Some weeks ago the WTO reported that the number of new anti-dumping investigations initiated by its members increased by 17% in the latter half of 2008. This is complemented by the fact that actual impositions of new anti-dumping measures rose by 45%. This development is interesting, as well as indicative of other significant probabilities.

While it was found recently that protectionist measures do not seem to be increasing among WTO members (despite the unfortunate favor of "buy local" by the US and China), another probable rationale for the increased resort to trade remedy measures is that international trade activity could be starting to get additional vigor. Of course, the other reason could be that, despite the world’s seemingly cautious attitude toward commercial institutions, whether it be private or governmental, local, or international, the increase in anti-dumping cases is an expression of the country members’ continued trust in the WTO system.

The demographics of the increased number of anti-dumping cases are interesting as well. One hundred twenty new anti-dumping cases alone were started by a mere 15 WTO member countries in the subject period. The total number of new cases for last year is 208, a big increase from 2007’s 163. The context of this figure, however, is that at the height of the run-up to the launch of the present Doha Round of negotiations in 2001, 366 new investigations were made.

Another remarkable fact is that the big developing countries are leading the initiations. India takes pole with 42 new investigations in the second half of last year, followed by Brazil (16), China (11), and Turkey (10). The most popular targets are products from China (with 34 new proceedings). Product wise, the base metals sector has 43 investigations against it, chemicals (22), textiles (19), plastics and rubber (14).

That’s why the WTO’s 2009 World Trade Report is getting much discussion among trade law practitioners. Because ironically, according to the report, considering the increase of anti-dumping cases, dumping apparently is good for the importing country:

"What are the effects of dumping on the economic welfare of the importing country? Economic theory suggests that, with the possible exception of predatory dumping, all other instances of dumping either increase, or at worst, have an ambiguous effect on, the economic welfare of the importing country. Of course, for the most part, economic literature has treated dumping as an example of the exercise of market power. But within this context of imperfectly competitive markets, dumping may increase efficiency in resource allocation. In most circumstances, the welfare of the importing country increases as a result of dumping, as consumers and users of the product benefit from lower import prices, even though the reason for the reduction in price (the dumping) may vary."

I’ve always understood that dumping cases are to be dealt with warily. In instances where there seems to be harm to a domestic industry that produce goods similar to that being dumped, the effect of low prices normally associated with dumping has been found to be to the benefit of consumers and end-users of such products. The World Trade Report does make an exception analysis with regard to "predatory dumping." Thus, the "exception to this general conclusion that dumping is beneficial to the importing country is the case of successful predatory dumping. Domestic consumers and other users of the dumped product may benefit from low prices during the initial stage of dumping, but they will face higher prices in the future when the foreign producer acquires monopoly power in the domestic market. If predatory dumping is successful, i.e., the foreign firm’s discounted profits from dumping exceed its profits in the no-dumping scenario, consumers will be worse off as initially low prices do not compensate for the higher prices later on."

However, it must also be said that the extent — and even the existence — of the benefits assumed to go to the "predator" is questionable. Certain economists doubt the chances for success of predation, citing the tendency of those so engaged to collude in raising prices after their competitors have been eased out of the market. This would then result in the difficulty of keeping out new competitors due to the raised prices.

Even considering instances of "innocent" sales below costs, such as when prices are lowered due to the increase in production experience, it has been demonstrated that overall welfare is actually improved. Indeed, whether even dumping is actually "unfair" is disputable due to the inability of those invoking it to differentiate the effects between losses caused by non- predatory dumping and that caused by non-dumped low priced imports.

In any event, it is the reality that consumer groups tend to be not as well organized as industry lobbyists and labor unions, which leads perhaps to the truth of the report’s categorizing "anti-dumping" measures as a mere "safety valve to let off protectionist steam."

So, dumping is good for you after all.

By Jemy Gatdula
Contact: jemygatdula@yahoo.com. Visit my blog at www.jemygatdula.blogspot.com

Source: www.bworldonline.com