Introduction
The aim of this paper is to analyze the concept of anti-dumping duty. Dumping is a practice of large international corporations whereby goods are exported to another country at a price lower than the cost of production. This practice harms local companies and industries as it makes it difficult for them to compete in a market where artificially cheap products are being sold. To combat this practice, countries may impose an anti-dumping duty which is a tax that is imposed on dumped products to make them more expensive and render them uncompetitive.
Definition of Dumping
Dumping occurs when a foreign manufacturer sells goods below their home market or cost of production in another region. Often, this is done as a way to break into a foreign market. The lower cost makes it easier for the company to gain market share. Because of this, they often take away market share from domestic producers, who are unable to compete. This practice is known as price discrimination and it is illegal under World Trade Organization (WTO) rules.
Elements of Anti-Dumping Duties
Anti-dumping duties (ADDs) are taxes imposed by WTO members on goods being imported from a country that is being accused of dumping. These duties are meant to counteract the negative effects of foreign products being dumped onto the market or sold at lower prices. ADDs are only imposed after a thorough investigation by the importing country and only after it can be proven that the goods are being sold at lower prices than the normal prices of goods in the importing country. The imposition of an ADD is meant to bring the cost of goods up to an acceptable level in order to create a fair and balanced market.
Impact of Anti-Dumping Duty
In the short-term, anti-dumping duties can have a positive impact on domestic industries, as the duties make it more difficult for foreign goods to enter the market at artificially low prices. This can create opportunities for domestic industries to increase their market share. In the long-term, however, anti-dumping duties can have a negative impact on consumers, as higher prices lead to lower demand. Furthermore, if a country is accused of dumping and retaliates with tariffs of its own, this can lead to a trade war which can have a significant and negative impact on the global economy.
Conclusion
Dumping can be very harmful to local industries and prevent them from being able to compete in the market. As a result, countries may choose to impose an anti-dumping duty as a way to make it more difficult for foreign goods to enter their market at artificially low prices. Anti-dumping duties can have some short-term benefits to domestic industries, but the long-term effects can be negative, as higher prices lead to lower demand and can potentially spark a trade war.
