Imposing Anti Dumping Measures – More Complex Than It Seems
1.
Introduction
The main idea behind imposing anti dumping measures is the counteracting of unfair
trade practices, especially unfair competition from foreign industries exporting their
goods at lower than market prices, submerging the domestic market with goods at
prices against which the domestic market cannot possibly compete. It is a protective
measure in favor of the domestic industry and a necessity for survival of the domestic
economy.
The “formula” for dumping is a priori very simple. According to the general
Agreements on Tariffs and Trade (GATT), a product is dumped when it is exported to
a foreign market at a price lower than sold locally, on the exporting country’s market.
Local prices are compared to the exported prices and when those differ by at least 2%,
the goods are considered being dumped. A sine qua non condition for imposing
antidumping duties is the existence of material injury to the domestic market and a
causal relation between the two.
However, beyond that rather straightforward definition of dumping there are many
other considerations taken into account in order for the anti dumping duties to be
imposed, or for filing an anti dumping complaint. Those considerations, not always
mentioned by the lawmaker or in textbooks, is the subject of this article.
As a preliminary, however, hereinafter is a review of the procedural considerations for
imposing anti dumping duties under Israeli legislation.
In order to bring the process in motion, the complainant must file an anti dumping
complaint with the Commissioner on Trade Duties, whose office is part of the Israeli
Ministry of Industry and Trade. Within 21 days, which can be extended to an
additional 30 days, the Commissioner examines the facts in order to determine
whether there is prima facie evidence of dumping. Such examination entails a review
of all the elements of dumping and goes beyond the mere calculation of the difference
between normal (i.e. the prices at which the product is sold on the exporting country’s
market) and the domestic value. The Commissioner’s initial review of the complaint
also examines whether the subject matter of the complaint, i.e. the exported goods, are
identical or similar to the ones manufactured locally, the existence of injury to the
local industry, which entails an analysis of domestic sales, market share, price of the
product on the domestic market, operational profits, effect on employment, and the
causal link between injury and dumping.
Upon completion of the investigation, the Commissioner writes a reasoned opinion on
whether the complaint warrants the initiation of an investigation. Such opinion may
be appealed before the Chairperson of the Advisory Committee.
A decision by the Commissioner to initiate an investigation brings about the second
step of the handling of an anti dumping complaint, which is the imposition of
provisional measures. Because such a decision has actual economical implication on
the exporting industry, it is more encompassing than the decision to initiate the
investigation, however, it is still based, as is the decision to initiate, on prima facie
evidence. Such decision can be appealed before the Chairperson of the Advisory
Committee, which in turn can be appealed before the District Court.
The third stage of the proceedings is the completion of the investigation and
publication of final findings. The Commissioner gathers additional evidence, verifies
such evidence and upon completion, submits his final findings to the Advisory
Committee. All parties then appear before the Advisory Committee, who shall submit
its findings and recommendations to the Minister of Industry and Trade.
Within 30 days after receiving the Advisory’s Committee’s recommendations, the
Minister of Industry and Trade has the authority to impose a duty as well as the level
of the duty, and may take into considerations other macro economic factors. He also
has to obtain approval of the Minister of Finance and the Finance Committee of the
Knesset.
The Minister's decision to impose a duty can be appealed at the District Court.
Special cases – Special considerations
2.
2.1
The Complainant is a monopoly
When the complainant is a monopoly, the considerations for imposing anti dumping
duties are more complex. The “unease” with monopolies stems from the fact that
they by definition quell the competition and thus may bring to a rise of the product
price on the domestic market, if there is no government supervision of prices. At first,
the import of identical or similar products at dumping prices on the local market
might seem as a blessing to consumers, finally allowing for competition and a
reduction of prices. However, one has to consider that such competition brought
about by dumping is not healthy competition bringing a benefit to the consumer, but
has the effect of ultimately crushing the domestic industry. Such effect is even
stronger when there is a sole producer on the market, which as a result of unfair
competition can be completely eliminated.
Whereas generally one of the concerns for imposing anti dumping duties is the need
to preserve the domestic producer so as to maintain the number of competitors on the
market, in the case of monopoly the concern is different, if not more substantial. The
concern is that if dumping goes “unpunished”, an entire industry may be eliminated,
causing the domestic market to be totally dependent on imports.
Another school of thought, however, which views a monopoly as a dinosaur, whose
dimensions are not fitting the modern, enlightened economy, might be more lenient
towards allowing import of dumped products. A government official who espouses
those ideas, is more likely to be sympathetic towards the exporting industry, therefore
less likely to impose anti dumping duties. He might offer a compromise by e.g.
restricting the amounts of dumped products to be allowed for import to a degree that
would not cause damage to the domestic monopoly, however, provide for “healthy”
competition. Because of the complexity of anti dumping proceedings initiated by
monopolies, there are very few actual complaints which have been lodged by
monopolies. One such case is a complaint lodged by the European Chemical Industry
Council on behalf of Rhone-Poulenc SA, the only European Community producer of
coumarin (Official Journal L 239, 07/10/1995). The complaint showed evidence of
dumping of coumarin originating from China and causing material injury. The EU
Commissioner considered the evidence sufficient to justify the initiation of a
proceeding, and the Advisory Commission, having reviewed the evidence, concluded
that it is in the interest of the Community to impose anti dumping measures. One of
the arguments of the Advisory Committee in this case in favor of imposing anti
dumping duties was to avoid the serious risk of having an entire domestic industry
shut down, making it entirely dependent upon imports.
Another complaint filed by a sole producer in the European Community market was
against imports of monosodium glutamate originating from Indonesia, Korea and
Taiwan. In this case, the Advisory Committee decided that there is enough
competition from non dumping exporters in order to preserve competition in the
domestic market, and warranted the imposition of anti dumping duties.
The case of monopolies is very particular indeed. Since the imposition of anti
dumping duties is effected in order to protect the domestic market’s interest, it can be
argued that allowing imports – even at lower than cost prices – would be beneficial to
the local economy. On the other side, allowing imports at dumping prices could very
possibly crush an entire domestic industry, leaving the market entirely dependent
upon foreign imports for a specific industry.
2.2
Effects of Filing an Anti Dumping Complaint
It might be beneficial for a domestic producer to file an anti dumping complaint, even
when the chances of actually obtaining relief are slim. The lodging of an anti
dumping complaint is a warning sign to the “dumper” that his days of dumping might
be counted. Instead of getting into lengthy and also costly proceedings, the exporter
at dumping prices might simply choose to cease its exports to the country from which
the complaint originated. Such is the case when the dumper is a large multinational
corporation, who can easily shift its exports to a different country. Operating in that
manner is probably more cost effective than continuing to export to the country from
where the complaint originates.
3.3
Macro Economic and Political Considerations
An antidumping complaint is in effect a complaint of an economic nature from one
country (or union of countries in the case of the EU) against another. It is in some
sorts a declaration of war, using economic sanctions as its weapon. Thus, government
authorities might in some cases be very reluctant to consider granting anti dumping
duties or even allowing the publication of the existence of dumping. The
Commissioner might be subject to enormous pressure, ranging from low to top
government officials which might be as high as the Minister of Industry and Trade.
Such pressure by the Minister might be exercised even at the level of the
Commissioner’s decision to publish his findings regarding his investigation of the
case. Although the Israeli anti dumping law only allows interference of the Minister at
the last instance, i.e. after review of the case by the Advisory Committee, in reality,
such intermeddling occurs already at very early stages of handling the complaint. The
Commissioner might be in a situation in which he wants to act but is hindered to do so
because of political pressure exercised on him. In such case, one might attempt to file
a complaint against the Commissioner with the High Court of Justice, claiming that he
is not acting in the line of his duties under the law. However, such complaint has very
low chances of succeeding since it will be difficult to prove any misconduct by the
Commissioner. A more effective strategy might be the enrolment of the press
denouncing undue interference by politicians and painting them as non-supportive of
the local economy. Ultimately, a positive outcome is most surely the result of
painstaking negotiations the complainant and the government officials.
3
Conclusion
This article gives only a glimpse of the complexity of anti dumping proceedings.
Where at first the procedure seems clear and simple, it is in effect a more complex
issue involving considerations such as favoring or not favoring a complete market
economy, some strategic “playing” by the complainant, who might get the desired
result even without obtaining the imposition of duties, as well as macro and political
considerations which might get in the way of imposing anti dumping duties.