UNFAIR PROTECTION OR VALID DEFENSE CASE STUDY ANSWER

 

UNFAIR PROTECTION OR VALID DEFENSE ?

            “Mexico Widens Anti – dumping Measure …………. Steel at the Core of US-Japan Trade Tensions …. Competitors in Other Countries Are Destroying an American Success Story … It Must Be Stopped”, scream headlines around the world.

            International trade theories argue that nations should open their doors to trade.  Conventional free trade wisdom says that by trading with others, a country can offer its citizens a greater volume and selection of goods at cheaper prices than it could in the absence of it.  Nevertheless, truly free trade still does not exist because national governments intervene.  Despite the efforts of the World Trade Organization (WTO) and smaller groups of nations, governments seem to be crying foul in the trade game now more than ever before.

            We see efforts at protectionism in the rising trend in governments charging foreign producers for “dumping” their goods on world markets.  Worldwide, the number of antidumping cases that were initiated stood at about 150 in 1995, 225 in 1996, 230 in 1997 , and 300 in 1998.

            There is no shortage of similar examples.  The Untied States charges Brazil, Japan, and Russia with dumping their products in the US market as a way out of tough economic times.  The US steel industry wants the government to slap a 200 per cent tariff on certain types of steel.  But car markers in the United States are not complaining, and General Motors even spoke out against the antidumping charge – as it is enjoying the benefits of law – cost steel for use in its auto product ion.  Canadian steel makers followed the lead of the United States and are pushing for antidumping actions against four nations.

            Emerging markets, too, are jumping into the fray.  Mexico recently expanded coverage of its Automatic Import Advice System.  The system requires importers (from a select list of countries) to notify Mexican officials of the amount and price of a shipment ten days prior to its expected arrival in Mexico.  The ten-day notice gives domestic producers advance warning of incoming low – priced products so they can complain of dumping before the products clear customs and enter the marketplace. India is also getting onboard by setting up a new government agency to handle antidumping cases.  Even Argentina, China, Indonesia, South Africa, South Korea, and Thailand are using this recently – popularized tool of protectionism.

            Why is dumping on the rise in the first place? The WTO has made major inroads on the use of tariffs, slashing tem across almost every product category in recent years. But the WTO does not have the authority to punish companies, but only governments.  Thus, the WTO cannot pass judgments against individual companies that are dumping products in other markets.  It can only pass rulings against the government of the country that imposes an antidumping duty.  But the WTO allows countries to retaliate against nations whose producers are suspected of  dumping when it can be shown that : (1) the alleged offenders are significantly hurting domestic producers, and (2) the export price is lower than the cost of production or lower than the home – market price.

            Supporters of antidumping tariffs claim that they prevent dumpers from undercutting the prices charged by producers in a target market and driving them out of business.  Another claim in support of antidumping is that it is an excellent way of retaining some protection against potential dangers of totally free trade.  Detractors of antidumping tariffs charge that once such tariffs are imposed they are rarely removed.  They also claim that it costs companies and governments a great deal of time and money to file and argue their cases.  It is also argued that the fear of being charged with dumping causes international competitors to keep their prices higher in a target market than would other wise be the case.  This would allow domestic companies to charge higher prices and not lose market share – forcing consumers to pay more for their goods.

 

Questions

1.       “You can’t tell consumers that the low price they are paying for a particular fax machine or automobile is somehow unfair.  They’re not concerned with the profits of companies. To them, it’s just a great bargain and they want it to continue.” Do you agree with this statement? Do you think that people from different cultures would respond differently to this statement? Explain your answers.

2.       As we’ve seen, the WTO cannot currently get involved in punishing individual companies for dumping – its actions can only be directed toward governments of countries.  Do you think this is a wise policy ? Why or why not? Why do you think the WTO was not given the authority to charge individual companies with dumping? Explain.

3.       Identify a recent antidumping case that was brought before the WTO. Locate as many articles in the press as you can that discuss the case. Identify the nations, products (s), and potential punitive measures involved. Supposing you were part of the WTO’s Dispute Settlement Body, would you vote in favor of the measures taken by the retailing nation? Why or why not?