Edited by William A. Kerr and James D. Gaisford
Chapter 32: Antidumping: Theory and Practice, Rationales and Calculation Methods
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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