If a company exports a product at
a price lower than the price it normally charges on its own home market, it is
said to be “dumping” the product. Opinions differ as to whether or not this is
unfair competition, but many governments take action against dumping in order
to defend their domestic industries. The WTO agreement does not pass judgment.
Its focus is on how governments can or cannot react to dumping—it disciplines
anti-dumping actions, and it is often called the “Anti-Dumping Agreement”.
(This focuses only on the reaction to dumping contrasts with the approach of
the Subsidies and Countervailing Measures Agreement.)
definitions are more precise, but broadly speaking the WTO agreement allows
governments to act against dumping where there is genuine (“material”) injury
to the competing domestic industry. In order to do that the government has to
be able to show that dumping is taking place, calculate the extent of dumping
(how much lower the export price is compared to the exporter’s home market
price), and show that the dumping is causing injury or threatening to do so.
Definitions and degrees of dumping
GATT (Article VI) allows
countries to take action against dumping. The Anti-Dumping Agreement clarifies
and expands Article VI, and the two operate together. They allow countries to
act in a way that would normally break the GATT principles of binding a tariff
and not discriminating between trading partners—typically anti-dumping action
means charging extra import duty on the particular product from the particular
exporting country in order to bring its price closer to the “normal value” or
to remove the injury to domestic industry in the importing country.
There are many
different ways of calculating whether a particular product is being dumped
heavily or only lightly. The agreement narrows down the range of possible
options. It provides three methods to calculate a product’s “normal value”. The
main one is based on the price in the exporter’s domestic market. When this
cannot be used, two alternatives are available—the price charged by the
exporter in another country, or a calculation based on the combination of the
exporter’s production costs, other expenses and normal profit margins. And the
agreement also specifies how a fair comparison can be made between the export
price and what would be a normal price.
extent of dumping on a product is not enough. Anti-dumping measures can only be
applied if the dumping is hurting the industry in the importing country.
Therefore, a detailed investigation has to be conducted according to specified
rules first. The investigation must evaluate all relevant economic factors that
have a bearing on the state of the industry in question. If the investigation
shows dumping is taking place and domestic industry is being hurt, the
exporting company can undertake to raise its price to an agreed level in order
to avoid anti-dumping import duty.
Procedures in investigation and litigation
Detailed procedures are set out
on how anti-dumping cases are to be initiated, how the investigations are to be
conducted, and the conditions for ensuring that all interested parties are
given an opportunity to present evidence. Anti-dumping measures must expire
five years after the date of imposition, unless a review shows that ending the
measure would lead to injury.
investigations are to end immediately in cases where the authorities determine
that the margin of dumping is insignificantly small (defined as less than 2% of
the export price of the product). Other conditions are also set. For example,
the investigations also have to end if the volume of dumped imports is
negligible (i.e. if the volume from one country is less than 3% of total
imports of that product—although investigations can proceed if several countries,
each supplying less than 3% of the imports, together account for 7% or more of
total imports). The agreement says member countries must inform the Committee
on Anti-Dumping Practices about all preliminary and final anti-dumping actions,
promptly and in detail. They must also report on all investigations twice a
year. When differences arise, members are encouraged to consult each other.
They can also use the WTO’s dispute settlement procedure.