Question

16. Vocabulary: antidumping duty, infant industry, countervailing duty, dumping, escape clause relief, fair value, subsidies.

Answer 1

1. Anti-dumping duty is a protective tariff which a country levies on foreign imports when it believes that the goods are being sold at a price below fair market price. The concept is coined from the process called dumping.i.e.a process in which a company exports a good at a price lower than it normally charges in the domestic country.

2. Infant industry argument is an economic rationale for trade protection. The focus of the argument is on the fact that nascent industries do not have economies of scale compared to the incumbents of other countries and that makes the competition one-sided and these entrants are discouraged to perform. hence, they seek protection from trade till they gain economies of scale similar to the incumbents.

3. Countervailing duty is also called anti-subsidy duty under the world trade organization rules, it neutralizes the negative impact of subsidies. It is imposed when investigation reveals that foreign country subsidizes its exports harming the domestic producers of the importing country. It is to maintain a level playing field which was inclined towards the country offering a subsidy to lower their prices.

4. Dumping is the process under which an industry exports a good at a lower price to the foreign country than charged in the domestic country.

5. escape clause relief is a provision in a contract that under certain circumstances, a party can withdraw from the agreement or change its conditions. For example, if an agreement was set for the sale of a house and the purchaser includes some kind of a clause which will allow him to escape from the contract without being liable for the breach of the contract.

6. Fair value is the rational and unbiased estimate of the potential market price, service or asset. It takes into account supply vs demand, acquisition and actual utility.

7. Subsidies are a form of financial aid extended to an economic sector with the aim of promoting economic and social policy. It is in the form of cash payment or tax reduction.