Dumping
is a process where a company exports a product at a price lower than the price
it normally charges on its own home market. To protect local businesses and
markets, many countries impose stiff duties on products they believe are being
dumped in their national market.
The
World Trade Organization (WTO) operates a set of international trade rules.
Part of the organization's mandate is the international regulation of
anti-dumping measures. The WTO does not regulate the actions of companies
engaged in dumping. Instead, it focuses on how governments can or cannot react
to dumping. In general, the WTO agreement allows governments to "act
against dumping where there is genuine (material) injury to the competing
domestic industry." In other cases, the WTO intervenes to prevent
anti-dumping measures. This intervention is justified to uphold the WTO's free
market principles. Anti-dumping duties distort the market. Governments cannot
normally determine what constitutes a fair market price for
any good or service; fair market value is
whatever price the market will bear as determined by supply and demand.
Practical
Examples of Anti-Dumping Measures - In June 2015, American steel
companies United States Steel Corp., Nucor Corp., Steel Dynamics Inc., Arcelor Mittal
USA, AK Steel Corp. and California Steel Industries filed a complaint with the
Department of Commerce and the ITC alleging that China (and other countries)
were dumping steel on the U.S. market and keeping prices unfairly low.
A year
later, the United States, after a review and much public debate, announced that
it would be imposing a 500% import duty on certain steel imported from China.
China may bring the debate before the WTO by China if it feels the tariffs are
unfair.
