meaning of dumping

8/13/2019 Meaning of Dumping

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MEANING

Dumping is said to occur when goods areexported by a country to another country at a

price lower than its normal value.

This is an unfair trade practice which can

have a distortive effect on international trade.

To avoid these unfair practices antidumping

evolved.

Thus the purpose of antidumping duty is torectify the trade distortive effect of dumping

and re-establish fair trade.

And it provide relief to the domestic industrya ainst the in ur caused b dum in .


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ANTIDUMPING DUTIES

ANTIDUMPING duties nullify the effect of market distortionscreated due to unfair trade practices (dumping) Remedial innature Levied on the exporting country Antidumpingmeasures: Antidumping duty Price undertaking

JUSTIFICATIONS Material injury to domestic producers Longstart up period and high start-up costs Once these firms areforced out of the market as a result of dumping; difficult torestart Intention of dumping is to wipe out the domesticindustries and eventually acquire monopoly power in theforeign market


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Anti dumping law with reference to wto

and anti dumping agreement

WTO AND ANTI-DUMPING AGREEMENT The Agreement governsthe application of antidumping measures by Members of the WTOThe provisions of the Agreement were first negotiated during theKennedy Round (1967) of GATT negotiations The Agreement laysthe sunset provision The Agreement applies to trade in goods

only Rules for the conduct of anti-dumping investigations initiation of

cases, calculation of dumping margins, application of remedialmeasures, injury determinations, enforcement, reviews, duration ofthe measure and dispute settlement. Dispute settlement :strengthens the ability of national governments to challenge anti-

dumping actions by other member nations Public interestrequirement: Gains to the consumers from lower prices more thanoutweigh the losses suffered by the producers


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ANTI-DUMPING LAW IN INDIA

LEGAL FRAMEWORK Based on Article VI of GATT1994 Customs Tariff Act, 1975 - Sec 9A, 9B (asamended in 1995) Anti-Dumping Rules [CustomsTariff (Identification, Assessment and Collectionof Anti Dumping Duty on Dumped Articles and forDetermination of Injury) Rules,1995]Investigations and Recommendations by

Designated Authority, Ministry of CommerceImposition and Collection by Ministry of Finance.


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ANTI-DUMPING SCENARIO OF CHINA

Anti-dumping export ratio (ADER), defined as

economys share of anti-dumping cases in the

world divided by economys share in world

exports, If ADER>1, then that economy is

targeted more than its share in the exports.

Chinas ADER = 4. Also the ADERs of Korea,

India and South Africa are more than 1,


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DETERMINATION OF DUMPING

Difference between Normal Value and Export Price:Margin of dumping (% of export price) Normal Value :comparable price at which the goods under complaintare sold, in the ordinary course of trade, in the

domestic market of the exporting country If the normalvalue cannot be determined by means of domesticsales, following two alternative methods : Comparablerepresentative export price to an appropriate third

country Cost of production in the country of origin withreasonable addition for administrative, selling andgeneral costs and for profits


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Export Price

price paid or payable for the goods by the first

independent buyer Like Articles : The article

produced in India must either be identical to

the dumped goods in all respects or in the

absence of such an article, another article that

has characteristics closely resembling those

goods.


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INJURY TO THE DOMESTIC INDUSTRY

The Indian industry must be able to show that dumped imports arecausing or are threatening to cause material injury to the Indiandomestic industry Injury analysis can broadly be divided in twomajor areas: The Volume Effect : The Authority examines thevolume of the dumped imports, including the extent to which there

has been or is likely to be a significant increase in the volume ofdumped imports, either in absolute terms or in relation toproduction or consumption in India The Price Effect : Extent towhich the dumped imports are causing price depression orpreventing price increases for the goods which otherwise wouldhave occurred Causal Link : A causal link must exist between the

material injury being suffered by Indian industry and dumpedimports


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RELIEF TO THE DOMESTIC INDUSTRY

ANTI-DUMPING DUTIES

Non-cooperative exporters are required to pay theresiduary duty (highest of the co-operative exporters)Lesser Duty Rule: Government is obliged to restrict theanti-dumping duty to the lower of the two i.e. dumping

margin and the injury margin Injury Margin: Differencebetween the fair selling price due to the domesticindustry and the landed cost of the product underconsideration De Minimis Margins: Any exporter,whose margin of dumping is less than 2% of the export

price and the volume of the dumped imports arebelow 3% of the total imports, shall be excluded fromduties PRICE UNDERTAKINGS: Exporter concerned mustfurnish an undertaking to revise his price


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CONFLICT BETWEEN ANTI DUMPING

LAW AND COMPETITION LAW

Antidumping laws were initially enacted toaddress the situation of international pricepredation . They were considered as

extension of competition laws. Antidumpinglaws as they exist today do not seem to beconcerned with the issue of predatory pricing.They attach sanctions to every instance of

international price discrimination which canbe shown to cause injury to the domesticindustry.


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Objectives of competitive laws

Objectives of Competition laws are Promotion ofcompetition and prevention of anti-competitivepractices Protection and promotion of consumer

interest Achieving economic efficiencyGeographic/ regional integration Public interestCompetition advocacy

Objectives of Anti dumping laws Remedying the

injury to the domestic industry due to dumpingPublic interest Address predatory pricingConsumer welfare


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PRICE DISCRIMINATION

Under competition law, only the price

discrimination, which adversely affects

competition in markets and thus has negative

consumer welfare impact, is prohibited. Under

anti dumping law, every instance of price

discrimination is prohibited.


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EFFECT of antidumping ON

COMPETITION

From the economics point of view, there is noreason to support any anti-dumping law, sinceprice differentiation across markets is a perfectlyrational and legitimate profit-maximization

action. Domestic price discrimination normally isnot penalized. They do not afford effectiveassistance to the domestic industry they areintended to protect. They protect producers at

the expense of consumers, which results inhigher prices, lower quality products, lessconsumer choice and a general lowering of thestandard of living for the vast majority of people.


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Domestic producers can enlist the help ofgovernment to prevent foreign competition evenwhen there has been no dumping. They providegood for the minority i.e. producers at the

expense of the greatest number i.e. consumers.They reduce rather than enhance socialcooperation and harmony. They redistributeincome in the wrong direction i.e. from the poor

and middle classes to the rich. Domesticproducers can raise their prices with little fear ofbeing underpriced by foreign suppliers.


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Thus existence of antidumping law hurts

competition both ways, by forcing exporters

to sell at higher prices and by providing the

domestic producers the freedom to chargehigher prices than what would be otherwise

possible.


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SHORTCOMINGS

Anti-dumping rules allow exporters to avoid

antidumping actions if exporters agree to raise

their prices. Such agreements are a means of

suspending ongoing anti-dumping cases andcan be used to promote anticompetitive

behavior.


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Under current anti-dumping rules, nationalauthorities are allowed to exercise enormousdiscretion. Since the criteria for determining theexport price and the normal value are neither

stringent nor specific, the importing country candetermine incidents of dumping at will. It canlead to the protection of inefficient domesticindustry. A firm is likely to be subject to an anti-

dumping investigation if it exports a product at aprice lower than the normal value in the homemarket, regardless of whether there is apredatory intent or not.

EFFECT OF ANTI DUMPING DUTIES ON TRADE


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EFFECT OF ANTI-DUMPING DUTIES ON TRADE

FLOW

A decline in the aggregate annual import of about 7%in the year 1993 from a growth of 17.4% in importsarising due to trade liberalization in 1992. In general,trade from the subject country is restricted when the

anti-dumping duties are levied. Right after the case isfiled and during the duration of investigation, importsdrop by a large amount (91%) from pre-petition level.by the next year after the case has been filed, importsstart going up again (rise by 53%). However, they never

again regain their pre-petition high.


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anti-dumping investigations have restrictiveimpact on imports from the subject Countries,other countries benefit by increasing their sales.This diversion of trade from subject to non-

subject countries can offset the restrictive effectsof anti-dumping. the existence of trade diversiondoes not necessarily imply that anti-dumpingduties have no effect at all on overall import

trade. Overall imports fall in response to anti-dumping duties, by a small but considerableamount.


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CONCLUSION

It can be agreed that overall the anti-dumping

policy of India helps to check unwanted imports

and hence might qualify as effective. Do little

when it comes to the trade diversion that takes

place during the initiation of an anti-dumping

case against a certain country Re-initiation andre-investigation on the potential similar imports

from a different country is time consuming


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THANK YOU

meaning of dumping

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