Protectionist anti-dumping procedures

Dumping occurs when a foreign country decides to off load stock to another country at well below the price they charge at home. While consumers may enjoy cheaper products, local industry may argue that the imports are being used to drive them out of business, and get monopoly power. The local industry usually asks for an anti-dumping tariff to be imposed on imports to help the locals compete.

With the disappearance of traditional barriers to trade, industrialized countries have increasingly resorted to anti-dumping procedures to artificially increase the price of cheap imports, notably from developing and low-wage countries. Phoney price comparisons are regularly made to justify protection of inefficient domestic industries. Little account is taken of rapidly moving exchange rates or the effects of recession. The hypocritical application of such double standards penalizes foreign suppliers for behaviour that is considered totally acceptable by domestic producers.

Anti-dumping tariffs are calculated to be the difference between the foreign (import) price and the imported good’s foreign market value, but this definition can change. How dumping is perceived is further complicated by whether or not a country is considered a “market” or a “non-market” economy. That is, whether prices reflect the global market (market) or are set by the government (non-market).

Such procedures are systematically employed by the EEC/EU, Canada, the USA, and increasingly Japan.

While dumping cases were often brought by the United States against Japan in the 1970s and 1980s, in this millennium it’s all about China. China was granted market economy status in 2016 (as a prerequisite to joining the WTO in 2001) so that trade barriers could be removed and prices and output from the country allocated by the market. In principle, this would allow resources to flow to their most productive use. The US and the European Union constantly reignite disputes about China subsidising steel production to deliberately oversupply the world market, although legal action not always taken. The dispute is whether China is a market economy status in name only, still using government regulations to set the price and quantity on world markets.