Introduction
What is the practice of selling imported goods at “less than fair value” known as?
Dumping is the term used to express the practice of selling imported goods at “less than fair value.” During the course of international trade, the undesirable practice of “selling goods abroad below cost or at a price below that charged in the domestic market in order to eliminate a surplus or to gain an edge on foreign competition, or when goods are unacceptable for the domestic market” is referred to, as dumping. (Dumping).
Is it an unfair international trade practice?
Dumping is detrimental since it harms the domestic industry of the country where dumping takes place; they may not be able to set up pricing strategies that could perhaps match the prices offered by low cost foreign goods, and are thus rendered uncompetitive.
In this case, Pygo International, who holds 12% stakes in US markets in diamonds business, resorts to dumping in order to get larger share of US markets, This could spell disaster to US diamond business since they may not be able to match Pygo in pricing and may thus be rendered uncompetitive, price wise. It is imperative that steps be taken that could possibly address this grave situation and dissuade Pygo International from following such adverse practices which, if allowed to continue would be harmful not only for US diamond markets but also for global diamond business.
What are its remedies?
Anti-dumping measures on the lines suggested by Agreement on Implementation of Article VI of General Agreement on Tariff and Trade (GATT) needs to be invoked. For this it is necessary to make comparisons between the export price with the ‘constructed “normal value” of the products, so that the figure are realistic and not inflated. (Legal Texts: the WTO Agreements).
Again, the main aspect that needs to be considered in dumping is the extent and Intensity of damages caused by dumping on domestic industry. In this case, it is assumed that the damages are significant and therefore, the impact of anti-dumping laws also needs to be reinforced, in order to discourage dumping. This could also be used through countervailing duties, in that the benefits that dumping countries receive through dumping may be offset by payment of duties.
Should the US firms be tougher in case of foreign firms in such situations?
Dumping is a serious offence since it places a premium on pricing and marginalizes
Product quality and other parameters. Moreover, if anti-dumping laws are not operationalised, it is tantamount to the government, in a way, encouraging it, which is far from the truth. Thus, the following modus operandi for anti-dumping needs to be set into action.
“When an antidumping or countervailing duty order is imposed, Commerce instructs the Bureau of Customs and Border Protection (Customs) to assess antidumping or countervailing duties on imports of the product into the United States to offset the unfair trade practice. Under the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA or Byrd Amendment), antidumping and countervailing duties collected are distributed annually to affected domestic producers for qualifying expenditures incurred. “ (Trade Remedy Investigations).
Conclusion
In this case, the question of negligence quantum(less than 3%) is absent, and it could be said to be around 12% which is a substantial proportion by any standards,
Thus it is well within the powers of aggrieved domestic producers of diamonds in the US to place an application with the concerned US Trade Department for investigations into the dumping practices of diamond products by the said company, Pygo International, in the US and also file applications for putting antidumping and/or countervailing duties on the import of such products into US by the said company.
It is believed that such practices would alleviate the detriment and actual injury caused to the US domestic diamond industry by dumping practices of this company.
Works Cited
Dumping: Business Dictionary: Dumping. Answer.com. 2009. Web.
Legal Texts: the WTO Agreements. World Trade Organization. 2009. Web.
Trade Remedy Investigations: Antidumping and Countervailing Duty Investigations. United States International Trade Commission. 2009. Web.