Dumping and the world by N_Corp

A wise man once said that the Indians are obsessed with cleanliness of our kitchen; yet never even think twice before dumping garbage on streets. Well this activity has got a whole new meaning and a whole new audience. Now many nations are accused of this ‘heinous crime’ on a day to day basis. Though legally speaking ‘dumping’ is not a ‘crime’ as per WTO, which surely does not encourage it but at the same time permits this activity. Things get funnier when China comes into picture, read on…

Well what really is dumping? Dumping is exporting a product to another nation at a price below normal value. Now that raises another question: what is this ‘normal value’? It is a price that the exporting nation charges in its domestic market (or an approximation thereof).

Now we see why dumping is discouraged. Firstly it comes under the classification of predatory pricing. Secondly and more importantly it distorts the domestic market of the importing nation. Why allow it then? On the name of free market? Well your objection is justified and under GATT, nations can take action against dumping so that the final value of the foreign product in their market is close to normal value of the dumped product at home. Authorities investigate such cases and impose punishment that is valid for roughly/generally a term of 5 years. The incidence of these cases is maximum in two obvious nations. Argentina being one and the other being… yes… INDIA.

Finally we come to the astounding bit. China is not granted a "Market Economy Status" by the EU. Seems trivial? But it is not, for now the perplexing question arises: when cases of dumping come up against China, how do we calculate the normal value of Chinese product.  To do so, an ‘analogue market’ is chosen, i.e. the normal value is calculated for that domestic market. Now which market do you think is usually chosen as an analogue for China? Well… wait for it… its USA! Yes the very same USA which outsources to China because of cheap cost of input factors!

(still to come: Dumping and the Indian steel industry)