank everyone who helped to transform our term paper into grandfaculty success. We are highly indebted to the Management of Lovely professional University

for the opportunity to work on this project .


4/25

4

CONTENTS

Page no.

Introduction 5

Objective of study 6

Literature review 7-9

Definition and objective of dumping 10

Types of dumping 11

Economic analysis of dumping

Why do firm dump? 12

Effects of dumping 12

Benefits of dumping 13

Acts and laws that govern dumping 13-16

Rational behind anti-dumping laws 17-18

Dumping case between India and china 19-20

Current strategy 21-22

Future prospects 23

Conclusion 24

Reference 25


5/25

5

Introduction

Dumping, is a pricing practice where a firm charges a lower price for exporting goods thanit does for the same goods sold domestically. It is said to be the most common form of price

discrimination in international trade. Dumping can only occur at places where imperfect

competition and where the markets are segmented in a way such that domestic residents cannoteasily purchase goods intended for export. It is a subtle measure of protection which comesunder the non-tariff barriers and is product and source specific. Antidumping duties were

initiated with the intention of nullifying the effect of the market distortions created due to unfairtrade practices adopted by aggressive exports. They are meant to be remedial and not punitive in

nature. Although dumping does benefit the consumers of the importing country in the shortrun, it is harmful to the domestic producers as their products are unable to compete with the

artificially low prices imposed by the imported goods. As a method of protection to the domesticindustries, anti dumping duties are thus levied on the exporting country which has been accused

of dumping goods in another country. As the anti dumping duty is only meant to provideprotection to the domestic firms in the initial stages, as per the international laws, the

antidumping legislations may last for a maximum period of five years.

Dumping is a term that is used in financial markets as well as in international trade. In the

context of buying and selling securities, dumping refers to the practice of selling large blocks of

securities. More specifically, when dumping securities the seller is primarily interested in gettingrid of the securities at any price. One simply dumps, or unloads, on the market with no regard to

the selling price of the securities.

Dumping is also used in a commercial sense in the context of international trade. It refers to thepractice of one country selling commodities or finished products in another country below cost

or fair market value. Predatory dumping occurs when one nation exports goods to another nation

below cost or fair market value in order to obtain market share at the expense of domesticcompetitors. In many cases, predatory dumping drives out domestic competition. Then, havingestablished a dominant marketing position in the industry, the predatory dumpers raise their

prices well above previous levels.
http://www.referenceforbusiness.com/encyclopedia/Clo-Con/Commodities.htmlhttp://www.referenceforbusiness.com/encyclopedia/Man-Mix/Marketing.htmlhttp://www.referenceforbusiness.com/encyclopedia/Man-Mix/Marketing.htmlhttp://www.referenceforbusiness.com/encyclopedia/Clo-Con/Commodities.html


6/25

6

OBJECTIVE OF STUDY

To know about the dumping whether it is a boon or bane for the country

Reason behind the dumping in a country Adverse affect of dumping Steps taken by government to stop dumping-like anti dumping regulation


7/25

7

LITERATURE REVIEW

Dumping in a Linder Model of Trade with Multiple Retail Channels

Abstract (Summary)

The last decade has witnessed an accelerating adoption of AD laws by LDCs and their increasingusage against developed countries. Our model of third degree price discrimination with

heterogeneous consumers that have differing preferences for quality in the two countriessuggests that this is likely to continue. Duopolistic interaction may yield bilateral dumping, or

unilateral dumping in either direction, under free trade. Even when dumping is unidirectional,there is a compelling basis for the introduction of AD laws by both governments. This mitigates

competition, which is beneficial for both firms, and portends pessimism for an abatement of thisrecent proliferation of AD laws and complaints.

CHINA'S 'MADE IN CHINA' PROBLEM

Abstract (Summary)

China's state planning agency is warning of massive overcapacity in a half-dozen industrialsectors. Trade frictions could develop if China starts exporting the excess at cut-rate prices--what

trade experts call dumping. Washington is starting to take action. China now faces duties thatnearly double the price of tubular steel exports to the U.S. after the Commerce Dept. issued a

preliminary ruling that Beijing is dumping the tubes, which are used in the oil industry. Beijing,too, is concerned about the industrial glut. If companies adding capacity can't sell their extra

output, they risk defaulting on their loans. And plans to wean China off state spending, creating amore consumption-driven and innovative economy, could suffer if companies continue to over

invest in commodity production. China has taken some steps to rein in the expansion. Thatdoesn't mean it will be easy to fix the problem. China may not be willing to make the

macroeconomic changes required to face up to the challenge. Chinese economists, meanwhile,argue that growth eventually will eat up any excess production.


8/25

8

China steps up dumping campaign

Abstract (Summary)

The Chinese government has stepped up its campaign against the alleged dumping of chemicals,

announcing antidumping duties on imports of caprolactam, phenol, and toluene diisocyanate(TDI). China is using antidumping measures partly to compensate for falling tariffs since itsWTO accession, some sources say.; The Ministry of Commerce, formerly the Ministry of

Foreign Trade and Economic Cooperation, imposed provisional antidumping duties last week onimports of phenol from Japan, Korea, Taiwan, and the US.

Dumping: China Strikes Back;

Abstract (Summary)

At first glance, it looks like a typical case of tit for tat. On June 18, Washington set anti-dumping

margins of up to 198% on a slew of Chinese manufacturers for allegedly selling bedroomfurniture in the U.S. at less than the cost of production. That same day, China's Commerce

Ministry announced a preliminary antidumping finding of its own - against Corning Inc. -assessing a 16% penalty on its sales of fiber-optic cables. A final ruling is due in 18 months. So

is Beijing unfairly targeting American companies to get back at the U.S. for the furniture rulingand a similar decision on color televisions in April? Actually, the jury is out. The complaint

against Corning was filed last July, well before the furniture and TV rulings, and also involves aJapanese and two Korean suppliers. Indeed, most of the 27 antidumping cases filed by China

since 1997 have been against Japanese and Korean exporters.


9/25

9

Dumping Issue May Foil E-Commerce Agenda at WTO

Abstract (Summary)

Many other nations want to use the new round of trade talks to attack the U.S.'s antidumpinglaws, which are dear to the steelmakers and other old-line industries. Some officials fromdeveloping countries are going so far as to suggest a link: If the U.S. won't bend on antidumping

laws, they won't open their borders to American-dominated e-commerce.

"A number of countries would like to see a revision of the U.S. antidumping disciplines," says

Mexico's undersecretary of international trade, Luis de la Calle. For the WTO talks to succeed,he says, the agenda must include more items that other countries want, or there will be no

incentive to bargain with the U.S. "If developing countries see exclusions of things they careabout, they won't come" to the talks, he says.

Japan, Mexico, South Korea and Brazil, in particular, loathe U.S. antidumping laws, whichpunish countries for "dumping" products on the U.S. market at prices below those in their homemarkets. U.S. steel companies most recently used the statutes to punish Japan, Russia and South

Korea for undercutting U.S. steel prices.


10/25

10

DEFINITION

Dumping is a term that is used in financial markets as well as in international trade. In the

context of buying and selling securities, dumping refers to the practice of selling large blocks ofsecurities. More specifically, when dumping securities the seller is primarily interested in getting

rid of the securities at any price. One simply dumps, or unloads, on the market with no regard tothe selling price of the securities. Dumping is also used in a commercial sense in the context of

international trade. It refers to the practice of one country selling commodities or finishedproducts in another country below cost or fair market value.

Objectives of dumping

To enter into a foreign marketdumping may be resorted to make an entry in a foreign marketwith subsidies being provided by the government

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

To develop a market in foreign countries by selling at a lower price in the initial stages just asnew markets van be developed in the country itself by selling at lower prices
http://www.referenceforbusiness.com/encyclopedia/Clo-Con/Commodities.htmlhttp://www.referenceforbusiness.com/encyclopedia/Clo-Con/Commodities.html


11/25

11

Types of dumping:

Sporadic Dumping: Occasional sale of a commodity at below cost in order to unload anunforeseen and temporary surplus of the commodity without having to reduce domestic

prices.

Predatory Dumping: Temporary sale of a commodity at below cost or a lower priceabroad in order to derive foreign producers out of business, after which prices are raisedto take advantage of the monopoly power abroad.

Persistent Dumping: Continuous tendency of a domestic monopolist to maximize totalprofits by selling the commodity at a higher price in the domestic market than

internationally (to meet the competition of foreign rivals).

For international price discrimination to take place, conditions must be met:

Domestic and foreign markets must be separated. Demand elasticity of the product must be different in two markets. The

good can be sold with a lower price where the demand elasticity is high;and with a higher price where demand elasticity is low

It is said to be the most common form of price discrimination in international trade. Dumping

can only occur at places where imperfect competition and where the markets are segmented in a

way such that domestic residents cannot easily purchase goods intended for export. It is a subtlemeasure of protection which comes under the non-tariff barriers and is product and source

specific.

Although dumping does benefit the consumers of the importing country in the short run, it is

harmful to the domestic producers as their products are unable to compete with the artificially

low prices imposed by the imported goods.


12/25

12

Economic analysis on dumping

Why do firms dump?

Dumping occurs when firms start using price discrimination as a strategy for profit

maximisation. The conditions mandatory for dumping to take place are

- Presence of an imperfect market where price discrimination between markets is possible.

(Because in imperfect market firms are price setters not price takers).

- Segmented markets where there is no arbitrage easily possible between markets.

Only if the above two conditions are satisfied is it profitable for the exporting firm to engage in

dumping. For any firm, price discrimination in favour of exports is more common because theshare of exports is usually lesser than the domestic demand. In the export market, individual

firms have lesser monopoly power and hence choose to keep prices lower in foreign markets

while charging higher prices for domestic markets. This can also be explained through the price

elasticity of demand for goods. In areas where the demand is price inelastic, producers tend to

charge a higher price. This is said to be the case in domestic markets. In foreign markets, price

elasticity of demand is elastic and hence prices are low. Thus, if there is high elasticity on export

sales than on domestic sales, firms will dump.

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 be

threatened.

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


13/25

13

Benefits of dumping:

On the exporting country

a)

It finds market for its surplus productionb) By exporting more, it is able to strengthen its balance of payments positionc) 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 ofthe product to reap profits in the long run. Because this may require fixing price below

marginal cost, it may be treated as predatory pricing.

Which are the acts and laws that govern dumping?

The first Indian Anti-dumping legislation came into existence in 1985 when the Customs Tariff

(Identification, Assessment and Collection of duty or Additional duty on Dumped Articles and

for Determination of Injury) Rules, 1985 were notified. Section 9 of the Customs Tariff Act,

1975 empowers the central government to impose anti-dumping duty. The manner and procedureof anti- dumping investigations and the appointment of designated authority, are governed by the

anti-dumping rules. These rules contain the operational provisions and confirm to the WTO

agreement on anti-dumping. The Directorate General of Anti-Dumping & Allied Duties

(DGAD) was constituted in April 1998.

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 Uruguayround of GATT negotiations in 1992 and in subsequent incremental reforms, notably the

Luxembourg Agreement in 2003. Initially the CAP sought to increase European agriculturalproduction 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 theEuropean 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 policyhas moved away from market intervention and towards direct payments to farmers regardless of
http://en.wikipedia.org/wiki/Common_Agricultural_Policyhttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/Agreement_on_Agriculturehttp://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/w/index.php?title=Luxembourg_Agreement&action=edit&redlink=1http://en.wikipedia.org/wiki/European_Agricultural_Guidance_and_Guarantee_Fundhttp://en.wikipedia.org/wiki/European_Agricultural_Guidance_and_Guarantee_Fundhttp://en.wikipedia.org/w/index.php?title=Luxembourg_Agreement&action=edit&redlink=1http://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/wiki/Uruguay_roundhttp://en.wikipedia.org/wiki/Agreement_on_Agriculturehttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/Common_Agricultural_Policy


14/25

14

production (a process of "decoupling"). Furthermore the payments are generally dependent onthe farmer fulfilling certain environmental or animal welfare requirements so as to encourage

responsible, sustainable farming in what is termed 'multifunctional' agricultural subsidies - thatis, the social, environmental and other benefits from subsidies that do not include a simple

increase in production.

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.

Dumping is considered to 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 country surrogate

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.

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 arenormal 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.
http://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Tradehttp://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Trade


15/25

15

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 find who theparty 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


16/25

16

Calculation of dumping margin

There are many different ways of calculating whether a particular product is being dumpedheavily or only lightly. The agreement narrows down the range of possible options. It providesthree 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 pricecharged 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 alsospecifies 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 onlybe 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 mustevaluate 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 parameters by which injury to the domestic industry is to be assessed in the anti dumping

proceedings are such economic indicators having a bearing upon the state of industry as the

magnitude of dumping, and the decline in sales, selling price, profits, market share, production,

utilisation of capacity etc. Existence of dumping can be estimated by calculating the dumping

margin which is the difference between the Normal Value of the like article and the export Price

of the product under consideration.

Dumping margin= normal value- export price

The normal value is the comparable price at which the goods under complaint are sold, in the

ordinary course of trade, in the domestic market of the exporting country or territory while the

export price of goods imported into India is the price paid or payable for the goods by the first

independent buyer.


17/25

17

RATIONALE BEHIND ANTI-DUMPING LAWS

Political reality suggests that any government that attempts to establish or maintain an open

import regime must have at hand some sort of pressure valve - some process to manageoccasional pressures for exceptional or sector-specific protection. Since the 1980s anti-dumping

has served this function. An anti-dumping petition is the usual way in which an industry, plagued

with troublesome imports, will request an anti-dumping investigation. It is the way in which the

government then provides protection.

Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its

trade distortive effect. Thus, 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.

Anti-Dumping is a reactionary measure to the dumping 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 arecontrolled 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.34 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.

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 firms maximize their own production and profits.It must be recordedhowever, 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 is

predatory or not, domestic producers demand protection against any form of dumping even if it

actually not harmful.


18/25

18

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. 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 by free 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 useall 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.


19/25

19

Dumping case between India and china

Invasion of Chinese goods in India

China has indulged in large scale dumping all across the world; India being majorly affected.

Here it has to be remembered that everything you complain against will not be qualified as

dumping. According to WTO, if Investigations prove for such goods falling in the anti dumping

bracket that the exporter is charging a price below than what he charges in his domestic market

or if the volume of imports is too high so as to cause a disadvantage to the local producers can be

called as dumping. Thus, we conclude that not any and everything will be classified as dumping.

Once a complaint is filed, it has to be investigated by a designated agency taking into account the

WTO laws.

Dumping wars have gained strong ground especially in the times of recession, with India filing

maximum number of anti dumping cases against China. A growing insecurity for India in

resorting to levy of high anti dumping duty is the current high trade deficit with China. Can we

forget to mention here the case of green veneer tape, where the Interest of the local monopolist

was protected at the cost of consumers getting a better product at more competitive prices?

Besides dumping is not the only way Chinese goods enter India, much of it enters through Illegal

route of Nepal.

China leads in the number of anti dumping cases filed against any country in the WTO. Between

1995 and 2005, India filed more anti dumping complaints against China than any of the

developed nations of US and Europe. Anti dumping measures have become more popular today

to offset unfair competition, in relation to other measures such as QRs and import quotas which

are non discriminatory in nature and require injury in severest form. To India, the pinch is more

in those areas where it is also a large producer such as chemicals, toys, electronics, leather and

textiles. Recently anti dumping Import duties have been filled on acrylic fibers, Analgin,

potassium permanganate, paracetamol, sodium nitrite, caustic soda and green veneer tape. From

1995-1999, India initiated 140 anti dumping investigations which are highest for any country.

Many feel this is not fair. It is also seen that the amount of anti dumping duties levied are against

the basic rules. This also arises due to the non market economy (NME) status of China in

countries such as US. As we examine, we find out that the entire amount of duty which is levied

against the Chinese goods is flawed. Here it is pertinent to understand the meaning of a Non

Market Economy. In very simple terms, a Non Market Economy is one which does not operate


20/25

20

on market principles of cost and pricing. For NMEs, the value of its goods do not reflect the true

price. In most cases in US, it is seen that where the Chinese companies fail to respond against the

AD case, (Many a times due to Ignorance of the legal structure) it gets more of an unfair deal.

Chinas relation with US- It has already been mentioned that the boom in China is made inUSA. Another question which is being asked commonplace today is Are Economies such as

US and Europe overly dependent on cheap Chinese products? The answer is no as Stephen

Dunaway rightly points out, that due to intense competition, the cost differentials between China

and other counties has indeed narrowed down. Another point which needs mentioning is that

Chinas Economy is highly export dependent on countries such as US, so we may as well study

the dependence the other way.

China is facing strong opposition of dumping from the European countries as well. These

Countries are levying a high import duty on vast scales Chinese dumping of leather goods. To

salvage their own domestic Industries countries like Japan are resorting to high level investment

in China to sell back in their own domestic economies. This will soon be followed suit by many

other Economies. FDI is playing a big role in Chinas technological process with China

becoming an attractive destination. India and China are considered at par in terms of

investments. India with its paranoid behavior is lacking in many respects to provide a suitable

ground to MNCs to invest in the country thus losing big on FDI.


21/25


22/25


23/25

23

Future Prospects

As all good things come to an end so will the heavenly rights enjoyed by China. The price of

Chinese products in near future will be more realistic as IPR is enforced. The west too is

realizing the huge trade surplus of China, the recent imposing quotas on Chinese textiles (Betterknown as the Bra War) bringing China to reality grounds. Also though China has maintained the

price of its goods as static to capture large share in world volumes but it is sooner or later going

to face the rising cost of raw materials. China would soon increase its prices when it enters the

market economy status which is 2016 for US. We must not forget that India and China produce

similar kinds of goods in terms of their export basket to the West. China has highly skilled labor

and a comparative advantage in the assembly stage of technology. India has to improve its

manufacturing prowess; Non tariff measures such as Anti Dumping will only prove to be

detrimental. In many cases, it has been observed that the mere filing of a case leads to a total

disruption of trade. Trade relations in the coming years between these two BRIC giants are

bound to improve, Chinas imports are surging into India on account of their product

diversification and competitiveness. The reality is that 72% of the products imported are at par

with Indian Quality or even superior. The World today sits back to notice when a professor

claims that in 2050 the trade relations between India and China will be the most important

economic relationship in the world and these countries will drive the growth of the entire world

leaving far behind the Giant four.


24/25

24

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 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 dutiesThe 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 marginal cost 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. 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 domestic users, be they user enterprises or consumers.

As politics, it undercuts rather than supports a policy of openness; by giving voice to only thenegative impact of trade on domestic interests and by inviting such interests to blame their

problems on the "unfairness" of foreigners.


25/25

25

Reference

Books

1. http://proquest.umi.com/pqdweb?index=51&did=46570205&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287511478&clientId

=129893

2. http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clien

tId=129893


tId=129893


tId=129893
http://proquest.umi.com/pqdweb?index=51&did=46570205&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287511478&clientId=129893http://proquest.umi.com/pqdweb?index=51&did=46570205&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287511478&clientId=129893http://proquest.umi.com/pqdweb?index=51&did=46570205&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287511478&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=12&did=1922844301&SrchMode=1&sid=7&Fmt=2&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287509911&clientId=129893http://proquest.umi.com/pqdweb?index=51&did=46570205&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287511478&clientId=129893http://proquest.umi.com/pqdweb?index=51&did=46570205&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287511478&clientId=129893http://proquest.umi.com/pqdweb?index=51&did=46570205&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1287511478&clientId=129893

rohitecotmpr

Documents

Transcript of rohitecotmpr