Anti-Dumping

Antidumping law and practice- USA and China.

Among the trilogy of trade remedy regimes- countervailing duty, safeguard and antidumping actions- antidumping actions are by far the remedy of choice. It's a measure internationally adopted to stop unfair competition, regulate international market order and protect the security of the national industries. It's adopted by an increasing number of countries as it's playing an increasingly important role in international trade. It's perhaps the most controversial subject involving foreign trade. The United States is the world's biggest user of antidumping and has been for decades. China, on the other hand, has been the number-one target of antidumping by most countries for the past decade. The first dumping lawsuit against china came in 1979 when Europeans accused Chinese saccharin manufacturers of dumping.

If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be "dumping" the product. The WTO agreement does not pass judgment. Its focus is on how governments can or cannot react to dumping- it disciplines antidumping actions, and it is often called the "Antidumping Agreement" (The Agreement on Implementation of article VI of the General Agreement on Tariffs and Trade 1994). Antidumping refers to a legal system under which the government of a country investigates the dumping of imports and take corresponding antidumping measures in accordance with the law.

Broadly speaking, the WTO agreement allows governments to act against dumping where there is genuine ("material") injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping and show that the dumping is causing injury or threatening to do so. Typically, antidumping 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 different ways of calculating whether a particular product is being dumped. The agreement (AD Agreement) narrows down the range of possible options to three methods. The main one 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 combination of the exporter's production costs, other expenses and normal profit margin. The agreement also specifies how a fair comparison can be made between the export price and what would be a normal price. The AD agreement (Article 16) requires member countries (WTO members) to inform the Committee on Antidumping Practices about all preliminary and final antidumping actions, promptly and in detail. Member countries must also report on all investigations twice a year.

World Trade Organization makes statistics on antidumping initiations available to everybody visiting its website. According to the data on "AD initiations by exporting country" for period from January 1st 1995 to June 30th 2003 there were the total of 324 AD cases initiated against China and 122 against the United States. Which gives these countries first and third place, respectively. Republic of Korea takes second place with 174 antidumping cases initiated against it during a period of 8.5 years. It's interesting to mention that from 1999 to 2002 number of initiated cases against China has a growing tendency (41, 43, 53, 51 cases), while an inverse tendency for the U.S. (14, 13, 15, 12).

Antidumping has been called the "third rail of American trade politics" because politically powerful special interests enjoy the protection it provides. For years, American companies have taken advantage of the antidumping law to punish foreign firms that give American consumers a bargain.

In the U.S. the institutional responsibilities for determining "dumping" and "material" injury are in hands of two organizations: the International Trade Administration of the Department of Commerce (DC) and the U.S. International Trade Commission (ITC). The first of the two mentioned above makes determinations on whether or not "dumping" takes place. The ITC, on the other hand, is the body responsible for establishing the existence of actual or threatened material injury due to subsidized imports. The ITC's investigations are divided into a preliminary and a final phase. In the preliminary phase the ITC must determinate if there is a reasonable indication of injury. Inconclusive or incomplete evidence related to the key elements may support an affirmative preliminary finding of injury but not be adequate to support a final determination of injury. With regard to the material injury determination to be performed by the USITC, there are no clearly defined guidelines for what constitutes material injury to a US industry. In practice, the USITC's actions will largely be based on each commissioner's individual standard of what constitutes a material injury. Appeals lie to the court of International Trade from both DC and ITC decisions and then to the Court of Appeals for the Federal District.

The U.S. market share of Chinese made products has increased significantly in recent years and the US trade deficit with China has been growing as well. It's not possible to determine subsides in a non-market economy such as China, Chinese goods are not subject to countervailing duties. As a result, China increasingly has been the subject of US antidumping measures. And it's very likely that antidumping duties will remain an American weapon of choice against China in the future. American antidumping duty orders against China include: cotton shop towels, natural bristle paint brushes and brush heads, petroleum wax candles, silicon metal, paper clips, fresh garlic, honey, preserved mushrooms, folding metal tables and chairs, sulfanilic acid, industrial nitrocellulose etc. one argues that the high number of U.S. antidumping cases initiated against other countries (including China) doesn't necessary indicate that U.S. activity is particularly aggressive. The United States is a large country with large quantities of imports, and one would expect such a country to encounter dumping more frequently than a country with small quantities of imports.

The People's Republic of China faces enormous pressures as it adapts to the more open international trading system mandated by the WTO. With the elimination of most import quotas and the reduction of many tariffs and non-tariff