Dumping (pricing policy)

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(Redirected from Antidumping)

In economics, "dumping" can refer to any kind of predatory pricing, and is by most definitions a form of price discrimination. However, the word is now generally used only in the context of international trade law, where dumping is defined as the act of a manufacturer in one country exporting a product to another country at what some perceive as an unreasonably low price. The term has a negative connotation, but advocates of free markets see "dumping" as beneficial for consumers and believe that protectionism to prevent it would have net negative consequences. Advocates for workers and laborers however, believe that safeguarding businesses against predatory practices, such as dumping, help alleviate some of the harsher consequences of free trade between economies at different stages of development (see protectionism). The Bolkestein directive, for example, was accused in Europe of being a form of "social dumping," as it favored competition between workers, as exemplified by the Polish Plumber stereotype.

A standard technical definition of dumping is the act of charging an extraordinarily lower price for a good in a foreign market than one charges for the same good in a domestic market. This is often referred to as selling at less than " fair value." True dumping (by a technical definition) is actually very difficult under free trade, and is also made illegal by the WTO.

In the United States, domestic firms can file an antidumping suit under the regulations determined by the Department of Commerce and the International Trade Commission. These proceedings operate on a timetable governed by U.S. law. The Department of Commerce has regularly found that dumping occurs in U.S. markets. If the domestic industry is able to establish that it is being injured by the dumping, then antidumping duties are imposed on goods imported from the dumpers' country at a percentage rate calculated to counteract the dumping margin.

Related to antidumping duties are "countervailing duties." Like antidumping duties, countervailing duties attach to imported goods that are being sold at unreasonably low prices. The difference is that countervailing dutes seek to "countervail" export subsidies being granted in the exporting country rather than simply goods being sold by the foreign sellers at less than fair value.

As countries rule domestically on whether native industries are in danger, and whether foreign firms' prices are below the cost of production, and since the foreign cost of production cannot be easily known by domestic courts, the institutional process surrounding the investigation and determinations can be very unpredictable. Members to the World Trade Organization can file complaints against anti-dumping measures.

The Common Agricultural Policy of the European Union has often been accused of dumping though significant reforms were made as part of the Agreement on Agriculture at the Uruguay round of GATT negotiations in 1992 and in subsequent incremental reforms, notably the Luxembourg Agreement in 2003. Initially the CAP sought to increase European agricultural production and provide support to European farmers through a process of market intervention whereby a special fund - the European Agricultural Guidance and Guarantee Fund (EAGGF) - would buy up surplus agricultural produce if the price fell below a certain centrally determined level (the intervention level). Through this measure European farmers were given a 'guaranteed' price for their produce when sold in the European community. In addition to this internal measure a system of export reimbursements ensured that European produce sold outside of the European community would sell at or below world prices at no detriment to the European producer. This policy was heavily criticised as distorting world trade and since 1992 the policy has moved away from market intervention and towards direct payments to farmers regardless of production (a process of "decoupling"). Furthermore the payments are generally dependent on the farmer fulfilling certain environmental or animal welfare requirements so as to encourage responsible, sustainable farming in what is termed 'multifunctional' agricultural subsidies - that is, the social, environmental and other benefits from subsidies that do not include a simple increase in production.

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