Antidumping laws were first designed to permit countries to respond to predatory pricing by
foreign firms. More recently, they have been used to protect domestic firms against any
foreign competition.Countervailing Duties
A countervailing duty is a tariff imposed by one country designed to
offset the effects of specific subsidies provided by foreign governments to
their exporting firms. For example, if the German government provided
subsidies to its firms that produce and export machine tools, the
Canadian government might respond by imposing a countervailing duty—
a tariff—on the imports of German machine tools designed to “level the
playing field” between German and Canadian firms in that industry.
Countervailing duties, which are commonly used by the U.S. government
but much less so elsewhere, provide another case in which a trade-
remedy law can become a covert method of protection.
There is no doubt that countervailing duties have sometimes been used to
counteract the effects of foreign subsidies. Many governments complain,
however, that countervailing duties are often used as thinly disguised
protection. At the early stages of the development of countervailing
duties, only subsidies whose prime effect was to distort trade were
possible objects of countervailing duties. Even then, however, the
existence of equivalent domestic subsidies was not taken into account
when decisions were made to put countervailing duties on subsidized
imports. Thus, the United States levies some countervailing duties against
foreign goods even though the foreign subsidy is less than the domestic