R7.

7
The three policy responses used to counter dumping are antidumping duties, safeguard tariffs and
countervailing duties.
When the export price is less than the home market prices, the antidumping tariff tries to increase the
price of the foreign firms dumped good which will allow the home country to protect domestic
producers. Here the antidumping tariff will give the home country a terms of trade gain as it is the
foreign country that will have to pay for the tariff and lower their price.
What we also have is a safeguard tariff where home countries suspend previous agreed concessions in
order to remedy the trade situation that could seriously hurt domestic producers. However normally it is
the antidumping tariff that is enough for foreign firms to increase their product prices and lower their
competition in the home market.
The final policy response we have are countervailing duties which are Tariffs levied on imported goods
to offset subsidies made to producers of these goods in the exporting country Countervailing
duties (CVDs), also known as anti-subsidy duties, are trade import duties imposed under World Trade
Organization (WTO) rules to neutralize the negative effects of subsidies. They are imposed after an
investigation finds that a foreign country subsidizes its exports, injuring domestic producers in the
importing country. As export subsidies are considered to be an unfair trade practice, the World Trade
Organization (WTO) which deals with the global rules of trade between nations has detailed
procedures in place to establish the circumstances under which countervailing duties can be imposed by
an importing nation.
Comparison and differences
- In contrast to antidumping duties, which address behavior of foreign private parties, countervailing
duties are meant to address behavior of a foreign country (i.e., its government). The agreement also sets
out provisions on how to determine the amount of benefit received from the subsidies and on injury
and causation. It is also important to keep in mind that developing countries are granted special
treatment under this regime.
- For countervailing duties, many of the procedural requirements with respect to commencing an
investigation are analogous to those applicable to antidumping. Among these, investigations are
initiated at the request of the domestic industry. If imposed, countervailing duties must not exceed five
years in duration, unless it is necessary to avoid subsidization and injury.
- For safeguard tariffs, the regime addresses how one determines whether there has been serious
injury and what must be considered in determining whether the imports at issue are to blame. In
contrast to the agreements relating to antidumping and countervailing duties, the Safeguards
Agreement does not set out detailed procedures, but instead imposes basic requirements, such as
requiring that an investigation be conducted pursuant to procedures already published, requiring public
notice, and requiring that interested parties have the opportunity to present their views. The findings of
the investigation must be published.

R7.9
Problems with infant industry Protection
-the protection for the infant industry argument stipulates that once an emerging industry has
developed well enough to compete on an international level, tariffs and other such protective measures
are to be removed. However this may be difficult in practice once these are imposed.
-mature industries could possess a trade secret or patent and it is here infant industries say they cannot
compete without more revenue to research, extra revenue that is created through a tariff. The infant
industry argument therefore does not consider business loans which are available as a free market
solution.
-certain products will require a specific environment (ie agricultural goods) to succeed and it is here that
putting more business capital from barriers cannot solve the problem. Some nations also have more
advanced machinery and transportation processes to help increase efficiency and naturally there is no
incentive for the company to purchase this capital as it will undercut profits despite the help of tariffs.
-extra revenue attained through tariffs may not provide enough incentive for infant industries to train
their workforce. Foreign firms can pay for less by recruiting already skilled workers.
Infant-industry theory holds that once the emerging industry is stable enough to
compete internationally, any protective measures introduced, such as tariffs, are
intended to be removed. In practice, this is not always the case because the
various protections that were imposed may be difficult to remove.


Antidumping duties may be imposed if the export price is less that the price in the home market or (if
such a home price is not available) the highest price in any third market supplied or the costs of
production (including reasonable selling costs and prot).
Foreign rms can inuence the amount of an anti-dumping duty by their own pricing policies. The
antidumping duty may be set to equalise prices in the exporters Home market with the export price, so
a rm may raise its export price if a duty is threatened. For a diagrammatic exposition, see FT Fig 9.9.
Safeguarding Tariffs
are emergency actions taken when any product is being imported ... in such quantities and under such
conditions as to cause or threaten serious injury to domestic producers (FT 241). Previously agreed
concessions for that product can be suspended in whole or part for such time as may be necessary to
prevent or remedy such injury. Such time may, in practice, be a long time.
Safeguard actions involve a determination that imports are the most important cause of serious injury.
They are typically used much less frequently than antidumping duties.

Countervailing duties

can be imposed on subsidized imports to oset the injury to domestic producers ( DFAT )