Trade Issues

"Fair Trade" Laws Impede Trade

Tariffs on imports have fallen across the world in recent years. But nontariff barriers have increased dramatically over the last two decades. These protectionist measures are now greater impediment to trade than tariffs -- discouraging exports and imports, say economists.

Nontariff barriers include laws against unfair trade practices -- most commonly dumping, in which importers sell goods within a country at a price lower than in some foreign market. Typically, fair trade laws allow authorities to impose extra taxes or exclude imported goods when domestic manufacturers complain they are harmed by the competition. For example,

  • In the United States, 233 antidumping cases were investigated by the Commerce Department between 1968 and 1978, whereas 451 cases -- almost twice as many -- were investigated between 1980 and 1989.

  • In the earlier period, 11.9 cases were investigated for every $100 billion of merchandise imports in 1987 dollars.

  • In the later period, 13.2 cases were investigated for every $100 billion.

The process of determining whether dumping has occurred is so complicated and biased, notes economist Lester Thurow, that if "applied to domestic firms, 10 out of the top 20 firms in the Fortune 500 would have been found guilty of dumping in 1982."

  • Dumping was found to be occurring over 80 percent of all cases decided by the U.S. International Trade Commission between 1980 and 1985.

  • That rose to 97 percent for all cases decided between 1988 and 1992, Forbes magazine reports.

  • But the conditions for predatory pricing didn't exist in over 85 percent of the U.S. cases filed from 1979 and 1989, according to a recent study by the Organization for Economic Cooperation and Development (OECD).

Furthermore, other countries are using fair trade laws more frequently against the U.S. More antidumping cases were initiated against U.S. exporters than those from any other country in the 1989 to 1993 period, according to reports filed with the World Trade Organization.

Source: Joseph E. Stigliz (senior vice president and chief economist, World Bank), "Dumping on Free Trade: the U.S. Import Trade Laws," Southern Economic Journal, October 1997.

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