Any sane government should ensure that it takes measures to safeguard the interests of local companies. This enables local companies to flourish. Growth of local companies has several economic benefits to the country (Wing, 2011). Various government agencies help in protecting local companies from the tactics of foreign companies, which may lead to the collapse of local companies.
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The US Commerce Department is the American organization that regulates the market to ensure that foreign companies do not engage in unacceptable activities. Dumping is one of the practices that the US Commerce Department prohibits (Carbaugh, 2010). The Commerce Department imposed an antidumping tax to Chinese non-frozen apple juice concentrate (AJC) exporters.
The Chinese AJC exporters priced their products at an extremely low price. This threatened the existence of American AJC producers. Therefore, the Commerce Department had to act to protect the interests of American AJC producers. However, the US Court of International Trade reversed the decision Commerce Department.
Response by certain Chinese AJC exporters to the antidumping investigation enabled the firms to benefit from reduced antidumping rates. Initially, the Commerce Department had imposed an antidumping rate of 15% on Chinese AJC exporters that responded to the investigation. On the other hand, Chinese AJC exporters that did not respond to the antidumping investigation received an antidumping rate of 52% (Peng, 2011).
However, the Court of International Trade reduced the antidumping rate of the Chinese AJC exporters received. The court reduced the antidumping rate of companies that responded to the investigation from 15% to 1.5% (Peng, 2011). However, the court did not reduce the antidumping rate of Chinese AJC exporters that did not respond to the investigation.
Therefore, it is clear that responding to the investigation increases the probability of a company receiving a much lower antidumping rate. Companies that responded to the antidumping rates had to contend with high legal fees. Therefore, this was more costly to the companies in the short-term. However, the long-term benefits of responding to investigation outweigh the short-term costs.
The US Court of International Trade disapproved the decision of the Commerce Department since it did not use a proper model in comparing Chinese AJC exporters with India’s Horticultural Produce Marketing & Processing Corp. (HPMC). This is because HPMC did not operate in an ideal market economy. HPMC was a government-controlled company that did not make a profit (Peng, 2011).
The company was dependent on government loans and other government sources for its survival. Government support created unfair competition to other companies in the industry (Kerr & Gaisford, 2008). Therefore, it was not practical to compare the Chinese AJC exporters to the Indian company.
The antidumping case shows that it is vital for companies to conduct proper investigations before accusing other companies of dumping. Failure to use the right model in comparing the Chinese AJC exporters with other AJC producers led to the ultimate reversal of the decision of the Department of Commerce (Peng, 2011).
However, if the Commerce Department and American AJC producers had used the right surrogate factors to compare the Chinese AJC exporters with other companies, the Court of International Trade would not have disapproved its decision. The antidumping case highlights the importance of responding to antidumping investigations.
Companies that responded to the antidumping investigation received less antidumping rates than companies that did not respond to the investigation. Responding to the antidumping investigation is expensive to the companies in the sort-term (Debroy & Chakraborty, 2007). However, the long-term benefits due to lower antidumping rates outweigh the short-term costs. Therefore, it is vital for companies to respond to antidumping investigations.
The US department of Commerce helps in regulating business activities to ensure that companies do not engage in unacceptable practices. The antidumping case highlights the importance of conducting thorough and relevant investigation in determining whether certain companies engage in unacceptable business practices.
Carbaugh, R.J. (2010). International economics. Mason, OH: Cengage Learning.
Debroy, B. & Chakraborty, D. (2007). Anti-dumping: Global abuse of a trade policy instrument. New Delhi: Academic Foundation.
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Kerr, W.A. & Gaisford, J.D. (2008). Handbook on international trade policy. Cheltenham: Edward Elgar Publishing.
Peng, M.W. (2011). Global business. Mason, OH: South Western Cengage.
Wing, K. (2011). International trade finance: A practical guide. Hong Kong: City University of HK Press.