Impacts of The Anti-Dumping Measures by the WTO
The introductory portion of this chapter will deal with anti-dumping legislation of China and Chinese Taipei as the members of WTO I have selected. The major features of their laws and practices, together with legal and institutional frameworks, will also be discussed in detail.
China
The world’s principal target for the anti-dumping investigations since the creation of world trade organization is the nation of China. Because of its quickly increasing exports from 1995 till 2004, the first ten years of the world trade organization, China was taken as the target of 411 anti-dumping investigations. It outnumbered the 207 investigations, including Korea, which placed itself as the second most prominent target of the same cases during the same period.
Conversely, China has as well become a great user of anti-dumping measures. The first anti-dumping regulation in China was enacted in 1997 and begun its initial investigation during the same year. Since 1997, China has been developing its anti-dumping rule, adding more staff of its investigation officials, and consistently accumulating its anti-dumping practices. As 2004 was getting to its end, the number of anti-dumping examinations in China summed to 112, of which seventy-nine were started after it acceded to the World Trade Organization. China was one of the most significant users of anti-dumping measures in that era.
The development of China’s anti-dumping rule and the institution has been exceptional, but not its exact implementation. Individuals like lawyers, authorities of China’s trading partners plus academics, who have been observing China’s anti-dumping practice, highlighted that discrepancy is noticed between the official text of China’s anti-dumping rule and its implementation. The most serious problems linked with China’s anti-dumping practice, include lack of openness and consistency, though quick and substantial improvements are also noted.
Legal and institutional framework
4.1 Laws and Regulations
4.1.1 The Regulation of 1997
The initial domestic rule of China controlling anti-dumping was article 30 of the 1994 foreign trade law. It states that, if a good is imported at a lower selling price and brings or threatens to bring a physical injury to the relevant developed state industry, or materially slows down the development of a specific industry, the state is allowed to take relevant actions to discard or lessen the injury or threat of injury.
While article 32 says that the agency or official appointed by the state council must perform examinations and make determinations as per the relevant rules and administrative regulations. Though, it was not until 1997 that the relevant rules and administrative regulations were enacted. By march 25th of 1997, the state council promulgated anti-dumping and anti-subsidy regulations of the people’s republic of China. It became the initial implementation of article thirty of the 1994 foreign trade law.
Moreover, article one of the 1997 regulation stated that the goals of the regulation were maintaining foreign trade order alongside honest competition and protecting the interior industry. The 1997 regulation was enacted due to the following reasons. One, china rapidly liberalized its trade in products at the beginning till mid 1990s in expectation of its accession to the world trade organization, plus the resulting competitive domestic market status needed improved protection of state industries. The few measures presented for that purpose were anti-dumping and countervailing duties. The second reason is that china was a consistent target of international duping actions in the beginning till mid 1990s. China decided to bring in anti-dumping measures as a countermeasure against foreign anti-dumping actions against china. This enabled china to adopt relating measures against any nation adopting discriminatory anti-dumping measures against its exports.
Under the regulation of 1977, the initial anti-dumping examination was started on December 10th 1977 against newsprint from Canada, Korea and united states. Generally, 33 anti-dumping examinations were done under the regulation of 1977. Among these 33 investigations, 6 cases were brought to a halt with no imposition of anti-dumping duties because of the unfavourable determination of injury.
4.1.2 The Regulation of 2002
China was obliged to introduce its state anti-dumping law into conformity with the law of the WTO anti-dumping agreement, as it acceded to the WTO by 2001. Later the regulation of 1997 was replaced by 2002 regulation which had six chapters and 59 articles. This regulation included, most of the subject matter controlled by the WTO anti-dumping agreement. Additionally, the language of this regulation was general, and had no comprehensive rules for enforcing the anti-dumping procedure.
The state council also enacted the 2002 regulation, and just like the 1977 regulation, it was based on article thirty of the 1994 foreign trade law. According to the Chinese legal system, the state council regulations are normally positioned below laws enacted by the national people’s congress and positioned above the laws enacted by the ministries enacted by the supreme people’s court. Mostly in china, laws offer general principles, regulations to give comprehensive rules for the implementation of laws and regulations. Most of these implementing regulations are known as provisional laws, that signifies the possibility of the future revisions after collecting implementing practices. However, they are not different from the usual rules and provisions in their legal effect.
By 2004, both the 2002 regulation and the foreign trade law were revised. The regulation revised implies the institutional change in anti-dumping investigating officials. The regulation of 2004 also urges the officials to consider public interest in accepting an offer of price undertaking. Besides, the 2004 regulation requires the competent officials to consider public interest in the imposition and accumulation of anti-dumping duties. The foreign trade law which was revised also applies that similar language its predecessor used regarding anti-dumping measures. Nevertheless, it gives a wider legal basis to the 2004 regulation and the regulating laws and provisions than its predecessor by referring to anti-dumping examinations plus dumping to a third nation.
Chinese Taipei
Chines Taipei was originally a member of GATT using the name republic of china, though it pulled out from GATT in 1950. Chinese Taipei recently established its economy and was among the Asian NIES. It was a frequent target of the import constraints, following the establishment of its export driven economy. From 1995 to 2005, Chinese Taipei initiated 160 anti-dumping investigations against imports. It was considered as the fourth biggest number of examinations within the globe.
Chinese Taipei enrolled to accede to the WTO in January 1990. After bilateral and multilateral negotiations, Chinese Taipei acceded to WTO by the name of the separate customs territories of Taiwan, Matsu, Penghu and Kinmen. After the application for accession, Chinese Taipei created rules and regulations for trade relief measures after Tokyo round codes, EU and US rules.
The economic growth of Chinese Taipei was stimulated by small and medium sized organisations. Since 1990s, mainly because of increasing wage levels, its economy displayed a shade of stagnation. However, there are no lots of cases of investigations compared to other nations, like Brazil, this made its state industries to use import relief measures.
Legal and Institutional Framework
4.2 Laws and Regulations
The following legal instruments are contained in the anti-dumping laws and regulations of Chinese Taipei; custom law, anti-dumping duties, foreign trade act, implementation regulation on the imposition of countervailing together with rules for tackling import relief cases. All these instruments were severally amended since they were enacted.
Custom laws offer for the basic framework of the anti-dumping laws of Chinese Taipei. Its article 68 denotes that the goods that had been imported at a lesser price than the normal value, and is causing material injuries, might be subjected to the imposition of a suitable anti-dumping duty plus the customs duty. Article 69 of the customs rule also gives that the term injury to any state industry involves material injury, or even a threat of material injury and material retardation of the development of the industry. In addition, it provides the amount of anti-dumping duty subjected should not go beyond the dumping margin of the goods imported.
Latest trends
In the past, many anti-dumping measures had been taken by the U.S., the European union, Australia and Canada. This displays that developed nations have been faster to place anti-dumping regimes in place. Nevertheless, in current years certain developing nations have also started to impose anti-dumping measures, for instance, Brazil, south Africa, India and Korea. It is essential to monitor members imposing anti-dumping measures to make sure that their procedures and techniques conform with the anti-dumping agreement. There has also been a rise in the number of anti-dumping measures embraced by developing nations against EU, U.S. along with other active users of anti-dumping provisions. The figure below gives the number of AD investigations per nation.
Figure 1: number of anti-dumping investigations, per nation
Anti-dumping, safeguards plus protectionism during economic recession of 2008
The great decline in the economic activities precipitated in the US by the financial stress of 2007 to 2008 and drastically spread to other nations. It started in the late 2002 and moved through till mid 2009, making it the longest and deepest economic fall in many nations, including the U.S. during this period, protectionism has been an evolving concern. It was the first time the world experienced a significant reduction in the industry demands for temporary new import barriers through trade remedies since the beginning of the economic depression. At the same time, it was a period when a great increase in new trade barriers were imposed.
When an economy is experiencing hiccups, protection is increased. At the moment that the crisis is worldwide and synchronised, and while the high unemployment proceeds to bring protectionist pressures, the protectionist reaction has gotten wider than normal.
Legal protection
Tariffs of the most significant trading economies are high against ceilings that they are bound in the recent WO negotiations. Therefore, they can never increase the used tariffs legally to address to demands for extra trade barriers. Rather, many apply one of the WTO steady trade remedy policies, which include anti-dumping, countervailing duties, worldwide safeguards along with china-specific safeguards, in responding to industry calls for protection from imports.
The wide spread of the worldwide financial catastrophe led to a sudden and unexpected fall in global trade in the fourth quarter(4Q) 2008. The world trade organization approximates a yearly decrease in the word trade in fourth quarter 2008 as 10% and above; with significant decrease experienced in Europe with 16%, north America wit 7% and Asia with 5%. In the 1st quarter of 2009, a yearly estimate shows that the world trade went down by about 30%. The drop-in trade during these six months between 2008 and 2009 was abrupt. This abrupt collapse between this period has not been associated with any significant new protectionist initiatives that the G20 members of the WTO had taken by that point in the catastrophe. Even under the unexpected event that all of these members trade remedy examinations started from the first quarter 2008 to fourth quarter 2009 were to lead to prohibitive trade restrictions for the goods affected, as an upper limit such could have resulted less than 0.5% of these economies’ imports. An evidence of a global rise in industry requests for modern trade remedies starting from late 2008 till 2009, as per the data shown below, the major rise in imposition of modern trade barriers arrived in the late 2009, that is to say. It happened after the sharp trade contraction of fourth quarter 2008 through the first quarter 2009 had already happened.
The 4Q 2009: new initiated trade remedy investigations
First take into consideration industry demands for new import barriers under trade remedies. As shown in the figure below, it is the first time since the beginning of the catastrophe that the 4Q 2009 underwent a great reduction in industry request for new import barriers. The member governments of the WTO started 26 new product level examinations under national trade remedy rules in 4Q 2009, a 23.8 percent reduction compared to the 4Q 2008. Following four consecutive quarters of rise, the number of recent requests for trade restrictions in 4th quarter in 2009 tumbled 57 percent when compared to the third quarter in 2009.
Figure 2: recently started trade remedy investigations, 1st quarter in 2007 to 4th quarter in 2009
The figure above shows developing nations instigated 76.9 percent of these recent investigations compared to 23.1 percent instigated by developed economies. China proceeded to be the exporting nation most highly targeted by recent investigations.
Additionally, while the 4th quarter in 2009 might eventually come to be considered as the turning point in the protectionism data, also take into consideration the annualized data. The total number of industry requests for trade restrictions in 2009 was 19.7 percent above the total requests filed for 20008, which itself thirty five percent was more than the total request filed in 2007.
The 4th quarter in 2009: newly imposed import restrictions
Similarly, the 4th quarter in 2009 also gives the first evidence of the long-awaited rise in the enforcement of the modern trade restrictions after the closure of these trade remedy investigations started during the economic catastrophe. The figure below displays that the 4th quarter in 2009 led to a 35.7 percent rise in the number of new imports limiting measures enforced, when compared to a similar period in 2008. Members of the WTO enforced thirty new product level import barriers in the fourth quarter in 2009 under state trade remedy rules which is also a great jump from the twenty-one recently enforced import barriers imposed in the 3Q 2009.
Figure 3: Recently enforced trade remedies, 1st quarter 2007 to 4th quarter 2009
The rise in the quarterly number of recently imposed trade restrictions has been forecasted given i) the rise in investigations started in the initial stages of the worldwide economic catastrophe and ii) historical evidence that most of the recent investigations eventually led to enforcement of recent definitive import barriers, naturally with a twelve to eighteen months lag.
The yearly count of the recently imposed import barriers for 2009 is 29.5 percent more than the sum for 2008. The figure shows that developing nations enforced 83 percent of the definitive latest measures, when compared to developed nations that enforced 17 percent. Similarly, china was the exporting nation mostly targeted by enforcement of latest import limiting trade remedies in the 4th quarter in 2009.
Motivations towards Anti-dumping measures implementation
In some countries price discrimination existed connecting both domestic and import markets which generally showed the existence of distorting markets within home markets like a monopoly/cartel, import barriers, or some groups of these elements which gives home steps the ability to keep home price higher than price of exports. Dumping becomes a way by which competitive results are determined under this circumstance effectively through the distortion itself, irrespective of individual producers competing. Protected firms would run their facilities at a higher utilization rate through dumping in a short run than in the case of economically practicable within the open market offering them a main cost benefit not related to their competitiveness of cost comparative. Investment with a market can be discouraged by dumping where it is taking place and vice versa, dumping may well promote the increase of investment within the protected market over long run. Under such dynamics, dumping may allow an originally less structured industry to replace the same or structured competitor which is not gaining from a protected market. Due to the fact that erosion or destruction of regional industries can be as a result of dumping for reasons not related to usual competition of market, simply allowing dumping to take place with no any regulation could risk consensus of politics that assist the present system of liberal multilateral trading.
Dumping can become specifically acute when it injures or destroys industries considered as important to regional economic well-being and regional security due to friction coming out a situation that has been seen at a number of points within this century. A symptom of a bigger phenomenon is the basic controversy surrounding the anti-dumping, a division that is present between a number of regional markets with respect to the policy of competition and has defeated entire trials at agreement for at least half a century. The task of addressing specific challenge brought through this divergence has been assigned more or less by default to anti-dumping measures. They are considered as an imperfect tool. These measures continue to be important to the system of world trading until bigger national differences with respect to the policy of competition are accommodated, acting as an “ affiliate machine required to enable harmoniously trade among many trade systems. One of the biggest results of the generation of statesmen is the today’s open multilateral system of trading that created a foundation of post-world war orders.
General Agreement of Tariffs and Trade(GATT) plus its additional agreements and codes are the given legal underpinning of this system, presently managed by the World Trade Organization which is newly formed. Through the basic process of uniting commitments by endorsers to minimise barriers within trade on the most-favoured-nation basis, the General Agreement of Tariffs and Trade has made the progressive liberalization of world trade possible. In notable part however, the GATT has survived as a result of its framers being wise enough to accept that the system could not sustain the entire commitment chosen by endorsers in the absence of some exceptions. Provisions, special rule for developing countries, escape clause, anti-dumping as well as countervailing duty measures were the included exceptions which have served as an affiliate process to ease the upsets which have taken place as the border reduction restrictions. This has resulted to national economic system’s variation into gradually closer competitive contact. With absent of these processes, provided with politically sensitive subject of international trade the GATT might never have been ended or endured within the face of the pressures which have strike it. Applying measures of anti-dumping right was an essential element towards agreement which made the General Agreement of Tariffs and Trade’s formation possible. The parties which were engaging to the GATT eventually came together and formed a complex system of policies and steps in line to which parties may practice anti-dumping duties in suitable cases. Most major trading countries have created anti-dumping rules within these parameters.
GATT members having many open markets-countries like Australia, US, European Union and Canada have been the most active users of anti-dumping measures. Many newly industrializing countries are becoming more active while putting anti-dumping measures into use as they liberalize their trade regimes. Currently scathing attacks from many quarters is subjected to anti-dumping policy such as business, law prominent figures as well as academia. In US firms anti-dumping laws was characterised as a tool that is used to push foreign firms into “ a quick descent into legal hell” as they “excitedly precede a price hike” for home consumers. The Institute of American Enterprise called anti-dumping measures a chemical weapons applied in the trade wars, a system used for price-fixing cartelization which in the favour of local producers stacks the deck against their foreign competitors. Economic injury resulted via practice of commercial dumping is equalized through the practice of anti-dumping measures. The policy can be a times applied in an arbitrary, unnecessarily burdensome or irrational manner. When the first anti-dumping statutes was enacted in early 1920s, it was directed against classic dumping alone. Then after world war period the scope of the policy was extended to accept other types of export sales that are made down the production cost without withstanding absenteeism of price discrimination between regional markets. Following the recent monograph within washing DC, the law anti-dumping has benefits powerful lobby- the international trade bar. The business of international lawyers would dramatically reduce if anti-dumping law is eliminated. Majority of parties practicing anti-dumping law within Washington are by far represent foreign firms seeking to avoid the forcing of anti-dumping measures. Majority of these practitioners have been voiced in attacking the anti-dumping policy and in case the international trade bar were sampled on the subject, then the majority would in the support to repeal the law. The sheer number of eminent economist who have attacked anti-dumping is impressive although academic attacks are normally less colourful in their choice of words. Reason as to why laws so odious have not been repealed quickly in US, according to some critics, is because of “lobbying” by protected US producers.
Anti-dumping effects to the involved nations
Any country which was exposed to dumping had to benefit from the lower prices. A bigger consumer surplus existed among the customers in the importing country since they could access to a bigger supply of goods at a lower price. When an anti-dumping measures were imposed on the low-price imports, the benefits of consumers within the importing country lost. The goods had the same price-level in both home and foreign market if duties were taxed on the imports. The supply had to reduce and producers had to follow the ineffective low level of output in case the foreign market raised the price. A higher price had to be paid for the products by the consumers within the importing country leading to reduced consumer surplus. Higher price could not be paid by some consumers and this would drive them out of market leading to a dead-weight social cost.
All the consumers as well as industrial satisfaction which raised from dumping had to disappear when the anti-dumping measure were imposed. Dumped products were driven out of market by importing country as a result of anti-dumping measures, which were high enough. Some products managed to remain but at higher prices. Domestic firms were able to increase their prices when dumped products left the market as a result of low competition. When anti-dumping policy was introduced in a market where home industry was comprising of only a single producer, it was leading to that producer charging monopoly prices due to the fact that the competition was missing within the market.
Another impact of anti-dumping policy was a trade diversion. Domestic market share, or third country imports raised when there was a reduction of dumped imports. These products became more expensive when duties were placed on dumped imports. Consumers were still interested in consuming these products but at the lowest possible cost. Exporters from other countries were benefited which were now relatively affordable. Patterns of trade changed as a result of trade diversion. It was evident that the real prices were highly related to the size of the applied duties from the data collected by European on general anti-dumping measures. Data showed that after three years from which anti-dumping policies were levied, there was a reduction by a round 60% of imports from the targeted nations. As a result of increase of imports from the non-targeted nations by a round 40% at the same time, the effect of trade diversion was clear.
Low-cost suppliers finally drove out home producers from market because of foreign exporters selling their goods at lower price level. Domestic workers lost their jobs as well as shareholders of the firms which lost capital when producers left the market. Domestic products became more attractive to the consumers through anti-dumping on the imported products. There was now going to be no direct competition between the domestic producers and the producers in foreign country. Customers benefited from lower price level when the anti-dumping measures were removed and the producers had a higher chance of being affected through the losses from low costs of imports.
Strategies for dealing with anti-dumping law
When a firm exports a good at a cost lower than the price it usually charges in its interior market, then such is referred to as dumping the good. Individuals view it in different angles whether it is a fair or non-fair competition. However, many governments act against dumping so as to protect their home industries. The WTO agreement never pass judgements, it only focuses on how the governments can or can not respond to dumping. The WTO agreement ensures countries to respond against dumping when here is reasonable injury to the competing home industry. To conduct that the government has to be capable of showing that dumping is happening, measure the degree of dumping (by how much is the export price lower than the normal price in the home market), and display that the dumping process is bringing injury or threat to injury.
Article six of GATT provides nations to act against dumping. The anti-dumping law elaborates and clarifies article 6, and both work as one. They allow nations to perform in a manner that would usually destroy GATT laws of binding tariff and not mistreating between trading partners. Actually, anti-dumping action refers to charging additional import duty on a specific good from the specific exporting nation so as to bring the cost closer to the usual price or to do away with the injury to home industry in the importing nation.
For one to deal with the anti-dumping laws, they should also know how to determine the normal, export value plus the dumping margin; all these as provided in the agreement.
Getting the normal value
First, normal value refers to the cost of the good at hand, in the common course of trade, when aimed for utilization in the exporting state market. The agreement talks of several ways of determining the normal cost, here we will discuss about one.
Third nation cost as normal price
This is one of the methods for determining normal value which involves looking at the comparable cost of the similar good when exported to a suitable third nation, given that cost is representative. The Agreement never highlights any procedure for knowing what third nation is suitable.
Determining the export value
The export cost will usually be grounded on the transaction cost at which the foreign manufacturer sells the good to an importer. Nevertheless, as is the circumstance with normal cost, the Agreement provides that such a transaction cost might not be suitable for reasons of comparison.
Exceptions
There should be no costs for exports for a given good, for example, in case the export deal is an interior transfer, or in case the good sold in a barter trade deal. Besides, the cost of transaction at which the exporter exchanges the good with the importer for money might not be reliable due to a connection or a compensatory deal between the exporting and the importing country or a third body. In such an event, the cost of transaction might not be an arm’s length market cost, though might be adjusted, for example for tax reasons. The Agreement acknowledges that, in such events, another technique of getting a suitable value f export for comparison is required.
Alternative way of calculation
The Agreement acknowledges that in cases where the export cost is unavailable, or where the export cost is not reliable because of a connection or compensatory deal between the exporting and importing country or third body, another technique might be employed in determining the cost of exports. such lead to a “constructed export cost”, and is determined on the ground of the cost at which the goods imported are initially resold in an self-standing buyer.in case the good imported is never resold to a self-standing buyer, the officials might get substantial basis on which to determine the cost of exports.
Fair comparison between normal and export value
Basic requirements
The Agreement requires that a fair comparison of the export price and the normal value be made. The basic requirements for a fair comparison are that the prices being compared are those of sales made at the same level of trade, normally the ex-factory level, and of sales made at as nearly as possible the same time
As part of the Agreement’s requirements about openness and participation, the investigating officials are needed to notify parties of the information required to make sure a fair comparison, for instance, information about changes, allowances, and currency conversion, and may not impose an “unreasonable burden of proof” on parties.
Allowance
In order to make sure that these values are comparable, the Agreement needs that changes be made to either the normal value, or the export price, or both, to account for differences in the product, or in the circumstances of sale, in the importing and exporting markets. These allowances must be made for differences in conditions and terms of sale, taxation, quantities, physical characteristics, and other differences demonstrated to affect price comparability.
Calculation of dumping margins
The Agreement contains rules governing the calculation of dumping margins. In the usual case, the Agreement requires either the comparison of the weighted average normal value to the weighted average of all comparable export prices, or a transaction-to-transaction comparison of normal value and export price (Article 2.4.2). A different basis of comparison can be used if there is “targeted dumping”: that is, if a pattern exists of export prices differing significantly among different purchasers, regions or time periods. In this situation, if the investigating authorities provide an explanation as to why such differences cannot be taken into account in weighted average-to-weighted average or transaction-to-transaction comparisons, the weighted average normal value can be compared to the export prices on individual transactions.
Refund or reimbursement
The Agreement requires Members to collect duties on a non-discriminatory basis on imports from all sources found to be dumped and causing injury, except with respect to sources from which a price undertaking has been accepted. Moreover, the amount of the duty collected may not exceed the dumping margin, although it may be a lesser amount. The Agreement specifies two mechanisms to ensure that excessive duties are not collected. The choice of mechanism depends on the nature of the duty collection process. If a Member allows importation and collects an estimated anti-dumping duty, and only later calculates the specific amount of anti-dumping duty to be paid, the Agreement requires that the final determination of the amount must take place as soon as possible, upon request for a final assessment. In both cases, the Agreement provides that the final decision of the authorities must normally be made within 12 months of a request for refund or final assessment, and that any refund should be made within 90 days.
The following are the guidelines that should be utilized in dealing with anti-dumping laws
- Association on anti-dumping actions
The group which meets at least two times per year, gives members of the WTO the chance to talk about issues regarding anti-dumping agreement, article 16. The committee has done the review of state legislations reported to the world trade organization. Such provides the chance to pose questions reading the operation of state anti-dumping laws and regulations, plus questioning the consistency of state practices with the anti-dumping agreement. This committee as well reviews notifications of anti-dumping practices done by members, giving the chance to talk about matters raised about specific cases.
The association has formed a different body, Ad Hoc group on implementation, which is free to every member of the world trade organization, and which is anticipated to aim on technical matters of implementation.
Settling disputes
According to article 17, clashes in the anti dumping area are subjected to binding clash settlement inform of the dispute settlement body of the world trade organization. Members may challenge the imposition of anti-dumping measures, in some cases may challenge the imposition of preliminary anti-dumping measures, and can raise all issues of compliance with the requirements of the Agreement, before a panel established under the DSU. In disputes under the Anti-Dumping Agreement, a special standard of review is applicable to a panel’s review of the determination of the national authorities imposing the measure. The standard provides for a certain amount of deference to national authorities in their establishment of facts and interpretation of law, and is intended to prevent dispute settlement panels from making decisions based purely on their own views. The standard pf the review says tat it should be reviewed after a period of three years to know whether it can be allowed for general application. This standard is for anti-dumping clashes and a ministerial decision only.
Alerting
Every member of the WTO is needed to forward their anti-dumping legislation into conformity with AD agreement, and to alert that legislation to the association on AD actions. While the Committee does not “approve” or “disapprove” any Members’ legislation, the legislations are reviewed in the Committee, with questions posed by Members, and discussions about the consistency of a particular Member’s implementation in national legislation of the requirements of the Agreement.
Additionally, members are needed to report to the association two time a year concerning every dumping examinations, actions, plus measures taken. The Committee has adopted a standard format for these notifications, which are subject to review in the Committee.
Ultimately, members are needed to quickly inform the association of preliminary and ultimate anti-dumping actions undertaken, involving in their notification certain minimum information required by Guidelines agreed to by the Committee. These notifications are also subject to review in the Committee.
Last but not least, there also some procedural requirements that come in as strategies that have to be considered when dealing with anti-dumping laws. It starts with the investigation, then provisional measures and cost undertakings, followed by collection of duties, lastly review and public notice
In the investigation stage, the agreement gives the necessities for starting the investigation. The Agreement specifies that investigations should generally be initiated on the basis of written request submitted “by or on behalf of” a domestic industry. In addition, the Agreement establishes requirements for evidence of dumping, injury, and causality, as well as other information regarding the product. The succeeding step will operate under articles 7 which gives rules associated with the imposition of provisional measures to article 12, which provides comprehensive requirements for public notice by examining authorities of the initiation of the examinations, preliminary, and ultimate determinations, along with undertakings.
Factors influencing the perceived benefits
For a nation to protect its economy, it has to impose duties on the goods they trust are being dumped in their state market since these goods have the possibility to undercut home businesses plus the local economy. The primary aim of placing anti-dumping duties is saving the state jobs, these import barriers could also result in higher costs for domestic consumers. And in the long run, anti-dumping duties could reduce the global competition of domestic industries manufacturing the same products.
The chief economic influencer for countries to benefit from adopting the anti-dumping policy is related to retaliation. Meaning, the current generation using anti-dumping policy were the key targets of the tough users yesterday. This implies that constant AD practices by a single nation stimulate actions by other nations formerly targeted by the former. This is displayed in figure 4, where the group of historically tough utilizers is the key target of AD practices now. This figure illustrates that the earliest tough users primarily target other tough utilizers of the AD actions. It as well explains that current tough users apply anti-dumping primarily towards traditional tough users together with other current tough users. As an outcome of this retaliation process, the more nations adopt AD policies over time, they are expected to benefit. Mainly the domestic industries are those that benefit from this trade relief, where an extra import duty is placed on the subsidized imports.
Figure 4: Intensity of anti-dumping initiations by group of users between 1980 till 2000
Another factor that also influences the benefits of the AD law is competition to have a share in the international market. Typically, the WTO is a global organization which deals with the rules of trade amongst countries. WTO also operates a group of international trade rules, involving the global regulation of anti-dumping measures. The WTO never intervenes in the actions of organizations involved in dumping. Rather it aims on how governments can or can not react to the actions of dumping. So, when the anti-dumping rules are put into place, it is advantageous in that the unwanted foreign competition is excluded effectively and the market share and profitability is well preserved.
Anti-dumping cases are usually initiated by producers of products that are experiencing a loss of market share or profits due to lower priced imports of foreign like product. Known as petitioners, these domestic producers petition both the Department of Commerce and the International Trade Commission to conduct an investigation on their behalf. The petitioners must also demonstrate that they represent a significant portion of the entire U.S. industry of the producers of the products in question.
One of the first advantages is that the Department of Commerce and the International Trade Commission provide technical support to the petitioners by reviewing draft petitions, offering substantive comments, and pointing out deficiencies that might cause a delay or prevent the initiation of an investigation. This is consistent with the functions of both agencies, which is to offer assistance to businesses seeking relief under U.S trade laws.
Another advantage is that the petitioners provide the initial pricing analysis regarding the dumping allegations. While petitioners are required to obtain objective data to support their allegations of pricing at less than fair value, often the price of the subject products in the foreign home market cannot be accurately determined, nor can cost of production be accurately identified. This can lead to the use of assumptions most favorable to the petitioners in the calculation of the home market pricing or cost of production.
From there, if a determination is made to initiate an investigation, the Department of Commerce issues an extensive questionnaire to the off-shore exporters of the products in order to substantiate the petitioners’ allegations. In many cases the foreign exporters/ producers do not respond to these questionnaires or are otherwise reluctant to provide detailed pricing or cost information leaving the Department of Commerce to base their pricing and cost determinations essentially on the information submitted by the petitioners, almost certainly leading to a finding of dumping.
Another advantage is that the petitioners are responsible for providing the product description, or “scope.” This is critical as the scope defines exactly what is covered under the anti-dumping case and it is in the petitioners’ interest to define the scope as broadly as possible. Products can be identified by HTSUS, but can also be identified by description, regardless of classification. In many anti-dumping cases the scope of coverage is very broad to include a wide range of finished and semi-finished products.
Another practice that favours petitioners in the U.S. is called “zeroing”, which is a method used when calculating whether a product is being sold at a lower price in the U.S. than in its home market. This occurs when a comparison is made between the goods sold in the US with the price of the goods sold in the off-shore home market. , If the price comparison yields a negative value in the home market – i.e., the home market price is less than the U.S. sales price, this negative value is replaced with a zero. This means that the negative value, which might serve to offset a positive difference in the price in another sample sale, is disregarded. This can result in a finding of dumping where one might otherwise not exist, or serve to increase the margin of dumping once found to exist.
Finally, a factor that bodes well for petitioners is that several years of statistics show that the Department of Commerce ruled in favour of petitioners’ claims in over 99% of petitions submitted, and the International Trade Commission agreed with injury claims in over 70% of the cases. Furthermore, it is not uncommon for anti-dumping duties to average over 100% of the value of the products, which in most cases makes the products prohibitively expensive to import into the U.S.
Initiating an anti-dumping case can be challenging, expensive, and involve the coordination and participation of many interested parties, often competitors, as well as their unions when applicable. However, the process of establishing a case and the advantages available to the petitioner, coupled with the significant benefits afforded by obtaining anti-dumping protection, may make pursuing a case a tangible option for surviving in todays’ globally competitive environment.
Anti-dumping law and its impacts on the economy
Instead of giving out a particular case, we will discuss several ways through which anti-dumping law affect trade flow and eventually the economy. As some of these ways have already been well published in literature, others have been less exposed.
First, anti-dumping protection gives rise to trade diversion. This signifies that anti-dumping protection result in a shift in trade for the economy of origin. Most countries have experienced cases where an affirmative anti-dumping case against a named nation leads to depressed exports from that nation to the benefit of exports from other not-named partners. Normally, the increased exports from not-named nations do not completely counterbalance the lost exports from the nation named. So, net exports to the nation enforcing AD measures are probably to be lesser than they were earlier before protection. Trade diversion results in an unfavourable impact on the aggregate exports to the nations imposing AD measures. Even launching a investigation imposes cost on firms thereby discouraging smooth trading. Cases where investigations were put to a stop, imports from the nations named for the investigation decreased by seventeen percent.
Second anti-dumping protection could lead to AD jumping and inward foreign direct investment. In this case, exporters might decide to establish a manufacturing plant in the protected market to avoid AD duties. Such can be a profitable plan, given that the formerly exporting company has a firm specific benefit that could be shifted across borders to beat the fixed price of establishing an additional company.
Additionally, AD protection could as well lead to creation of international cartels plus implicit collusion. Such an anticompetitive nature of AD laws might as well depress trade eventually affecting the entire economy. Besides, some exporter will be accused of some forms of unjustness. These accusations are legible to bring conflict in international relation, thus making the imposition of anti-dumping unbeneficial in the trade market.
Another impact is seen within the importing nation. The anti-dumping measures frequently include a conflict of interests between manufacturers and consumers of the imported good. Furthermore, there could also be clashes between the manufactures of the same product, with those firms that have outsourced portion of their production and hence have great import interest, more probably to reject measures.
The kind of economies greatly affected by anti-dumping policies are those that systematically apply the protectionist device. All of the latest tough users like brazil, India, Turkey, Taiwan and Mexico display great negative effects of anti-dumping, with the greatest impacts reported in Mexico. The yearly imports in that nation are depressed by about 7.4 billion U.S. dollars, compared to what they would have been without the anti-dumping practices. Generally, latest tough users have their yearly imports depressed by nearly 6.7 percent because of the protection. A lot of latest weak users never imposed any measure during the sample period. Amongst those who imposed AD laws, like China, Venezuela and Egypt showed the greatest effects.
In relation to the ancient users, we approximate two different effects of anti-dumping on trade; a direct effect and a reputation impact. The difference between ancient tough users and the ancient weak users enables us to quantify a reputation impact accrued by the repetitive application of anti-dumping practices. An effect like a priori is anticipated to be available for the ancient tough users but not for ancient weak users. In 2000, the ancient tough users like EU, Canada, Australia, the U.S. and New Zealand, underwent an additional trade loss over the preceding period of 0.6 percent, for imposing AD law for an additional year.
The new AD measures by ancient tough users also depress trade on top of the reputation effect. The measure of the anti-dumping they place against all tough users lead to an average trade loss of about 3 percent of their yearly imports from other tough users. The united states has experienced the impact of this trade loss, which is twenty billion dollars. On the other hand, the group of ancient weak users, display little evidence of a reputation effect, though their recent AD measures have trade depressing impact between zero and 11.5 percent, depending on the nation being considered.
These trade impacts are quite huge. Their significance could be better appreciated when someone considers that they refer to aggregate trade flows and not just to the two to five percent of trade flows directly affected by anti-dumping. In such sense, it is safe to report that anti-dumping has a solid chilling effect on imported goods. For certain nations, additionally, the trade losses emanating from anti-dumping practices seriously counterbalance the benefits from trade liberalization. India is taken as a major example. It begun liberalizing in 1991, which resulted in an 11.9 percent rise in its imported products. Though India has had an anti-dumping policy in force since 1985, it enforced its initial AD measure in 1993, as a result of AD actions it also underwent a 7.8 percent yearly loss in imports. Such confirms the say that anti-dumping actions can greatly prevent the benefits from trade liberalization- in India’s case, reducing the overall benefits from trade liberalization to only 4.1 percent.