Last December, Malaysia's only newsprint maker, Malaysian Newsprint Industries, did what many companies would like to do when faced with what they see as unfair pricing by foreign competitors - it organised an anti-dumping action.

Subsequently, Malaysian government officials ruled in the firm's favour, hitting paper makers in Canada, Indonesia, the Philippines, South Korea and the US with provisional import duties of up to 42 percent.

Anti-dumping measures are permitted by the 1994 General Agreement on Tariffs and Trade. The World Trade Organisation (WTO) says dumping occurs when a company exports goods at below cost or more cheaply than it normally charges at home. Anti-dumping measures add import duty to the offending product to bring prices to levels deemed "normal value".It was a perfectly legal effort to protect a domestic industry, but it's also an example of a double standard - the world marches to the tune of free trade, but allows certain kinds of protectionism if they is dressed up properly.

The industries hit hardest around the world, according to WTO data, include base metals, chemicals, rubber and plastic goods, and textiles.

Anti-dumping actions are increasingly prevalent, partly as traditional tariffs fall, and because many of the countries targeted in the past have taken up the tactic themselves.

Once used largely by rich states to shield firms from cheaper foreign rivals, they are used increasingly now by emerging economies like India, Argentina and South Africa.

They threaten to undermine efforts to free up world trade. While the WTO negotiates a serpentine course towards reducing and abolishing tariffs, countries erect new barriers using anti-dumping measures.

India tops the WTO list, initiating 331 actions between 1995 and the end of last year. During the same period, the US and the European Union (EU), traditionally the most prolific instigators of anti-dumping actions, started 292 and 267 cases respectively.

Though countries formulate anti-dumping actions differently, a rising trend is evident. But it is by no means an even playing field. Richer states and multi-nationals can afford the legal and other costs of anti-dumping measures. Poorer ones are often too ill-funded to bring them.

Supporters defend the practice as essential protection against predatory price wars. Detractors say the wider costs to consumers, competitors and governments far outweigh the benefits.

Gary Horlick, a Washington-based trade lawyer, says dumping claims stem invariably from what he calls the worst form of protectionism. "There are gains (for) the people protected, but the costs exceed those gains by a substantial margin," he says, citing the example of Chile.

Santiago weaned itself off overdependence on copper by expanding exports of fruit, vegetables, wine and wood products, only to run into anti-dumping suits brought by newly found competitors in Europe and the US.

The future of anti-dumping actions may to a large extent lie in the hands of recent WTO entrant China. It has been the main target of suits, and if Beijing were to go on the offensive, the 26 actions it began in the 1995 to 2002 period could balloon to match the 308 it faced. Alternatively, it could pursue reform of the rules, drawing powerful allies in Japan, South Korea and a host of developing countries.

Martin Khor, the director of the Malaysia-based campaign group, Third World Network, says change could tackle the lack of compensation available for those targeted by bad-faith suits. Other reforms could produce a fairer dispute settlement system and a bar on immediate repeat cases by those who fail to prove their dumping claims.

More important for developing countries, says Khor, would be the inclusion of agriculture.

"The present laws in the WTO do not prevent dumping of agricultural products from the north to the south. That's a big weakness."

However, even basic reform will face tough vested interests in Brussels and Washington, according to Peter Guilford, a former European Commission trade expert turned lobbyist.

"Of course it's highly political," he says.

"The EU can only sell a world trade round to reluctant European companies in return for an understanding that anti-dumping policy will be sustained to keep local industry alive.

"That's the tacit trade-off that never speaks its name."

Source: Business Report