Dumping Strategy

TRADE
DUMPING
-NEHA SATISH & SHIVAM GUPTA
TRADE DUMPING
“THE SALE OF GOODS ABROAD AT A PRICE WHICH IS

LOWER THAN THE SELLING PRICE OF THE SAME
GOODS AT THE SAME TIME AND IN THE SAME
CIRCUMSTANCES AT HOME, TAKING ACCOUNT OF
DIFFERENCES IN TRANSPORT COSTS”
Haberler Viner’s
EXAMPLES:
1. FLAT PANEL DISPLAY SCREENS DUMPING BY
JAPANESE COMPANIES IN 1991
Following complaints by American businesses on the dumping of flat
panel display (FPD) screens by Japanese companies, the Commerce
Department ruled that Japanese companies were liable for the dumping
of the FPD screens in the U.S. market. Consequently, the ITC initiated an
investigation in early 1991, and the agency found that Japanese
companies dumped FPD screens, causing material damage to American
businesses. The ITC recommended a 62.5% anti-dumping duty on FPD
screens imported from Japan.

2. DUMPING OF STEEL BY CHINESE COMPANIES IN
2015
Large American steel producers filed complaints with the U.S.
Department of Commerce on the dumping of steel by Chinese companies
in U.S. markets. The American businesses complained that the large
imports of steel resulted in unfair competition since the imports were
unfairly low.
The ITC investigated the allegations on the recommendation of the
Commerce Department to find out if there was injury or threat to injury
on the domestic market. The agency found the Chinese companies guilty
of dumping steel products, and it caused material damage to the
American businesses. The ITC imposed a 500% import duty on select
steel imports from China to protect the domestic steel industry.
TRADE DUMPING
TYPES OF DUMPING
SPORADIC DUMPING PERSISTENT DUMPING PREDATORY DUMPING

It is adopted under exceptional or When a monopolist continuously sells The predatory dumping is one in which
unforeseen circumstances when the a portion of his commodity at a high a monopolist firm sells its commodity
domestic production of the commodity price in the domestic market and the at a very low price or at a loss in the
is more than the target or there are remaining output at a low price in the foreign market in order to drive out
unsold stocks of the commodity even foreign market, it is called persistent some competitors. But when the
after sales. In such a situation, the dumping. This is possible only if the competition ends, it raises the price of
producer sells the unsold stocks at a domestic demand for that commodity the commodity m the foreign market.
low price in the foreign market without is less elastic and the foreign demand Thus, the firm covers loss and if the
reducing the domestic price. is highly elastic. When costs fall demand in the foreign market is less
continuously along with increasing elastic, its profit may be more.
production, the producer does not
lower the price of the product more in
the domestic market because the
home demand is less elastic
TRADE DUMPING
OBJECTIVES
▸ To Find a Place in the Foreign Market
▸ To Sell Surplus Commodity
▸ Expansion of Industry
▸ New Trade Relations
EFFECTS OF DUMPING:
▸ Effects on Importing Country
▸ Effects on Exporting Country

TRADE DUMPING
ANTI-DUMPING MEASURES
▸ Tariff Duty : To stop dumping, the importing country

imposes tariff on the dumped commodity consequently,
the price of the importing commodity increases and the
fear of dumping ends. But it is necessary that the rate of
duty on imports should be equal to the difference
between the domestic price of the commodity and the
price of the dumped commodity. Generally, the tariff duty
is imposed more than this difference to end dumping, but
it is likely to have harmful effects on other imports.
TRADE DUMPING
▸ Import Quota: Import quota is another measure to stop dumping
under which a commodity of a specific volume or value is
allowed to be imported into the country. For this purpose, it
includes the imposition of a duty along with fixing quota, and
providing a limited amount of foreign exchange to the importers.
▸ Import Embargo: Import embargo is an important retaliatory

measure against dumping. According to this, the imports of
certain or all types of goods from the dumping country are
banned.
TRADE DUMPING
▸ Voluntary Export Restraint : To restrict dumping,

developed countries enter into bilateral agreements with
other countries from which they fear dumping of
commodities. These agreements ban the export of
specified commodities so that the exporting country may
not dump its commodities in other country. Such bilateral
VER agreements exist between India and EU countries in
exporting Indian textiles
TRADE DUMPING
THE ROLE OF THE WTO IN ANTI-DUMPING

▸ Most countries are members of the WTO. Member countries adhere to the principles laid out
during negotiations of the General Agreement on Tariffs and Trade. That was a multilateral trade
agreement that preceded the WTO. Countries agree that they won't dump and that they won't
enforce tariffs on any one industry or country. To install an anti-dumping duty, WTO members
must prove that dumping has occurred.The WTO is specific in its definition of dumping.
▸ First, a country must prove that dumping harmed its local industry.It must also show that the
price of the dumped import is much lower than the exporter's domestic price. The WTO asks for
three calculations of this price:
▸ The price in the exporter’s domestic market.

▸ The price charged by the exporter in another country.
▸ A calculation based on the exporter’s production costs, other expenses, and reasonable profit
margins.
▸ For example, the Canadian lumber dispute has been ongoing since 1982. In 2004, the WTO
ruled that the United States failed to prove Canadian lumber imports harmed the U.S. lumber
industry.
TRADE DUMPING
THE EU AND ANTI-DUMPING

▸ The EU enforces anti-dumping measures through its economic arm, the
European Commission. If a member country complains about dumping by a
non-member country to the EU, then the EC conducts a 15-month investigation.
Like the WTO, the EC must find that material harm has occurred to the industry.
▸ Unlike the WTO, the EC doesn't explicitly define dumping by using a formula to
determine that the price is lower than in the exporter's market. The EC must
find two other conditions before it imposes duties. First, it must find that
dumping is the cause of material harm. Second, it must find that the sanctions
don't violate the best interests of the EU as a whole.
▸ If found guilty, the exporter can offer to remedy the situation by agreeing to
sell at a minimum price. If the EC doesn't accept the offer, it can impose anti-
dumping duties. These can be in the form of an ad valorem tax, a product-
specific duty, or a minimum price.
TRADE DUMPING
PRICE DETERMINATION UNDER DUMPING

TRADE DUMPING
CASE STUDY : PROTECTING THE INDIAN STEEL INDUSTRY FROM CHINESE TRADE DUMPING
TRADE DUMPING
TRADE DUMPING
TRADE DUMPING
THANK YOU

Dumping Strategy

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TRADE

“THE SALE OF GOODS ABROAD AT A PRICE WHICH IS

SPORADIC DUMPING PERSISTENT DUMPING PREDATORY DUMPING

▸ To Sell Surplus Commodity

▸ New Trade Relations

▸ Effects on Exporting Country

▸ Tariff Duty : To stop dumping, the importing country

▸ Import Embargo: Import embargo is an important retaliatory

▸ Voluntary Export Restraint : To restrict dumping,

THE ROLE OF THE WTO IN ANTI-DUMPING

▸ The price in the exporter’s domestic market.

THE EU AND ANTI-DUMPING

PRICE DETERMINATION UNDER DUMPING

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