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introduction

If a company exports a product at a price lower than the price it Normally charges in its own home market, or sells at a price that does not meet its full cost of production, it is said to be "dumping" the product. It is a sub part of the various forms of price discrimination and is classified as third degree price discrimination. Opinions differ as to whether or not such practice constitutes unfair competition, but many governments take action against dumping to protect domestic industry. The TO agreement

does not pass !udgment. Its focus is on how governments can or cannot react to dumping it disciplines anti"dumping actions, and it is often called the "anti"dumping agreement". The legal definitions are more precise, but broadly speaking, the TO agreement allows governments to act against dumping where there is genuine #"material"$ in!ury to the competing domestic industry. To do so, the government has to show that dumping is taking place, calculate the extent of dumping #how much lower the export price is compared to the exporter s home market price$, and show that the dumping is causing
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in!ury or threatening to cause in!ury

Definitions
hile permitted by the TO, &eneral 'greement on Tariffs and Trade #'rticle (I$ allows countries the option of taking action against dumping. The 'nti")umping 'greement clarifies and expands 'rticle (I, and the two operate together. They allow countries to act in a way that would normally break the &'TT principles of binding a tariff and not discriminating between trading partnersanti"dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the normal value or to remove the in!ury to domestic industry in the importing country. There are many different ways of calculating whether a particular product is being dumped heavily or only lightly. The agreement narrows down the range of possible options. It provides three methods to calculate a products normal value. The main one is based on the price in the exporters domestic market. hen this cannot

be used, two alternatives are available the price charged by the exporter in another country, or a calculation based on the combination of the exporters production costs, other expenses and normal profit margins. 'nd the agreement also specifies how a fair comparison can be made between the export price and what would be a normal price.

Five percent rule


'ccording to +ootnote * 'nti")umping 'greement, domestic sales of the like product are sufficient to base normal value on if they account for , per cent or more of the sales of the product under consideration to the importing country market. This is often called the"five"per"cent or home"market"viability test. This test is applied globally by comparing -uantity sold of like product on the domestic market with -uantity sold to importing market. Normal value cannot be based on the price in the exporter.s domestic market when there are no domestic sales. +or example, if the products are sold only for foreign market, the normal value will have to be determined on another basis. /esides, the products may be sold on both markets but the -uantity sold on the domestic market is small compared to -uantity sold on foreign market. This situation often happens in countries with small home market. 0arge market, however, may face the same situation while the like products are sold in significant on both markets1 some types of products are sold in larger -uantity on foreign market while other types are vice versa. This is because of differences in consumer tastes, maintenance, etc.. This leads to some exported types of
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products are sold in small -uantities on the domestic market. 3alculating the extent of dumping on a product is not enough. 'nti"dumping measures can only be applied if the dumping is hurting the industry in the importing country. Therefore, a detailed investigation has to be conducted according to specified rules first. The investigation must evaluate all relevant economic factors that have a bearing on the state of the industry in -uestion. If the investigation shows dumping is taking place and domestic industry is being hurt, the exporting company can undertake to raise its price to an agreed .level in order to avoid anti"dumping import duty.

ANTIDUMPING DUTIES
'NTI)567IN& duties nullify the effect of market distortions created due to unfair trade practices #dumping$ 8emedial in nature 0evied on the exporting country 'ntidumping measures9 'ntidumping duty 7rice undertaking

:5;TI+I3'TION; 6aterial in!ury to domestic producers 0ong start up period and high start"up costs Once these firms are forced out of the market as a result of dumping1 difficult to restart Intention of dumping is to wipe out the domestic industries and eventually ac-uire monopoly power in the foreign market

Anti dumping law with reference to wto and anti dumping agreement
TO 'N) 'NTI")567IN& '&8<<6<NT The

'greement governs the application of antidumping measures by 6embers of the TO The provisions of the

'greement were first negotiated during the =ennedy 8ound #%>?@$ of &'TT negotiations The 'greement lays the Asunset provisionB The 'greement applies to trade in goods only 8ules for the conduct of anti"dumping investigations initiation of cases, calculation of dumping margins, application of remedial measures, in!ury determinations, enforcement, reviews, duration of the measure and dispute settlement. )ispute settlement 9 strengthens the ability of national governments to challenge anti"dumping actions by other member nations A 7ublic interestB re-uirement9 &ains to the consumers from lower prices more than outweigh the losses suffered by the producers

ANTI-DUMPING LAW IN INDIA


0<&'0 +8'6< O8= /ased on 'rticle (I of &'TT %>>4 3ustoms Tariff 'ct, %>@, " ;ec >', >/ #as amended in %>>,$ 'nti")umping 8ules C3ustoms Tariff #Identification,

'ssessment and 3ollection of 'nti )umping )uty on )umped 'rticles and for )etermination of In!ury$ 8ules,%>>,D Investigations and 8ecommendations by )esignated 'uthority, 6inistry of 3ommerce Imposition

ANTI-DUMPING SCENARIO OF CHINA


'nti"dumping export ratio #')<8$, defined as economy.s share of anti"dumping cases in the world divided by economy.s share in world exports, If ')<8E%, then that economy is targeted more than its share in the exports. 3hina.s ')<8 F 4. 'lso the ')<8s of =orea, India and ;outh 'frica are more than %,

DETERMINATION OF DUMPING
)ifference between Normal (alue and <xport 7rice9 6argin of dumping #G of export price$ Normal (alue 9 comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country If the normal value cannot be determined by means of domestic sales, following two alternative methods 9 3omparable representative export price to an appropriate third country 3ost of production in the country of origin with reasonable addition for administrative, selling and general costs and for profits.

Export Price
price paid or payable for the goods by the first independent buyer 0ike 'rticles 9 The article produced in India must either be identical to the dumped goods in all respects or in the absence of such an article, another article that has
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characteristics closely resembling those goods.

INJURY TO THE DOMESTIC INDUSTRY


The Indian industry must be able to show that dumped imports are causing or are threatening to cause material in!ury to the Indian Idomestic industry. In!ury analysis can broadly be divided in two ma!or areas9 The (olume <ffect 9 The 'uthority examines the volume of the dumped imports, including the extent to which there has been or is likely to be a significant increase in the volume of dumped imports, either in absolute terms or in relation to production or consumption in India The 7rice <ffect 9 <xtent to which the dumped imports are causing price depression or preventing price increases for the goods which otherwise would have occurred 3ausal 0ink 9 ' Icausal link. must exist between the material in!ury being suffered by Indian industry and dumped imports and 3ollection by 6inistry of +inance

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RELIEF TO THE DOMESTIC INDUSTRY ANTI-DUMPING DUTIES


Non"cooperative exporters are re-uired to pay the residuary duty #highest of the co"operative exporters$ 0esser )uty 8ule9 &overnment is obliged to restrict the anti"dumping duty to the lower of the two i.e. dumping margin and the in!ury margin In!ury 6argin9 )ifference between the fair selling price due to the domestic industry and the landed cost of the product under consideration )e 6inimis 6argins9 'ny exporter, whose margin of dumping is less than *G of the export price and the volume of the dumped imports are below 2G of the total imports, shall be excluded from duties 78I3<

5N)<8T'=IN&;9 <xporter concerned must furnish an


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undertaking to revise his price

CONFLICT BETWEEN ANTI DUMPING LAW AND COMPETITION LAW


'ntidumping laws were initially enacted to address the situation of Iinternational price predation. . They were considered as extension of competition laws. 'ntidumping laws as they exist today do not seem to be concerned with the issue of predatory pricing. They attach sanctions to every instance of international price discrimination which can be shown to cause in!ury to the domestic industry.

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Objectives of competitive laws


Ob!ectives of 3ompetition laws are 7romotion of competition and prevention of anti"competitive practices 7rotection and promotion of consumer interest 'chieving economic efficiency &eographicK regional integration 7ublic interest 3ompetition advocacy Ob!ectives of 'nti dumping laws 8emedying the in!ury to the domestic industry due to dumping 7ublic interest 'ddress predatory pricing 3onsumer welfare

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PRICE DISCRIMINATION
5nder competition law, only the price discrimination, which adversely affects competition in markets and thus has negative consumer welfare impact, is prohibited. 5nder anti dumping law, every instance of price discrimination is prohibited.

EFFECT of antidumping ON COMPETITION


+rom the economics point of view, there is no reason to support any anti"dumping law, since price differentiation across markets is a perfectly rational and legitimate profit"maximiLation action. )omestic price discrimination normally is not penaliLed. They do not afford effective assistance to the domestic industry they are intended to protect. They protect producers at the expense of consumers, which results in higher prices, lower -uality
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products, less consumer choice and a general lowering of the standard of living for the vast ma!ority of people

)omestic producers can enlist the help of government to prevent foreign competition even when there has been no dumping. They provide good for the minority i.e. producers at the expense of the greatest number i.e. consumers. They reduce rather than enhance social cooperation and harmony. They redistribute income in the wrong direction i.e. from the poor and middle classes to the rich. )omestic producers can raise their prices with little fear of being underpriced by foreign suppliers

Thus existence of antidumping law hurts competition both ways, by forcing exporters to sell at higher prices and by providing the domestic producers the freedom to charge higher prices than what would be otherwise possible.

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SHORTCOMINGS
'nti"dumping rules allow exporters to avoid antidumping actions if exporters agree to raise their prices. ;uch agreements are a means of suspending ongoing anti" dumping cases and can be used to promote

anticompetitive behavior. 5nder current anti"dumping rules, national authorities are allowed to exercise enormous discretion. ;ince the criteria for determining the export price and the normal value are
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neither stringent nor specific, the importing country can determine incidents of dumping at will. It can lead to the protection of inefficient domestic industry. ' firm is likely to be sub!ect to an anti"dumping investigation if it exports a product at a price lower than the normal value in the home market, regardless of whether there is a predatory intent or not.

Effect OF ANTI-DUMPING DUTIES ON TRADE FLOW


' decline in the aggregate annual import of about @G in the year %>>2 from a growth of %@.4G in imports arising due to trade liberaliLation in %>>*. In general, trade from the sub!ect country is restricted when the anti"dumping duties are levied. 8ight after the case is filed and during the duration of investigation, imports drop by a large amount #>%G$ from pre"
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petition level. by the next year after the case has been filed, imports start going up again #rise by ,2G$. Mowever, they never again regain their pre"petition high 'nti"dumping investigations have restrictive impact on imports from the sub!ect 3ountries, other countries benefit by increasing their sales. This diversion of trade from sub!ect to non"sub!ect countries can offset the restrictive effects of anti"dumping. the existence of trade diversion does not necessarily imply that anti" dumping duties have no effect at all on overall import trade. Overall imports fall in response to anti"dumping duties, by a small but considerable amount.

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CONCLUSION
It can be agreed that overall the anti"dumping policy of India helps to check unwanted imports and hence might -ualify as AeffectiveB. )o little when it comes to the trade diversion that takes place during the initiation of an anti"dumping case against a certain country 8e"initiation and re"investigation on the
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potential similar imports from a different country is time consuming. (arious laws are imposed by the government to eliminate the problem of antidumping in India. Thus this has helped a lot in terms of fair trade practices.

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