Question

Case Study-2

International trade theories argue that nations should open their doors to trade Conventional free trade wisdom says that by trading with others, a country can offer its citizens a greater volume and selection of goods at cheaper prices than it could in the absence of it. Nevertheless, truly free trade still does not exist because national governments intervene. Despite the efforts of WTO (World Trade Organization) and smaller groups of nations, government seems to be crying foul in the trade game now more than ever before.

We see efforts at protectionism in the rising trends in governments charging foreign producers for "dumping" their goods on the world market. Worldwide, the number of anti-dumping cases that were initiated stood at about 150 in 2014, 225 in 2015, 230 in 2016, and 300 in 2017.

There is no shortage of similar examples. The US charges Brazil, Japan, and Russia with dumping their products in the US market as a way out of tough economic times. The US steel industry wants the government to slap a 200 percent tariff on certain types of steel. But car makers in US are not complaining, and General Motors even spoke out against the anti-dumping charges — as it is enjoying the benefits of low cost steel for the use in its auto production. Canadian steel makers followed the lead of the US and are pushing for anti-dumping actions against four nations.

Emerging markets too, are jumping into the fray. Mexico recently expanded coverage of its Automatic Import Advice System. The system requires importers (from a selected list of countries) to notify Mexican officials of the amount and price of the shipment 10 days prior to its expected arrivals in Mexico. The ten day notice gives domestic producers advance warning of incoming low priced products so they can complain of dumping before the product clear customs and enter the market place. India is also getting onboard by setting up a new government agency to handle anti-dumping cases.

Why dumping is on the rise for the first place? The WTO has made major inroads on the use of tariffs, slashing them across every product category in recent years. But the WTO does not have the authority to punish companies, but only governments. Thus the WTO cannot pass judgments against individual companies that are dumping their products in other markets. It can only pass the rulings against the governments of the country that imposes anti-dumping duty. But the WTO allows countries to retaliate against nations whose producers are suspected of dumping when it can be shown that:

i) The alleged offenders are significantly hurting the domestic producers.

ii) The export price is lower than the cost of production or lower than the home market price.

Supporters of anti-dumping tariff claim that they prevent dumpers from undercutting the price charged by the producers in a target market and driving them about of business. Another claim in support of anti-dumping is that it is an excellent way of retaining some protection against the potential dangers of totally free trade. Detractors of anti-dumping tariffs charge that once the tariffs are imposed they are rarely removed. They also claim that they cost companies and governments a great deal of time and money to file and argue their cases. It is argued that the fear of being charged with dumping causes international competitors to keep their price higher in the target market than would have otherwise be the case. This would allow domestic companies to charge higher prices and not loose market shares forcing consumers to pay more for their goods.

Required Question

Questions 01: Based on the above case study, evaluate the effects of dumping on domestic business and also on the consumers

Question 02: As we have seen WTO cannot currently get involved in punishing individual companies for dumping. Its action can be only directed towards governments of countries. Do you think this is a wise policy? Justify your answer.

Answer 1

Here I am going to describe the two cases such as :-

1) CASE1 - first time going to describe about the effects of dumping on domestic business and also on the consumers.

2) CASE2 - next I am going to describe about if the policy that WTO cannot currently get involved in punishing individual companies for dumping is the correct or voice policy.

CASE 1 :- dumping is that case when the prices of the product of the service is lower in the exporters foreign country then the exporters domestic country. exporter does this trick to get the more market share in the foreign market as they 10 to lower the sales price in the exporter country. according to this trick they would attract the consumer and will get the more market share coverage. This has some impact over the domestic business and consumer also. By dumping the goods trading partner's industry gets ruined and damaged. Also when maintaining the dumping trade it takes lots of money. Also it increases the retaliation by the trading partners. Consumer are also affected by the dumping as the domestic country would suffer.

CASE 2 - here I am going to describe if the policy of WTO not involving into the punishing individual companies for dumping but government can take action towards those countries is the correct and vice policy. WTO supports the anti dumping agreement it helps in the trading partner country to retaliate against the exporter country to make sure there is not dumping. Anti dumping agreement can be done when both the parties stick to the the adequate price and they can hence avoid the dumping. So this policy would be probability correct and wise.