Page 274 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

International Trade and Finance

Notes • The export price is less than the price charged for the same product in the exporting country, or
• It is sold for less than its cost of production
In order to do that, the government has to be able to show that dumping is taking place, calculate the
extent of dumping (how much lower the export price is compared to the exporter’s home market
price), and show that dumping is causing injury or threatening to do so. Typically, anti-dumping
action means charging extra import duty on the particular product from the particular exporting
country in order to bring its price closer to the ‘normal value’ or to remove the injury to domestic
industry in the importing country.
There are many ways of calculating whether a particular product is being dumped heavily or only
lightly. The agreement narrows down the range of possible options. It provides three methods to
calculate a product’s ‘normal value’. The main method is based on the price in the exporter’s domestic
market. When this cannot be used, two alternatives are available—the price charged by the exporter
in another country, or a calculation based on the combination of the exporter’s production costs,
other expenses, and normal profit margins. And the agreement also specifies how a fair comparison
can be made between the export price and what would be a normal price.
Anti-dumping measures can only be applied if dumping is hurting the industry in the importing
country. Therefore, a detailed investigation has to be conducted according to specified rules first. The
investigation must evaluate all relevant economic factors that have a bearing on the state of the
industry in question. If the investigation shows dumping is taking place and domestic industry is
being hurt, the exporting company can undertake to raise its price to an agreed level in order to avoid
anti-dumping import duty.
Detailed procedures are set out on how anti-dumping cases are to be initiated, how the investigations
are to be conducted, and on conditions for ensuring that all interested parties are given an opportunity
to present evidence. Anti-dumping measures must expire five years after the date of imposition,
unless an investigation shows that ending the measure would lead to injury.
Anti-dumping investigations are to end immediately in cases where the authorities determine that
the margin of dumping is insignificantly small (defined as less than 2 per cent of the export price of
the product.) Besides, the investigations also have to end if the volume of dumped imports is negligible,
i.e., if the volume from one country is less than 3 per cent of total imports of that product, although
investigations can proceed if several countries, each supplying less than 3 per cent of the imports,
together account for 7 per cent or more of total imports.
Member countries are required to inform the committee on anti-dumping practices about all
preliminary and final anti-dumping actions, promptly and in detail. When differences arise, members
may consult each other and use the WTO’s dispute settlement procedure.
India has been the leading user of anti-dumping measures in the world (Fig.2) followed by the US,
the European Community, Argentina, South Africa, Australia, Canada, Brazil, China, and Turkey.
Emergency Protection from Imports
A WTO member may restrict import of a product temporarily (take ‘safeguard’ actions) if its domestic
industry is seriously injured or threatened with injury caused by a surge in imports. Safeguard measures
were always available under GATT (Article 19); however, they were infrequently used. A number of
countries preferred to protect their domestic industries through ‘grey area’ measures—using bilateral
negotiations outside GATT’s auspices. They also persuaded exporting countries to restrain exports
‘voluntarily’ or to agree to other means of sharing markets. Agreements of this kind were reached at for
a wide range of products among countries, e.g., automobiles, steel, and semiconductors.
The WTO agreements on safeguards prohibit ‘grey-area’ measures, and it set time limits (a sunset
clause) on all safeguard actions. The agreement says members must not seek, take, or maintain any
Voluntary Export Restraints (VERs), Orderly Marketing Arrangements (OMAs), or any other similar
measure on the export or the import side. The bilateral measures that were not modified to conform
with the agreement were phased out at the end of 1998. Countries were allowed to keep one of these
measures an extra year (until the end of 1999), but only the European Union—for restrictions on
imports of cars from Japan—made use of this provision.

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