What is dumping?
- Dumping is the practice of selling a product in a foreign market at an unfairly low price (a price that is lower than the cost in the home market, or which is lower than the cost of production) in order to gain a competitive advantage over other suppliers.
- An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports when it believes that the goods are being “dumped” – through the low pricing – in the domestic market.
- Anti-dumping duty is imposed to protect local businesses and markets from unfair competition by foreign imports.
Ill effects of such duties
- While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
- In the long-term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods.
Dumping and World Trade Organization
- The World Trade Organization (WTO) plays a critical role in the regulation of anti-dumping measures.
- The WTO Anti-Dumping Agreement allows the government of the affected country to take legal action against the dumping country as long as there is evidence of genuine material injury to industries in the domestic market.
- The government must show that dumping took place, the extent of the dumping in terms of costs, and the injury or threat to cause injury to the domestic market.
- In other cases, the WTO intervenes to prevent anti-dumping measures.
What’s in the News?
- The U.S. Department of Commerce is preparing to tax aluminium sheet exporters from 18 countries after determining that they had benefited from subsidies and dumping.
- President Joe Biden’s administration determined that imports from Germany in particular ($287 million in 2019) benefited from dumping ranging from 40% to 242%.
- The same is true for aluminium alloy sheets from Bahrain ($241 million), which the administration said benefited from pricing below the cost of production or the local market of 83%. Imports from India ($123 million in 2019) have benefited from subsidies for 35% to 89%, according to the U.S. investigation.