Friends of Anti-dumping Negotiations One

Friends of Anti-dumping Negotiations

One of the groups organized to push a point of view in the current WTO negotiations is the "Friends of Anti-dumping Negotiations."

Firms are said to "dump" goods when they sell them in a foreign country for less than they sell them in their own. The U.S., and increasingly other countries, have "anti-dumping" legislation to prevent this.

Anti-dumping is ripe for abuse. Dan Ikenson of the CATO Institute discussed the U.S. statute, here: "Antidumping: The Unfair, Unfair Trade Law":

"The antidumping law, perhaps the most arbitrary and disruptive U.S. trade barrier, is defended as a means of ensuring “fair” trade and maintaining a “level playing field” for domestic producers. Tough antidumping rules, its defenders claim, facilitate freer trade by providing assurances that “unfair” trade will be punished and thus deterred.

But that dubious justification is a smokescreen, pure and simple. The fact is that the antidumping law is protectionist, contradictory and unfair. Its overzealous application routinely punishes U.S. importers and foreign exporters who transact fairly, and ultimately undermines the administration’s broader trade agenda.

The Import Administration (IA) is part of the U.S. Department of Commerce. According to its Web site, the IA “[e]nforces laws and agreements to prevent unfairly traded imports and to safeguard jobs and the competitive strength of American industry.” It is a classic case of the fox watching over the henhouse. The IA’s concern for American industry extends only to those industries seeking to squelch foreign competition. The consequences for downstream producers and U.S. exporters are systematically ignored.

The IA’s methods of determining dumping are rigged in favor of protectionist outcomes, but are insulated from popular scrutiny by arcane and highly technical procedures. Indeed, most defenders of the law have no idea how it works in practice, but are simply attracted to its appealing rhetoric of “fair trade” and “level playing fields.” If it sounds good, it must be good.

Dumping is said to occur when an exporter’s prices in the United States are lower than those it charges for similar merchandise in its home market. Procedures for determining these price differences are not straightforward. They are subject to curious conditions and indefensible calculations, which are strictly the domain of the Import Administration."

For example,

"In virtually every case, all of the exporter’s U.S. sales are compared to only a higher-priced subset of its home-market sales (sales in its own country). Home-market sales priced below the average cost of production are simply disregarded. If an exporter sells five widgets in both the U.S. and the home-markets at prices of $1, $2, $3, $4, and $5, the average price in both markets is $3. No dumping, right? Wrong! If it costs $2.50 to produce these widgets, the home-market sales at $1 and $2 are dropped, causing the average home-market price to rise to $4 and generating a dumping margin of $1, or 33 percent. A tax of 33 percent would be slapped on future U.S. sales from that exporter. This procedure alone accounts for a significant portion of most dumping margins “calculated” by IA across industries, across countries, and over time. Yet, not a single antidumping defender could reasonably justify this so-called “cost test.”

Ikenson's column links to a more detailed report he co-authored, with Brink Lindsey, on the U.S. anti-dumping law and practice: "Antidumping 101: The Devilish Details of "Unfair Trade" Law". If you really want to get into the weeds, get Lindsey and Ikenson's Antidumping Exposed. The Devilish Details of Unfair Trade Law the book version of "Antidumping 101."

The WTO has rules (the Anti-dumping Agreement") on how countries can respond to instances of dumping. These rules are on the table during the current, Doha, round of negotiations.

The "Friends of Anti-dumping Negotiations" would like to see more controls introduced on anti-dumping legislation. The "Friends" includes Brazil, Canada, Japan, South Korea, Taiwan, Thailand, Singapore, Hong Kong, Mexico, Chile, Costa Rica, Israel, Norway, Switzerland, India and Columbia. (Bridges)

The United States is not one of the "Friends", and "remains in the opposite camp, considering the right to use anti-dumping measures to be a high priority in ongoing talks." (Bridges)

The "Friends" met in Geneva on January 18-20 to think through their negotiating plans for the coming year. The anti-dumping rule negoitiations are taking place within the WTO's "Negotiating Group on Rules". The next meeting of this negotiating group is on February 21-23. (Bridges)

Source: International Centre for Trade and Sustainable Development. " 'Friends' Group Meets on Anti-dumping to Prepare for Rules Talks." Bridges Weekly Trade News Digest January 26, 2005. Pages 10-11.