Question

Case of Antidumping in Action Study

A GAME OF CHICKEN

When it comes to chicken, Americans prefer white meat. South Africans prefer dark meat. Sounds like the basis for mutually beneficial trade. And it would be, if it weren't for those pesky dumping laws.

U.S. chicken producers noticed the differences in demand. They began exporting dark-meat chicken to South Africa. This created extra competition for South African chicken producers, but South African consumers gained more than local producers lost. That's the way trade works. In addition, U.S. chicken producers were happy. The price they received for their dark-meat exports was somewhat higher than the price they could get in the United States. This added to their profitability.

South African chicken producers scratched back. They charged U.S. producers with dumping by exporting dark-meat chicken at a price less than production cost. This is an ideal situation for a biased antidumping authority because there is no one way to determine this production cost. (What comes first, the dark meat or the white?) In 2000, the South African government determined that the U.S. firm Tyson was dumping by a margin of 200 percent (its export price was only one-third of its estimated production cost) and Gold Kiss was dumping by an incredible 357 percent margin. Something is fowl in South Africa. Good-bye gains from trade.

WHAT'S SO SUPER ABOUT SUPERCOMPUTERS?

In 1996 the Japanese company NEC won the contract to supply a supercomputer to a university consortium funded by the U.S. National Science Foundation, to be used for weather forecasting. This was the first-ever sale of a Japanese supercomputer to an agency of the U.S. government. It seemed to be a major setback for Cray Research, then the major U.S. supercomputer maker. But Cray thought it saw unfair trade.

With encouragement from the U.S. Depart-ment of Commerce, Cray filed a dumping complaint. NEC guessed that it was not likely to win with the Department of Commerce also acting as the judge, and it refused to participate in the case. Based on information provided by Cray, the U.S. government imposed antidumping duties on NEC supercomputers at the super rate of 454 percent (and at the almost super rate of 173 percent for supercomputers from Fujitsu, the other major Japanese producer). With these antidumping duties in place, no one in the United States would be buying NEC or Fujitsu supercomputers.

Not so super for U.S. users of supercomputers. Or for anyone in the United States who wanted accurate weather forecasts. NEC supercomputers were simply the best in the world for this purpose.

There's one more twist in this wired tale. Hey, maybe it isn't dumping after all. In 2001, Cray was in financial trouble, and its technology was lagging. In exchange for a $25 million investment by NEC and a 10-year contract to be the exclusive distributor of NEC supercomputers in North America, Cray asked the Department of Commerce to end the antidumping duty.

How do you compare the rationales for exercising anti-dumping sanctions in these two very different cases?

Answer 1

Dumping happend in international trade when an exporter is selling in importing country at a price below "normal price/value". Normal price can be price in the domestic market of the exporting country, a third country or if these are not available a price based on cost of production, expenses and normal profits. For dumping proved, it has to be shown that export price is above "normal price" and it causes injury or threatens to cause injusry to busniess of domestic producers in importing countries.

In the two cases described, rationale in South Africa vs. USA case is clearly mentioned that US producers are exporting below their costs of production, which will be below "normal price/value". In teh USA vs. Japan case it is not clear what are the basis of the calim on dumping, however given the increase in prices it will have to be that exporters prices are less than "normal prices" as they appply to each exporter. IN both cases exporters are exporting their products at prices less than prices that should be normally charged for the product and are causing injusry to competing businesses of importing countries. Even though the cases are different, rationate for anti-dumping actions are similar.