Despite the benefits to consumers from low-priced imports, most
governments use anti-dumping duties designed to protect their own
industries from what is viewed as unfair foreign pricing. Unfortunately,
however, antidumping laws have been evolving over the past three
decades in ways that allow antidumping duties to become barriers to
trade and competition rather than to provide redress for genuinely unfair
trading practices.
Several features of the antidumping system that is now in place in many
countries make it highly protectionist. First, any price discrimination
between national markets is classified as dumping and is subject to
penalties. Thus, prices in the producer’s domestic market become, in
effect, minimum prices below which no sales can be made in foreign
markets, whatever the nature of demand in the domestic and foreign
markets. Second, many countries’ laws calculate the “margin of dumping”
as the difference between the price that is charged in that country’s
market and the foreign producer’s average cost. Thus, when there is a
global slump in some industry so that the profit-maximizing price for all
producers is below average cost, foreign producers can be convicted of
dumping. This gives domestic producers enormous protection whenever
the market price falls temporarily below average cost. Third, law in the
United States (but not in all other countries) places the onus of proof on
the accused. Facing a charge of dumping, a foreign producer must prove
that the charge is unfounded. Fourth, U.S. antidumping duties are
imposed with no time limit, so they often persist long after foreign firms
have altered the prices that gave rise to them.