Handbook on International Trade Policy
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Handbook on International Trade Policy

Edited by William A. Kerr and James D. Gaisford

The Handbook on International Trade Policy is an insightful and comprehensive reference tool focusing on trade policy issues in the era of globalization. Each specially commissioned chapter deals with important international trade issues, discusses the current literature on the subject, and explores major controversies. The Handbook also directs the interested reader to further sources of information.
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Chapter 32: Antidumping: Theory and Practice, Rationales and Calculation Methods

Carol Chui-Ha Lau


Carol Chui-Ha Lau Introduction Dumping, defined as price discrimination or below cost sales, is a commonly adopted commercial strategy that is legal for domestic firms to apply but is punishable by international trade law when conducted by firms from other countries. Antidumping (AD) legislation allows importing countries to impose import duties on such dumped imports. AD legislation has been widely used in recent years by developed and developing countries alike, perhaps due to its legality and its ease and flexibility in adoption. This chapter provides an overview of the theory and practice of dumping and AD policies. It begins by contrasting the differences in how economists and the legislative authorities view dumping, followed by some statistics on the proliferation of AD practices worldwide. The WTO rules for AD legislation and the different methods that authorities use to calculate dumping penalties are also discussed. The chapter concludes with some suggested revisions for the current legislation. Dumping, antidumping, and international trade laws Economists have traditionally defined dumping as international price discrimination where prices vary across national markets (Viner 1923). Price discrimination dumping occurs when a firm exports a product at an export price lower than the price that it charges in its domestic market. For example, if a Japanese firm sells widgets for 10 yen in Japan and for the equivalent of 7 yen in Canada, the Japanese firm is dumping into the Canadian market. Economic theory shows that price discrimination is a profitmaximizing strategy when the...

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