Question

What is dumping? Can US companies succeed in getting tariffs imposed on imports by arguing for dumping? what method does US trade administration use to detect dumping? Why it is so difficult to detect whether dumping has truly occurred?

Answer 1

Dumping is when companies in a country lower their export selling rates in order to unfairly gain market share. They are lowering the price of the drug below what it will sell at home for. They might also drive the price below the actual cost of manufacturing. They raise the price until the market in the other nation has been eliminated.

Anti-dumping legislation prohibits goods that are priced below production costs by introducing tariffs that increase the price of these products to reflect their production costs. Given that dumping is not permitted under World Trade Organization (WTO) rules, nations that believe they are on the receiving end of dumped products that lodge a complaint with WTO. In recent years, anti-dumping lawsuits have risen from about 100 cases annually in the late 1980s to about 200 new cases annually by the late 2000s. Remember that cases involving dumping are countercyclical.

Case filings through during recessions. Case files go down during economic booms. In addition, different countries have also launched their own anti-dumping investigations. The United States government has in effect hundreds of anti-dumping orders from previous inquiries. For example, in 2009 some U.S. imports under anti-dumping orders included Turkey's pasta, Thailand's steel pipe fittings, Italy's pressurized plastic tape, India's preserved mushrooms and lined paper goods, and China's cut-to-length carbon steel and non-frozen apple juice concentrates.

US Antidumping Act of 1916- The Revenue Act of 1916 (hereinafter referred to as the "Antidumping Act of 1916") is U.S. law that dates back to 1916 and imposes penalties and imprisonment on parties engaged in dumping imports and sales with a view to harming the domestic industry in the United States. The legislation also requires dumping-injured parties to claim triple compensation for injuries sustained.

Zeroing- A procedure applied by the United States and the EU, in which goods are classified into many categories under investigation. Where goods of one sort have higher export prices than domestic prices, the gap is assumed to be "zero." This has the effect of raising the dumping margins artificially. The case of Indian cotton-type bed linen was the first time a panel had considered "zeroing" to be incoherent.

The International Trade Commission decides whether, as a result of imports of the dumped or subsidized goods, the domestic industry experiences material injury. The International Trade Commission considers all related economic factors, including production, revenue, market share, jobs and income for the domestic industry

The existence of price disparity between domestic and export markets typically suggests the presence of market manipulation in the home market, such as import barriers, a monopoly or cartel, or a combination of those factors that gives domestic producers the opportunity to sustain domestic prices at rates higher than export prices. In these circumstances, dumping is a process by which competitive outcomes are calculated, in turn by the distortion itself, not the relative competitiveness of the individual producers

In the short term, dumping allows covered companies to operate their facilities at higher utilization levels than would be economically viable in an open market, thereby giving them a major cost advantage unrelated to their competition in comparative costs. Dumping will, in the long term, discourage investment on the market where it occurs and, conversely, may well promote increased investment in the protected market. Over time, dumping will allow an initially less efficient (but protected and cartelized) industry to displace an equally or efficient rival, that is, not benefitting from a protected home market, through these dynamics.