Dumping Essay

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Dumping   is  a  predatory   price  practice   generally used only in the context of international trade law as international price discrimination,  where a company exports  a product  at a lower price than  the price it normally charges on its domestic market or at a price that is below its own costs of production.  In this case, the product is considered to be a dumped product.

In general, one can define dumping  as the act of selling products  in a foreign market  at prices below the normal value in the country of the exporter  (i.e., the comparable  price for the like product  consumed in the exporting country or in third countries  as the case may be, in the ordinary course of trade), for the purpose of injuring competitors of the importing country,  thus  gaining market  share  and  securing  a monopoly in this market.

Under  World  Trade  Organization  (WTO)  rules VI—Anti-Dumping     Agreement—of     the     General Agreement  on Tariffs and Trade  1994 [GATT 1994]), dumping  is discouraged  and  countries  are authorized  to adopt  anti-dumping measures,  when dumping  and material  injury resulting  from  it has occurred  to  the  domestic  industry  producing  the like product  or  one  product  that  has  mainly  the same characteristics  of the imported  dumped product. All WTO Members have been required to bring their  laws into conformity  with the Anti-Dumping Agreement.  In fact, one can argue that  one of the major  achievements  of the  Anti-Dumping   Agreement has been the establishment  of relevant rules, at the international level, governing the determination of dumping, the initiation  and conduct  of dumping investigations, the imposition  of anti-dumping and provisional measures, and the duration  and review of these measures.

Looking at dumping practices, a number  of questions may arise, such as: Why do companies practice dumping?  What  are the  effects of dumping?  How can  you identify dumping?  When  can  anti-dumping measures be taken? The answer to the first question is simple. In a competitive global market where import duties are reduced, companies may intend to increase their market share, driving producers  from other  countries  out  of the  market  and thus  securing a monopoly.  Regarding the  effects of dumping practice, the most relevant one is that it disturbs the market that receives dumped products and may drive local producers out of business. There is a large body of literature  discussing the conditions  that facilitate the practice of dumping by companies.

One identifies dumping by comparing prices in the export and the import markets. As simple as this fair comparison  of prices may be at first glance, this procedure is very complex and requires an investigation conducted by the importing country to determine the normal  value price at the exporting  market  and the appropriate  price  in the  domestic  market.  For this purpose,  prices are compared  to those  transactions that are at the same level, in general at factory level, and as close as possible to the same time of the sales transaction  at stake.

Also, discriminatory  price by itself is not sufficient to authorize anti-dumping measures, according to the Anti-Dumping  Agreement. These measures can only be applied  when  dumped  exported  products  cause or threaten  damage to the domestic  industry  of the importing, like-product country and a material injury results therefrom.  The basic requirements for determination of injury are the volume and price effects of dumped imports and the impact of dumped imports on the domestic industry.

Anti-dumping measures  may  take  two  different forms: Anti-dumping duties  or  price  undertakings offered to  exporters  to  avoid anti-dumping duties. Anti-dumping measures are based on a detailed investigation conducted  by the import country. The investigation has to evaluate all relevant facts, not limited to  economic  aspects,  that  may prove  that  dumped price and material  injury occurred  therefrom,  such as: Significant increase in dumped  import  products, price undercutting by dumped  imports  compared  to the  price of like product  of the  importing  country, significant  increase  of volume  and  price  effects of dumped products, actual or potential declines in sales of like products in the importing country, increase of market share by dumping producer,  actual or potential  effects on  cash  flow, inventories,  employment, and wages of importing  country, significant margins of dumping and other factors that may be deemed relevant. Thus, anti-dumping measures can be imposed by the importing  country only after the investigation has determined that  the  dumping  is occurring,  the domestic  industry  is suffering material  injury  and, last but not least, there  is a causal link between the two: Dumping price and injury.

Factors other than dumped  products  that may be causing injury to the  domestic  industry  have to be excluded  by the  investigation  in order  to  establish the causal link between dumping products and material injury. Provisional anti-dumping measures  may be determined by the importing  country  as long as a preliminary determination of dumping, injury, and causality has been duly established  and after initiation of the investigation.

A country’s failure to respect the requirements of the Anti-Dumping  Agreement can be taken to the WTO Dispute  Settlement  Body and  may be the  basis for invalidation  of such anti-dumping measures.  Hence, with the WTO  rules, dumping  has been successfully discouraged, yet dumping practices still remain.


  1. Philip Bentley and Aubrey Silberston, AntiDumping and Countervailing Action: Limits  Imposed  by Economic and  Legal Theory (Edward Elgar, 2007);
  2. Meredith Crowley, Cyclical Dumping and  US  Antidumping Protection 1980–2001 (Federal Reserve Bank of Chicago, 2007), www.chicagofed.org (cited March 2009);
  3. Benjamin Eden, “Inefficient Trade Patterns: Excessive Trade, Crosshauling and Dumping,” Journal of International Economics (v.73/1, 2007);
  4. M. Hoekman and P. Mavroidis, “Dumping, Antidumping  and Antitrust,” Journal of World Trade (1996);
  5. Marceau, Anti-Dumping and Anti-Trust Issues in Free Trade Areas (Clarendon Press, 1994);
  6. Nicolaides, “The Competition Effects of Dumping,” Journal of World Trade (1990);
  7. Pangratis and  E. Vermulst,  “Injury in Anti-Dumping Proceedings: The Need to Look Beyond the Uruguay Round Results,” Journal of World Trade (1994);
  8. U. Petersmann, “International  Competition Rules for the GATT-MTO  World  Trade  and Legal System,” Journal of World Trade (1993).

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