Anti-dumping by whom and on what

Two-thirds of anti-dumping cases launched since the end of the Uruguay Round of WTO trade negotiations have been targetted at developing countries (about 15% of all actions against China alone). If you count the Rep. of Korea as a developing country the proportion of cases launched against developing countries jumps to almost three-quarters. But developing countries are now among the most intensive users of anti-dumping. Seventy percent of cases were initiated by a developing country over that period, with India leading the pack by a long nose (342 cases up to the end of last year).

bar chart showing AD initiations 1995-03

A slide from my presentation in Bangladesh: data from WTO

I’ve been in Bangladesh, this last week, talking to business leaders and academics about what’s happening in world trade and what might be on the horizon. The garment industry is Bangladesh’s biggest exporter but has largely escaped foreign anti-dumping action. In fact, as the data shows, textiles and garments are a much smaller target for the anti-dumpers than “base-metals”—that is, steel—plastics and chemicals. But after the global textile and garment trade regime changes from a quota-based to a tariff-based system on 1 January 2005, it’s very likely that we’ll see a big pick-up in the use of anti-dumping and ‘safeguard’ action against garment imports. As Chinese exports to North America and Europe start to displace exports from East and South Asia and from Central America whose market shares have been protected, to a degree, by the old garment quota regime, these products will ‘slop-over’ into other developing country markets. Although China’s protocol of accession to WTO provides as special safeguard against it’s garment exports (that the US has already used[⇒ related story]), there’s no such instrument available for use against exports from e.g. Bangladesh. Hence the threat from anti-dumping … Of course, dumping is rational; it’s a competitive strategy that every firm uses in domestic markets. Only in trade—thanks, historically, to the US anti-trust approach to competition policy—is pricing below the fully-allocated long-run cost of production considered somehow “unfair”. There’s no mystery about why chemicals, steel and plastics are so commonly targeted: in an economic slump, firms with major capital investments typically price their products to cover fixed costs and take a hit on variables. That is, they “dump” so they can keep their plant running and hold-on to customers. This doesn’t mean that they are not profit maximizers or that their actions are anti-competitive. On the contrary.

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