The Economics of AntiDumping

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The Economics of Anti-Dumping

• Presentation by
• Dr. Adam McCarty
• for Ministry of Trade
• anti-dumping workshop

Continental Hotel, Ho Chi Minh City 9 December
2004
ASIAN LAW GROUP
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The presentation will cover five topics

• Definitions
• The Economic Logic
• The Political Logic
• International Trends in anti-dumping
• The Future for Vietnam

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1. Definitions

• The WTO Agreement on Anti-Dumping is very
  complex. It uses terms and concepts which have
  evolved over the course of a long usage of
  anti-dumping measures and which have specific
  connotations. Hence, one has to be very careful
  in interpreting them.
• (B.L.Das, 1999. p.206)

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What is it?

• Dumping is the export by an enterprise of a
  product at a price that is less than the normal
  value. The normal value is usually the price of
  that product in the exporting country in the
  ordinary course of trade. but not for
  non-market economies USA/EU policy.

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Three steps to determine dumping

• Determination of the export price
• Determination of the normal value, and
• Comparison of export price and normal value

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Normal Value

• Now it gets complicated
• Price in ordinary course of trade, but maybe
  none or rejected due to particular market
  situation. If rejected, use price of exports to
  an appropriate third country or construct based
  on production costs (of another exporting country
  if non-market economy!)

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2. The Economic Logic

• Not much
• Note dumping is by individual enterprises.
  General financial, income or price support from
  government is a subsidy that may provoke
  countervailing measures.

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Focus on fair trade not free trade

• unfair if strategic dumping (cheap exports,
  protected from imports) to achieve international
  economies of scale Japanese cars?
• unfair if predatory pricing to get long-run
  market shares very rare.
• Economically weak arguments.

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Measuring unfair trade

• Before import prices lower than the home market
  (strategic dumping)
• More frequently today import prices below the
  cost of production in the country of origin
  (predatory dumping).
• The second approach introduces complex discussion
  about real cost of production.

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But, but, but

• Why would an enterprise export at below the cost
  of production?
• In short-run to have long-run market share and
  charge higher prices. BUT requires a
  market-dominant position and barriers to entry
  for return of other exporters and domestic
  producers at lower prices.

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Economies of scale?

• Important to surprisingly few industries
  (vehicles and steel yes. catfish and shrimps
  no).
• Best achieved through increased investment, not
  by selling products at below cost of production
  (Bai Bang?).
• Comparative advantage is what matters.

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The winners and losers
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The economic logic

• is the weak excuse for a strong political
  logic
• Despite this fair trade face, the antidumping
  proceeding always has been and is increasingly a
  protectionist device, as various Congresses have
  amended the underlying statute to make the
  proceeding and remedy more effective. (K.W.Dam
  2001 148)

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3. The Political Logic

• antidumping is ordinary protection with a grand
  public relations program
• (J.Finger 1993 34)
• antidumping is the protectionists weapon of
  choice (K.W.Dam 2001 148)

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Dumping

• Uses emotive and misleading language.
• Is administered protection using legalistic
  proceedings and quasi-economics to confuse and
  justify old-fashioned industry protection.
• Is part of an increasing trend to use complex
  non-tariff barriers (NTBs) to trade as direct
  measures are phased out (tariffs and quotas).

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Why the need for complex NTBs?

• Because countries are a mix of conflicting
  interest groups (producers, workers, consumers)
• Antidumping is an NTB that allows one producer
  group to win protection, even while the overall
  national trade policy is moving towards free
  trade.
• Complex NTBs evade international and national
  criticism because they are complex!

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The political logic

• is the real explanation for antidumping actions
  - which explains why it is normally applied when
  narrow and organised producer groups have
  suffered from a sharp increase in lower-priced
  imports
• (e.g. Vietnamese catfish and shrimps to the USA)

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4. International Trends in antidumping
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Top 10 users of antidumping(measures in force)
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Top 10 targets of antidumping(measures in force)
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Antidumping initiations, 1995-2004 (note only
first 6 months of 2004)
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5. The Future for Vietnam

• 5.1 The trend
• 5.2 Defending
• 5.3 Attacking

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5.1 The trend

• A rising number of antidumping cases against
  Vietnam.
• The need for specialised Government officials and
  private sector legal and economic expertise to
  cope with the challenge.
• No logic in being cheap when defending export
  markets (within reason).

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5.2 Defending plan ahead act fast

• We can forecast industries at risk of AD
  actions and plan defences.
• The Government (and business groups) must be able
  to quickly mobilise enough funds and staff to
  deal with AD actions against Vietnam.
• Develop integrated defence strategies (e..g use
  sympathetic foreigners!)
• Keep pressure on removal of non-market status,
  etc.

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5.3 Attacking only if good for ALL Vietnam

• The initiation of AD actions should go through a
  Government-led formal analysis of net welfare
  impact on Vietnam.
• The central government must not let narrow
  business or provincial interest groups take the
  lead in using AD for protection.
• Public access and debate about particular AD
  arguments and research will help to ensure that
  consumers and civil society (mass organisations)
  have a say in the decisions.

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• Thank you.
• Adam McCarty
• Chief Economist
• Mekong Economics Ltd.
• adam_at_hn.vnn.vn

ASIAN LAW GROUP