It has been written by Shivangi Lal, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. It has been edited by Zigishu (Associate, LawSikho).
It has been published by Rachit Garg.
Table of Contents
Antidumping (AD) has risen to the forefront of international trade’s most contentious procedures in recent decades. Although politicians are open about their commitment to antidumping, economists and trade reformers have almost no affection for it. Antidumping has not been a big problem inside the World Bank or even between banks and the lending Governments in trade policy loans or programs wherein trade policy decisions are a substantial component. Antidumping has been handled in the majority of instances in accordance with the circumstances.
The literature on dumping in global trade has grown at an exponential rate during the last fifteen years. Politicians, economists, and lawyers have all thrown their weight into the current dumping argument with a fervour that is unusual even for a trade problem. As a consequence of the intensity of the debate, we are seeing an explosion of antidumping laws and the rise in antidumping actions in some of the advanced nations as well as some developing nations that are beginning to catch up to the latter.
During the 1980s, antidumping and CVD (countervailing duty) investigations skyrocketed. Between 1980 and 1989, the number of antidumping inquiries in the United States alone reached 451 and the number of (CVD) investigations reached 3015, while the bulk of inquiries focused on steel and lumber goods, even daily products were not spared”.
The table below summarizes that 1789 AD investigations were initiated in the United States, the European Union, Australia, and Canada between 1980 and 1989. When investigations within multiple methods of safety measures were taken into consideration, the figure grew significantly.
Dumping: What it is and how it occurs?
Mostly in the literature on the topic, dumping is described in a variety of ways. The idea of price discrimination in distinct markets, however, is central to all of these classifications. Jacob Viner defined dumping in 1922 as the practice of setting prices at a difference between national markets.
In Trade dumping occurs when goods are supplied for export at lower prices than they are sold domestically.” According to other writers: Dumping happens when a company sells comparable items in an export market for less than what it charges in its home market. It might also happen if the product’s export price is less than overall average expenses or marginal costs.
A product is considered to be dumped if its export value is below its actual levels, that really is, much less than sale of a similar product in the local market, as defined by Article VI of the GATT 1994. The premise looks to be straightforward. However, in state practice, determining export and domestic market prices, as well as comparing them, has proved to be anything other than straightforward.
A number of economists have questioned whether dumping occurs, and if so, under what conditions. Sporadic dumping, short-run or intermittent dumping, and long-term or continuous dumping are the three sorts of dumping circumstances identified by Jacob Viner.
It is necessary to occasionally dump items in order to dispose of surplus shocks in the near future. Intermittent or short-run dumping does not last continuously and is driven by various motives including entry into new markets, maintaining market share, and suppressing competitors.
In large-scale economies, long-term or continuous dumping is motivated by the need to attain or sustain full production. Only sporadic dumping is expected to cause harm to either the exporting or importing country. Short-term dumping does not necessarily harm either.
It is maintained that in order for dumping to occur,
(i) segmenting the markets is required so that exporters’ home markets are completely protected against secondary markets;
(ii) in order for an exporting firm to control the price in a particular market, it must acquire sufficient market power there,
(iii) Export markets are more elastic than domestic markets, which means sales are driven by cheaper prices.
The question then becomes whether such division is practicable on a global scale. “However, in reality, market segmentation will typically be the major essential condition for price dumping to occur,” it is said. The issue, therefore, becomes: Is international market segmentation?
The answer is yes for numerous goods and businesses. Differentiation of products, differences in pricing Product differentiation, taste differences, trade policies and regulatory regimes, varied product standards, and other factors all contribute to market segmentation. As a result, the trade environment will frequently be favourable to price dumping, both deliberate and inadvertent.
The municipal antidumping laws
Antidumping legislation has now been implemented in more than 40 nations. Antidumping measures were first instituted in Canada in 1904. Antidumping tax was created as an innovative solution to satisfy both manufacturers and farmers who sought higher customs duties and farmers who wanted reduced duties. New Zealand (1905), Australia (1906), and South Africa (1907) followed Canada (1914).
The Revenue Act of 1916, the first antidumping law in the United States, was created primarily to safeguard American industry against German cartels. The history of antidumping has been one of increasing sophistication and fine-tuning since then. Almost all of the nations named, including England, have since implemented new anti-dumping legislation.
It was difficult to prove “intent to damage or hurt” a US business. As a result, the Antidumping Act of 1921 dropped this unsettling notion in favour of the following:
“A special dumping duty would be imposed upon having found that a U.S. industry is being or is likely to be injured, or is being precluded from being established, as a result of the import and export of a class or kind of international goods that has been sold or is likely to be sold in the United States or elsewhere at less than its fair value.”
To reflect the modifications made by the Tokyo Round Anti-Dumping Code, US law was amended. (URAA adopts the Tokyo Code in defining what constitutes dumping.) If the export value is below the “similar price, in the regular course of commerce, for the equivalent goods” in the exporter’s home market, the commodity is dumped.)
Antidumping on the international plane
Even though the League of Nations performed research of dumping as early as 1922, antidumping was not controlled by international law till the creation of GATT in 1947. GATT Article VI “condemned” dumping yet did not make it illegal.
Antidumping was only challenged once by GATT in the 1950s. This was Italy’s response to Sweden’s antidumping decision over Italian nylon stockings. Various areas of antidumping, on the other hand, continued to pique GATT’s interest, with its expert groups studying them. However, it wasn’t until the Kennedy Round (1963) that anti-dumping proceedings were given serious consideration. At the time, there was a lot of worry about the US antidumping statute and how it was being applied.
The international anti-dumping regulations are set out in (a) GATT Article VI and (b) the World Trade Organization’s Anti-Dumping Agreement. The Anti-dumping Code of the Tokyo Round was updated through the Uruguay Round, creating the new Anti-dumping Agreement. In order to assess the damage to production and calculate dumping margins, the processes used in the Tokyo Round Anti-dumping Code were extremely technical and complex, thus an amendment was needed. Because the Code does not reflect the complexities of current international trade, a new amendment is necessary. The lack of information in the Code resulted in a lack of effective disciplines and encouraged the inclination to misuse the Anti-dumping provisions, necessitating a modification.
Antidumping is a private policy, not a state policy. Countervailing duty is a device that one contender can use against another — like marketing, product design, or price discounting. It is harnessing the power of the state to represent a personal interest: a method by which one contender can use the state’s power to gain a competitive edge over another competitor… The sole stipulation is that the beneficiary’s interest must be domestic, while the ostensible victims must be international.”
The Anti-dumping Committee (AD Committee) of the World Trade Organization (WTO) meets twice a year to discuss anti-dumping actions. The AD Committee’s responsibilities include reviewing countries’ anti-dumping implementation legislation for compliance with the Agreement, hearing reports on countries’ anti-dumping measures, and researching anti-dumping policies and practices. The AD Committee reports annually on the execution and administration of the AD Agreement to the Council for Trade in Goods, which is immediately subordinate to it.
Economists and trade advocates are concerned about the worrisome spike in the number of antidumping cases pursued by developed and developing nations. These issues have led to recommendations that antitrust principles be used in place of antidumping laws and regulations, or that safeguard mechanism under Article XIX of the GATT 1994 and the URSA be used instead. Neither proposition looks viable at this time in the evolution of international trade law. Furthermore, antidumping measures have become commonplace, and the global community regards them as the sole legal means of combating dumping as specified by and decided by law. Despite significant lobbying, neither local judicial systems nor treaty obligations have required a “economy-wide” cost-benefit analysis of the proposed anti-dumping measures.
Although the URAA(Uruguay round) has improved the discipline and made a lot of reforms, it cannot guarantee to have closed all loopholes for antidumping abuse. Federal agencies must implement a less commerce restrictive rule or practice if the URAA is silent, unclear, or allows for flexibility in establishing a regulation. The practice of voting in the ITC in the United States provides an example. In AD and CVD studies, a 3-3 vote reflects a positive decision. 150 It will be better to demand a strong majority rather than treating a vote that is equally divided as adequate to establish an injury finding.
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