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Antidumping, sometimes abbreviated as AD, is a source of controversy regarding several practices within the international trade. While many leaders and politicians may have lost their passion and zeal to implement antidumping laws, economists and other trade reformers still believe that antidumping is necessary in nurturing a sustainable international trade environment.
In most cases if not all, antidumping has only been dealt with in accordance with the existing circumstances and not as stipulated in the Antidumping Act of 1916 (Lindsey, 1999). In the view of the unfathomable significance of antidumping strategies, this paper discusses the U.S. Anti-Dumping Law’s history, trace of implementation, and impact on business and the society.
Based on the broadness of the topic, the analysis is limited to the ethical implication of the AD Act. To achieve this core and noble task, this synthesis is divided into segments, which give an informative and detailed analysis of issues surrounding the law and its overall impact on the business society.
Dumping has received a myriad of definitions in literature by scholars, researchers and analysts throughout history. However, the overall epicenter of most of these definitions has focused on price discrimination in several markets in world markets. According to Jacob Viner’s 1922 definition, dumping refers to price discrimination occurring between markets at an international level.
How does this occur in international trade? Dumping simply takes its course when export price is much lower compared to that which sellers are charging buyers at the domestic level, with regard to all the terms and conditions of sale (Lindsey, 1999). In other words, such products attract lower prices at the export market contrary to what consumers in the home market are being offered.
Besides this school of thought, dumping in business context may refer to a case where marginal costs are higher than the export cost of a given commodity in the market. It, therefore, suffices to mention that the major determining parameters for dumping are the export and domestic prices of the commodity in question.
Regardless of its simplicity and interpretation, dumping has remained a major problem in international trade for a long period of time, with several efforts having been witnessed to mitigate its impact in the now fully-grown international business market. On the other hand, a case where the export market attracts higher prices compared to what is offered locally is referred to as reverse dumping (Irwin, 2005). The above descriptions form the basic understanding of dumping as recognized by the World Trade Organization.
Moreover, it is important to note that major analyses of the current dumping situation revolve around commodities being sold at a higher value than local prices since antidumping laws mainly feature this scenario. The concept is sometimes linked to subsidies and bounties. Notably, dumping is not caused by subsidies and the two ideas are usually regulated by different and independent legislations (Mastel, 1998).
According to Viner (1923), dumping can be classified into sporadic, short-run and long-run depending on certain factors like the cause and duration. Based on the effects of dumping and the unbeaten need for good dumping, laws have been drafted and ratified to control dumping and ensure that all business operations on the international and local scale do not violate them (Viner, 1923).
A good example is the United States Antidumping Law which has been in existence for almost a century. The law has received manifold criticism and support throughout history with some critics arguing that it needs amendment to accommodate current and emerging issues, which may differ from its initial mandate.
The U.S. Antidumping Act of 1916
The United States Congress endorsed the act in the 1916 with the heading, “Unfair Competition”. This was contained in Title VIII of the Revenue Act of 1916. The act outlawed any form of dumping in the United States, including the sale of articles at a price higher than the local or wholesale price.
This was aimed at preventing easy exportation of products to the United States and to guard its market against external forces (WTO, 2004). Through this act, the U.S. could prevent any form of monopolization of the market emanating from traders who could consider finding a ready market for their products in the country.
With regard to the provisions of the act, one would become a defaulter and liable for the penalty if found violating the entire law or a section of it. A fine of $5,000 was proposed in the act and or a jail term not exceeding twelve months as deemed necessary and right by the court of law. Persons injured as a result of the defaulters’ misdemeanors were also at free will to sue the defiant in his/her or her district court of the U.S. This would result into recovery of the damage, payment of the suit expenses and an attorney’s fee (WTO, 2004).
History and implementation
In the early 20th century, a period which covered between 1904 and 1921, several countries that had become industrialized enacted a law to deal with dumping. These countries mainly consisted of the U.S., the Great Britain, Australia, Canada, the Union of South Africa and New Zealand. Their agreement aimed at compensating against unfair advantage of major foreign producers by imposing an antidumping charge.
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However, other rules were developed extremely after the Second World War when GATT started operating in the year 1948 (Krishna, 1997). A core component of GATT is Article VI, which clearly deals with cases of antidumping coupled with two important conditions that would warrant a country to impose an antidumping levy.
The first condition is when the importing country offers a lower price than the home country and that no person is authorized to impose an antidumping levy unless with substantive evidence of the likelihood, negative impact of the practice in the local market. However, this attempt failed due to lack of preciseness and binding ground (Hurabiell, 1995).
In another attempt to revive the antidumping law, it was made an agenda in 1967 during the Kennedy Round. The fruit of this was the GATT Antidumping Code which had better binding authority than the previous document (Hurabiell, 1995). This Round mainly dwelt on how and when to apply antidumping laws before the Code was adjusted in the year 1979 because of fundamental reasons.
The first one was to have a clear difference and clarity of thought between antidumping and countervailing. Secondly, the European Commission felt dissatisfied with the way the United States was interpreting injury requirements stringently. These necessitated further developments to make the Code more applicable in dealing with the dumping problem (Krishna, 1997).
Article 13 of the Antidumping Code was added, which required developed countries to have special regard on developing countries in exercising antidumping measures. As if this was not enough, the need for further negotiations was witnessed during the Uruguay Round of 1994 (Krishna, 1997).
This was in response to what economists believed to manageable trade and protectionism that had been achieved in the previous decade. It was highly welcomed as several nations pledged their commitment towards maintaining the cooperation multilaterally and their backing of measures that were tariff-free.
During the developments in Uruguay, the Antidumping Code was further developed to allow a country to impose levy on products from specific countries where dumping had a higher likelihood of causing domestic damage to the market. Additionally, it was acceptable if dumping practices by that country negatively affected the local industry (Krishna, 1997).
Impact on Business Society
An important observation of the U.S. Antidumping Law is that it predominantly focuses on international forms of price discrimination and acts on those sales that are made below cost. This does not matter on the nature of the sales made as a result of greed or not. On the other hand, antitrust laws guard against predatory sales and do not check on making sales below cost.
Analytically, this difference is essential since predatory pricing has adverse economic effects due to its tendency to promote monopoly and social inequality (Krishna, 1997). To the contrary, non predatory sales discrimination has net economic benefits to the side being favored with lower prices.
In addition countervailing-duty regulations allow the addition of levy on products that have been subsidized by the exporting country. Although these laws have been in existence for long, they have almost remained unchanged and embraced inclusivity. Initial laws covered sugar, before they were revised to accommodate dutiable and non-dutiable commodities imported from other countries (Mastel, 1998).
It is worth noting that several changes have been witnessed within the business society since the adoption of the General Agreement on Tariffs and Trade. This has led to a quantifiable rise in competition for local firms emanating from imports. However, suffering firms are protected under section 201 of the escape clause and adjustment assistance.
Trade adjustment aims at protecting workers who may have been affected as a result of high import competition. This is done through training, relocation allowance and job search. On the other hand, section 201 escape clause permits exemption from imports temporarily to allow the affected party to stabilize. Such breathing can be of importance in cases where firms are experiencing difficulties in adapting to import competition (Irwin, 2005).
Notably, the adoption and implementation of the U.S. Antidumping Law has resulted into better protection for industries as most firms are able to secure this protection than under the escape clause. This protection was considered as a rescue option for those industries which felt oppressed by the escape clause.
Moreover, the law continues to evolve to become more effective to serve the increasing number of industries seeking protection (Mastel, 1998). From this analogy, it can be clearly viewed that the core function and operating principles of the U.S. aid are prevention, punishing and compensation of predatory prices, among other international trade malpractice relating to the United States imports policies and directions.
While the antidumping laws are commonly faced with resistance and criticism, it is important to appreciate the impact of these laws in augmenting business ethics and operating standards in international trade. Antidumping laws are essential in providing a level ground for business as this may be over exploited by developed countries.
They further promote the growth of economies by eliminating extreme monopoly cases that may lead to social inequalities. Having been in operation for decades, the U.S. Antidumping Law has had an immense impact on business society even though the law has undergone numerous amendments.
Hurabiell, M. (1995). Protectionism versus free trade: Implementing the GATT antidumping Agreement in the United States. University of Pennsylvania Journal of International Business Law, 16(3), 567-614.
Irwin, D. (2005). The rise of U.S. antidumping activity in historical perspective, Issues 2005-2031. Washington, D.C: International Monetary Fund.
Krishna, R. (1997). Antidumping In Law and Practice. World Bank. Web.
Lindsey, B. (1999). The U.S. Antidumping Law Rhetoric versus Reality. Center for Trade Policy Studies. Web.
Mastel, G. (1998). Antidumping laws and the U.S. economy. New York: M.E. Sharpe.
Viner, J. (1923). Dumping: A problem in International Trade. Chicago: Chicago University Press.
WTO. (2004). United States – Anti-Dumping Act of 1916. World Trade Organization. Web.