Import Dumping

Dumping happens when firms sell their products abroad in export markets at below costs or significantly below prices in the home market.

Article VI of the General Agreement on Tariffs and Trade (GATT) permits special anti-dumping duties that are equal to the difference between the import price and the normal value of the product in the exporting country (the “dumping margin”).

China’s steel industry is experiencing significant excess capacity and China has being accused of dumping its steel products in the EU, selling them for less than they are worth. This makes it harder for EU steel producers to compete

Anti-Dumping Tariffs

Anti-dumping tariffs are allowed under WTO rules when cases of dumping have been established

There are three main options when introducing an anti-dumping import duty

1. An ad valorem duty – a % of the net EU frontier price. This is the most common form of import duty.
2. A specific duty – a fixed value for a certain amount of goods, e.g. €100 per tonne of a product
3. A variable duty – a minimum import price (MIP). Importers in the EU do not pay an anti-dumping duty if the foreign exporter’s export price to the EU is higher than the MIP

The lesser-duty rule is that duties can’t exceed the level needed to repair the harm done to European industry by the unfair dumping practices – currently between 9-13% for a range of steel products imported into the EU from China

Evaluation on the use of anti-dumping import tariffs

If a company exports a product at a price lower than the price it normally charges on its domestic market, this is dumping.

There has been a sharp rise in the number of anti-dumping duties and investigations of dumping allegations

Evaluation:

1. May be hard to accurately measure the “normal” price at which a country produces for their domestic market
2. Price differences often the result of standard factors such as lower unit labour costs or a more competitive exchange rate
3. Issues such as labour standards in exporting country might also be considered as important as pure price differences
4. Difficult to assess the scale of the “material injury” caused by import dumping into a market / industry.
5. Anti-dumping import duties could hit many other related industries e.g. a tariff on steel increases costs for car makers