Klitgaard and Schiele

Antidumping

• Trends– More developing countries are using

antidumping measures now.– The U.S.A. is increasingly targeted.

Reductions in tariffs

• Uruguay Round (1994)– tariffs on manufactured goods 1/3 by 1999– upper bounds on 99% of goods imported by developed

countries, 70% of goods imported by developing countries– eliminates quotas and other non-tariff barriers on many goods– eliminates VERs by 1999

• NAFTA (1994)– eliminates most tariffs by 2000– by 1997, ave. Mexican import tariff on US goods was 2.9%; US

tariff on Mexican goods 0.8%• Information Technology Agreement (1997)

– eliminates customs duties on computers and telecommunications equipment

– affects 10% of world trade

Arguments for Antidumping Actions

• protects domestic producers from unfair pricing strategies by foreign firms

• “benign form of protection”

• less distortionary than quotas

• only some foreign firms are targeted: other low-priced imports may be available

Arguments against Antidumping Actions

• raises prices

• may hurt export-oriented domestic firms if retaliation occurs

• may be abused

• even an implied threat may induce foreign producers to raise their prices

Theory

• Proponents claim that foreign firms will price predatorily to drive out competition, then raise prices to make up their losses.

• But it is unlikely that they will be able to raise prices high enough, long enough.– entry

Implementation

• U.S. industry files petition

• International Trade Administration determines whether the price is unfairly lo

• International Trade Commission determines whther the domestic industry is injured

Firm files petition

ITApreliminary

finding

ITCpreliminary

finding

both yes

deposit tariffs in escrow

finaldecision

yes

final decision

no

pay tariffs or raise prices deposited tariffs refunded

Implementation

• compare price in foreign producer’s own market to price in USA– but prices may differ from one market to

another depending on supply and demand

• If the foreign firm does not supply price information, the ITA uses “best information available”, supplied by US firms

• compare price to costs: loss indicates dumping

Implementation

• poor standards for interpreting “injury”

• “material harm”

• less strict than antitrust requirement

• most injury claims are accepted

• 1990-1997, 12% rejection rate at preliminary investigation, 17% at final investigation

Alternatives

• antitrust laws

• safeguard– limited to four years (usually)– requires proof of serious injury– more transparent– includes compensation (Italian wine vs. pasta)

conclusions

• Antidumping has been used as a substitute for other barriers to trade that have been eliminated.

• There are better alternatives.