Anti-Dumping Argument and Restricting Imports?
What is the Anti-Dumping Argument for Restricting Imports?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
What is the Anti-Dumping Argument for Restricting Imports?
Dumping refers to selling goods below their cost of production. Anti-dumping laws block imports that are sold below the cost of production by imposing tariffs that increase the price of these imports to reflect their cost of production.
Since dumping is not allowed under World Trade Organization (WTO) rules, nations that believe they are on the receiving end of dumped goods can file a complaint with the WTO. During recessions, case filings increase. During economic booms, case filings go down. Individual countries have also frequently started their own anti-dumping investigations. The U.S. government has dozens of anti-dumping orders in place from past investigations.
Back to: ECONOMIC ANALYSIS & MONETARY POLICY
Why Might Dumping Occur?
The innocent explanation is that demand and supply set market prices, not the cost of production. Perhaps demand for a product shifts back to the left or supply shifts out to the right, which drives the market price to low levels—even below the cost of production. When a local store has a going-out-of-business sale, for example, it may sell goods at below the cost of production. If international companies find that there is excess supply of steel or computer chips or machine tools that is driving the market price down below their cost of production—this may be the market in action.
The sinister explanation is that dumping is part of a long-term strategy. Foreign firms sell goods at prices below the cost of production for a short period of time, and when they have driven out the domestic U.S. competition, they then raise prices. Economists sometimes call this scenario predatory pricing.
Should Anti-Dumping Cases Be Limited?
Anti-dumping cases pose two questions. How much sense do they make in economic theory? How much sense do they make as practical policy?
In terms of economic theory, the case for anti-dumping laws is weak. In a market governed by demand and supply, the government does not guarantee that firms will be able to make a profit. After all, low prices are difficult for producers, but benefit consumers. Moreover, although there are plenty of cases in which foreign producers have driven out domestic firms, there are zero documented cases in which the foreign producers then jacked up prices. Instead, foreign producers typically continue competing hard against each other and providing low prices to consumers. In short, it is difficult to find evidence of predatory pricing by foreign firms exporting to the United States.
Even if one could make a case that the government should sometimes enact anti-dumping rules in the short term, and then allow free trade to resume shortly thereafter, there is a growing concern that anti-dumping investigations often involve more politics than careful analysis. The U.S. Commerce Department is charged with calculating the appropriate “cost of production,” which can be as much an art as a science.
When a domestic industry complains loudly enough, government regulators seem very likely to find that unfair dumping has occurred. A common pattern has arisen where a domestic industry files an anti-dumping complaint, the governments meet and negotiate a reduction in imports, and then the domestic producers drop the anti-dumping suit. In such cases, anti-dumping cases often appear to be little more than a cover story for imposing tariffs or import quotas.
- Trade Balance: Surplus and Deficit
- J Curve
- National Trade Data Bank
- Capital Account (Economics)
- Merchandise Trade Balance
- Current Account
- Income Payments
- Is it better to have a trade surplus or a trade deficit?
- Heckscher-Ohlin Model
- Linder Hypothesis
- The Balance of Trade as a Balance of Payments
- Supply and Demand Sides for Financial Capital?
- Flow of Capital
- Domestic Saving and Investment Determine the Trade Balance
- National Savings Identity and Trade Deficits
- How the Business Cycle Affects Trade Balances
- Trade Balance or Trade Surplus
- Comparative Advantage
- Absolute Advantage
- Specialization and Gain from Trade
- Absolute Advantage in All Goods
- Production Possibilities Frontier and Comparative Advantage
- Comparative Advantage and Mutually Beneficial Trade
- Opportunity Costs and International Trade
- Splitting Up the Value Chain
- How Economies of Scale Lead to Trading Advantages
- Closed Economy
- Import Quotas
- Double Column Tariff
- Infant Industry Theory
- Anti-Dumping Laws
- Non-Tariff Barriers
- Effects of Trade Barriers
- Who Is Benefited and Who is Harmed by Protectionism?
- Infant Industry Theory for Restricting Imports
- What is the Anti-Dumping Argument for Restricting Imports?
- What is the Environmental Protection Argument for Restricting Imports?
- Unsafe Consumer Products Argument for Restricting Imports?
- What is the WTO?
- What is the GATT?
- What are Free Trade Agreements?
- North American Free Trade Agreement
- Central European Free Trade Agreement
- General Agreement on Free Tariff and Trade (GATT)
- Common Market
- Common Market for Eastern and Southern Africa
- Central American Common Market
- Caribbean Community and Common Market
- What are Economic Unions?
- International Monetary Fund
- World Economic Forum
- Inter-American Development Bank
- Davos World Economic Forum
- Chamber of Commerce
- Jackson Hole Economic Symposium