Antidumping Is Turning Into Antitrade
May 26, 2000
"Dumping" is when one country sells items below cost in another country's market to drive domestic companies out of business. The World Trade Organization prohibits this and allows the attacked countries to increase tariffs to combat this "dumping." However, anti-dumping complaints have been abused in the past 20 years, according to one study.
The number of complaints filed has increased tremendously since the late 1980s:
- A decade ago, developing countries filed 1 or 2 complaints a year; today they account for 100 complaints.
- The number of complaints nearly doubled between 1987 and 1997, from 120 to 233.
- Argentina has filed almost 20 complaints annually since 1991.
This increase in antidumping complaints interferes with free trade. Increased tariffs resulting from antidumping complaints create additional problems.
- Once initiated, tariffs are difficult to remove because domestic firms enjoy protection and will lobby for it domestically.
- Imports of the goods on which tariffs are imposed fall by almost 70 percent, while import prices rise more than 30 percent.
- They can reduce trade between the countries involved by anywhere from 30 to 50 percent.
Ultimately as nations continue to overuse the antidumping complaint, free trade will decrease for all nations.
Source: Thomas Prusa, "On the Spread and Impact of Antidumping," Working Paper No. 7404, October 1999, National Bureau of Economic Research.
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