Dumping and Antidumping
Professor Ralph Ossa
33501 International Commercial Policy
International Commercial Policy
Dumping and Antidumping
Introduction
The price a firm charges for a given good in the
domestic market is sometimes different from the price it
charges for the same good in an export market.
In general, the practice of charging different customers
different prices is referred to as price discrimination.
The most common form of price discrimination in
international trade is dumping, a pricing practice in
which a firm charges a lower price to foreign customers
than to domestic customers.
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International Commercial Policy
Dumping and Antidumping
Conditions for dumping
Notice that dumping can occur only if the following two
conditions are met:
(i) the industry must be imperfectly competitive so that
the firm is a price setter rather than a price taker,
(i) markets must be segmented in the sense that
domestic residents cannot easily purchase goods
intended for export.
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International Commercial Policy
Dumping and Antidumping
Reasons for dumping
While dumping is often equated with predatory pricing, it
usually occurs for less malicious reasons:
Firms often have less to fear from competitors in the
domestic market allowing them to charge higher prices
to domestic consumers.
This is because firms often have a more secure position
with domestic consumers.
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International Commercial Policy
Dumping and Antidumping
Antidumping in the U.S.
While domestic price discrimination is a relatively
uncontroversial practice (just think of the pricing of
airplane tickets), dumping is widely regarded as unfair
and therefore subject to special antidumping laws in the
U.S.:
The antidumping process is initiated when a domestic
industry, usually represented by an industry association,
files a petition with the Commerce Department and the
International Trade Commission.
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International Commercial Policy
Dumping and Antidumping
Antidumping in the U.S. (cont.)
The Commerce Department determines if dumping has
occurred and, if so, calculates the dumping margin.
Specifically, the Commerce Department ascertains
whether a foreign exporter made sales in the U.S. at
prices that are “less than fair value”.
The “fair value” is given by either (i) the price charged
by the foreign exporter in the home market, or (ii) the
price charged by the foreign exporter in third-country
markets, or (iii) by an estimate of what the price should
have been based on the cost of production plus
administrative expenses and a profit margin.
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International Commercial Policy
Dumping and Antidumping
Antidumping in the U.S. (cont.)
The International Trade Commission determines if the
domestic industry has suffered “material injury” as a
result of the less-than-fair-value imports, where material
injury means “harm which is not inconsequential,
immaterial or unimportant”.
While the Commerce Department almost always finds
dumping, the injury determination is a more difficult
hurdle for the domestic petitioner to clear because of
the injury standard itself and because the International
Trade Commission is a quasi-independent federal
agency.
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International Commercial Policy
Dumping and Antidumping
Antidumping in the U.S. (cont.)
If dumping is found to exist and the domestic industry is
deemed to have suffered material injury, antidumping
duties are imposed to artificially raise the import price to
its “fair value”.
Only a small fraction of U.S. imports (less than 1
percent) is covered by antidumping duties.
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International Commercial Policy
Dumping and Antidumping
Antidumping worldwide
Source: The Economist
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