Understanding Dumping, Anti-Dumping, and Subsidies in International Trade

ØGATT (Article 6) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article 6, and the two operate together.

ØIf a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product.

ØIt provides three methods to calculate a product’s “normal value”:

1. the price in the exporter’s domestic market;
2. the price charged by the exporter in another country, or
3. a calculation based on the combination of the exporter’s production costs, other expenses, and normal profit margins.

ØThe WTO agreement allows governments to act against dumping, i.e. apply ADD, where there is genuine (“material”) injury to the competing domestic industry. ADD cannot be punitive or punishing.

ØAnti-dumping investigation must be conducted. Member countries must inform the Committee on Anti-Dumping Practices about all preliminary and final anti-dumping actions.

•Agreement on Subsidies and Countervailing Measures. It disciplines the use of subsidies, and it regulates the actions countries can take to counter the effects of subsidies. Country can use the WTO’s dispute settlement procedure to seek the withdrawal of the subsidy or the removal of its adverse effects OR launch its own investigation and ultimately charge extra duty (known as “countervailing duty”) on subsidized imports that are found to be hurting domestic producers.

•“Specific” subsidy — i.e. a subsidy available only to an enterprise, industry, group of enterprises, or group of industries in the country (or state, etc.) that gives the subsidy. Two categories of subsidies: prohibited and actionable. Prohibited subsidies: subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. Actionable subsidies: in this category, the complaining country has to show that the subsidy has an adverse effect on its interests. Otherwise, the subsidy is permitted.

ØGATT (Article 19). Agreement on Safeguards.

ØA WTO member may restrict imports of a product temporarily (take “safeguard” actions) if its domestic industry is seriously injured or threatened with injury caused by a surge in imports. Products are being fairly imported.

ØAn import “surge” justifying safeguard action can be a real increase in imports (an absolute increase); or it can be an increase in the imports’ share of a shrinking market, even if the import quantity has not increased (relative increase).

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