Findings on Dumping and Anti-dumping:

(October 5, 2010, Karobar Daily

India put Anti-dumping price on its imported DVDs from Thailand, Malaysia and Vietnam…)

What is Dumping?

Dumping is one of the kinds of pricing policy in international trade and is defined as the act of a
manufacturer in one country exporting a product to another country at a price which is either
below the price it charges in its home market or is below its costs of production.

A standard technical definition of dumping is the act of charging a lower price for a good in a
foreign market than one charge for the same good in a domestic market. This is often referred to
as selling at less than "fair value".

Why Dumping is done?

Dumping is the commercial practice of selling goods in foreign markets at a price below their
normal cost or even below their marginal cost so as to capture foreign markets. Many countries
follow dumping practices. It is harmful to less developed countries where the cost of production
is high. Since these practices are naturally considered to be unfair competition by manufacturers
in the country in which the goods are being dumped, the government of the foreign country will
be asked to impose "anti-dumping" duties. Under the World Trade Organization (WTO)
Agreement, dumping is condemned (but is not prohibited) if it causes or threatens to cause
material injury to a domestic industry in the importing country. [1]

What is anti-dumping then?

Anti-dumping are special duties additional to the normal ones, designed to match the difference
between the price in the home country and the price abroad. If the domestic industry is able to
establish that it is being injured by the dumping, then antidumping duties are imposed on goods
imported from the dumpers' country at a percentage rate calculated to counteract the dumping
margin. Antidumping duties offset injurious dumping. The use of anti dumping measure as an
instrument of fair competition is permitted by the WTO. [2]

How it is calculated?

While permitted by the WTO, General Agreement on Tariffs and Trade (GATT) (Article VI)
allows countries the option of taking action against dumping. The Anti-Dumping Agreement
clarifies and expands Article VI, and the two operate together. They allow countries to act in a
way that would normally break the GATT principles of binding a tariff and not discriminating
between trading partners—typically anti-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 injury 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 product’s “normal value”. The main one is based on the price in the
exporter’s domestic market. When 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
exporter’s production costs, other expenses and normal profit margins. And the agreement also
specifies how a fair comparison can be made between the export price and what would be a
normal price.

Calculating the extent of dumping on a product is not enough. Anti-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 question.
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.

Anti-dumping measures must expire five years after the date of imposition, unless a review
shows that ending the measure would lead to injury. Anti-dumping investigations are to end
immediately in cases where the authorities determine that the margin of dumping is, de minimis,
or insignificantly small (defined as less than 2% of the export price of the product). Other
conditions are also set. [3]

References:

1. Van den Bossche, Peter (2005). The Law and Policy of the World Trade Organization. Cambridge,
UK: Cambridge University Press. pp. 42. ISBN 978-0-511-12392-4. "Dumping, i.e. bringing a
product onto the market of another country at a price less than the normal value of that
product is condemned but not prohibited in WTO law."
2. http://www.scribd.com/doc/22243529/Trade-Barriers-Dumping-Anti-Dumping
3. http://en.wikipedia.org/wiki/Anti-dumping

For depth study on anti-dumping please read:

Antidumping protection: Good for bad firms but bad for good firms by Hylke Vandenbussche ,
Professor of International Economics, Université Catholique de Louvain-la-Neuve :
http://www.voxeu.org/index.php?q=node/1726