Anti-Dumping Law in a Liberal Trade Order

The origin of the word ‘dump’ is uncertain. Its usage, however, by the early nineteenth century had come to mean the act of throwing down in a lump or mass, as with a load from a cart, and it was then a natural extension to apply the word to the disposal of refuse and to describe as a dumping ground a market for the disposal of surplus stock. By the beginning of this century ‘dumping’ was used in English-language trade literature to describe loosely a situation in which goods were sold cheaply in foreign markets and today the term is used internationally to signify the practice of price discrimination in international trade.

To assess the welfare implications of dumping it is helpful to examine first the welfare aspects of price discrimination within national boundaries and to relate such conclusions as may be drawn to the problem of price discrimination within the international context. Subsequently, it will be useful to compare the welfare effects of dumping in the conventional sense (where the export price is assumed to be below the home market price) with the opposite form of differential pricing, generally known as reverse dumping.

Both legislative history and enforcement practice suggest that domestic price-discrimination laws tend to be directed mainly at secondary-line or buyer-level injury. On the other hand, dumping at buyer level can only benefit the importing country’s domestic industry, which is thereby given the opportunity of purchasing its inputs at prices below those prevailing in the exporting country. At the same time, recent criticisms of domestic price discrimination laws, so far as they affect primary-line competition (at the seller’s level), apply with even great force to anti dumping legislation.

Successive tariff reductions during post-Second World War trade negotiations have focused increasing attention on non-tariff barriers in international trade. As one commentator has put it, ‘the lowering of tariffs has, in effect, been like draining a swamp. The lower water level has revealed all the snags and stumps of non-tariff barriers that still have to be cleared away’.¹ Prior to the Kennedy Round of trade negotiations, which began in 1964, fears were expressed that further tariff reductions might be partly neutralised by more active application of existing non-tariff barriers, including anti-dumping measures. Accordingly, the negotiating brief, agreed in May 1963, made specific reference to non-tariff barriers, enabling the dumping issue to be placed on the agenda of the Kennedy Round Trade Negotiating Committee.

Under existing anti-dumping arrangements national enforcement agencies exercise considerable discretion in determining what constitutes injurious dumping. It is, therefore, instructive to examine the decisions of these agencies and the principles they have adopted in approaching the injury question. The United States International Trade Commission (USITC) has always published fairly detailed reports of its findings and following the passage of the 1974 Trade Act, which required that such reports contain a ‘statement of findings and conclusions and the reasons or bases therefore, on all of the material issues of fact or law presented’, this information has included background material prepared by the USITC’s research staff. The Canadian Anti-dumping Tribunal, since its inception in 1969, has likewise published detailed reports but, in contrast, other national agencies, including the Commission of the European Communities, have published only the barest outline of their determinations. This chapter, therefore, focuses on American and Canadian practice, although a recent anti-dumping case which came before the European Court is also examined. The final section reviews the proceedings of the GATT Committee on Anti-dumping Practices.

The world steel industry has always been characterised by ‘dual’ or double’ pricing, the industry’s expression for price discrimination between home and export markets. Similarly, the steel industry’s problems have been very much to the fore in discussions of anti-dumping policy, a prominence which has become more pronounced with the emergence in recent years of chronic excess steel-making capacity throughout the industrialised world. In 1977/78, the steel dumping problem came to a head when several countries followed the American example in adapting their anti-dumping policies to curb ‘below cost’ steel imports, a development which transformed the international steel market and which may have established a precedent for dealing with similar situations in other industrial sectors. Because of steel’s central role in the evolution of the dumping/anti-dumping problem it merits a chapter to itself.

Neither Article VI of the GATT nor the GATT Anti-dumping Code make special provision for dumping by centrally-planned economies. The second interpretative note to paragraph (1) of Article VI merely recognises that in the case of imports from a country ‘which has a complete or substantially complete monopoly of its trade and where all prices are fixed by the state’ a strict comparison with domestic prices may not always be appropriate. No alternative method of price comparison is proposed and it has been left to individual contracting parties to decide how best to deal with this problem. With the rapid development of East-West trade, however, and the increasing involvement of state-socialist countries in the GATT (Czechoslovakia was an original signatory and Yugoslavia, Poland, Hungary and Romania have become full members in recent years),¹ protection against dumping and low-priced imports from non-market economies has emerged as an important policy issue.

Modem anti-dumping action is, as we have seen, rooted in Jacob Viner’s classic analysis of dumping, Dumping: a Problem in International Trade, which was written over fifty years ago. Viner was himself an active participant in the drafting of the United States Antidumping Act of 1921, which he later described as being ’in almost all respects a model of draftsmanship in so far as anti-dumping legislation is concerned’.¹ Furthermore, nearly every subsequent study of the dumping/anti-dumping problem refers to Viner’s work as the definitive word on the economic implications of discriminatory pricing in international trade.