Andean&Mercosur Common MarketsPriscilla CarrinSeptember 12, 2013

Financial Services Dumping

In economics, dumping is the practice of selling a product abroad for less than the cost of production, the price in the home market, or the price to third countries. In international trade, dumping can be greatly detrimental to the country receiving the exports, as the products being of lower costs hurt local producers. Furthermore, dumping can often be related to low quality products or unfair production conditions.

In this case, financial services dumping is the unfair competition caused by a nations low requirements for bank capital assets ratios. These requirements are put into place to ensure that these institutions are not participating or holding investments that increase the risk of default and that they have enough capital to sustain operating losses while still honoring withdrawals.

An example of this can be the case of a country that in order of increasing more FDI makes easier the entering of multinational companies in the country. One of the measures that can use is the diminished of capital requirements, having a dramatically increased on FDI. But it can be considered as financial services dumping, since they are creating an unfair competition for the rest of the world.

In the information bellow you will find a recent case of financial services dumping that happened between the European Union and China at the beginning of this year.

Fresh accusations in China dumping case

European solar glass manufacturers have accused their Chinese competitors of dumping, opening a new front in an ongoing EU-China trade fight over renewable energy.

A group of EU companies have filed a formal complaint with the European commission, the EUs executive arm, in which they allege that Chinese manufacturers have sold their products well below cost in Europe in order to steal market share.

The European companies, under the name EU ProSun Glass, are seeking tariffs of more than 100 per cent on imported Chinese solar glass a thin film just a few millimetres thick that covers rows of solar cells. It requires higher levels of purity than typical window glass.

The solar industry is already the source of the EUs biggest ever trade investigation afterBrussels launched a probein November of Chinese cells and panels,roiling relationsbetween the two sides.

Commission investigators are currently in China, searching for evidence to substantiate claims that solar panel manufactures received illegal subsides from Beijing and then dumped their products in Europe. Chinese solar panel exports to the EU amounted to 21bn in 2011.

China is so intent on trying to dominate the entire solar industry that it is not only hitting the core, but also complementary products, said Ulrich Frei, managing director of Interfloat, a Lichtenstein-based solar glass manufacturer that operates in Germany.

EU ProSun Glass believes the lower prices were enabled, in part, by the provision of subsidized electricity, which accounts for about one-third of solar glass production costs. Its members are expected to expand the complaint in the weeks ahead to include allegations of illegal subsidies.Under EU rules, the commission must now determine whether there is sufficient evidence to open a formal investigation. (Joshua , 2013)

Sources

Joshua , C. (4 de February de 2013). Financial Times. Recuperado el 12 de September de 2013, de Fresh accusations in China dumping case: http://www.ft.com/cms/s/0/caf2b486-6eb9-11e2-8189-00144feab49a.html#axzz2ehSouiwh