Unfair Trade Practices

 Dumping and Anti-Dumping

Dumping

Dumping means selling a product in a foreign market at lesser price than in domestic
market.

Dumping occurs when a country or company exports a product to another country at a

price that is lower than the price it charges in its domestic market or lower than the
cost of production. This can lead to unfair competition and negatively impact
domestic industries in the importing country.

The reason dumping can occur are excess production, subsidies, market expansion.

Anti-Dumping

Anti-dumping is a duty imposed by the internal government on that dumped product

to the extent of margin. Margin of anti-dumping is the margin between normal value
in the dumped country and export price. Duty cannot be higher than margin.

Trade problems like dumping endanger domestic pricing structures, and anti-dumping
helps to solve it.

Law does not prevent dumping in a country, but the country has right to impose ant-
dumping duty to balance the loss resulting from dumping, not to stop dumping.
Governments may conduct investigations to determine if dumping is occurring and to
assess its impact on domestic industries.

‘Loss and injury’ are the central thing in legal situation.

 Dumping and Anti-Dumping under GATT and WTO Agreements

Dumping and anti-dumping measures have been addressed under both the General
Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO).

Under GATT

GATT 1947 didn’t specifically include anti-dumping except indirectly, in the form of
an exemption from MFN rule.

GATT Article VI on anti-dumping and countervailing duties intended to address the

injuries suffered by the domestic industries, and to limit the use of anti-dumping
measures by importing countries.

Under WTO

The 1995 WTO Anti-Dumping Agreement builds on GATT Article VI and the Tokyo
Round Code. It clarifies and expands anti-dumping provisions.

The agreement outlines the procedures for initiating and conducting anti-dumping
investigations, including requirements for transparency and due process. Anti-
dumping measures are not meant to be permanent.

The agreement specifies the duration of the measures and allows for a review to
determine whether more actions are required.

WTO Anti-Dumping Agreement provides a framework for addressing the issues

related to dumping and anti-dumping measures in a way that is consistent with
international trade rules and principles.

It aims to strike a balance between protecting domestic industries and preventing the
abuse of anti-dumping measures for protectionist purposes.

The Agreement on the Implementation of Article VI of GATT 1994 (Anti-Dumping

Agreement) was concluded in the Uruguay Round.

 Significance of Anti-Dumping Agreement

Regulates anti-dumping measures by setting out rules for the conduct of

 anti-dumping investigations,
 calculation of dumping margins,
 application of remedial measures,
 determination of injury, enforcement,
 duration of anti-dumping measures and
 dispute settlement.

 Determination of dumping

Article 2 of the Agreement determine the dumping.

 To consider dumping
 Price is less than ‘normal value’ in the country of origin
 Price is lower than comparable price in the 3rd country
 Price is below the cost of production

Article 2 also states about the three-tiered tests for embarking on anti-dumping
actions. They are:

 There must be a dumped import.

 Actual material injury or potential threat of material injury to the competing
domestic industry.
 A causal link between dumping and material injury

 Anti-dumping Investigation
Investigation must generally be initiated on the basis of a written application
submitted by or on behalf of a domestic industry as defined in Article 4 of the
Agreement.

The application must be supported with:

 Evidence of dumping
 Evidence of injury to the domestic industry
 Evidence of causal link between the dumped imports and the injury to the
domestic industry.

The agreement provides for three kinds of measures:

1. Provisional measures (Article 7)

Provisional duty or cash or bond security for the expected anti-dumping duty.

2. Price undertakings (Art. 8)

When there is an initial positive assessment of dumping, injury, and causality and the
authorities believe injury would be eliminated, modify the price or stop exporting at
dumped prices.

3. Definitive anti-dumping duties (Art.9)

Anti-dumping taxes are not required, and the government of the receiving country can
choose not to put them in place.

"Lesser Duty Rule" means that the government sets duties that are lower than the
dumping margin but still high enough to protect people.

The amount of anti-dumping can't be more than the dumping margin that was found
during the investigation.

Anti-dumping taxes must be applied and collected in a way that doesn't favor any one
company.

 Subsidies and Countervailing

A subsidy is a financial contribution or support provided by a government or public
body to a specific industry or enterprise. Subsidies can take various forms, including
direct cash payments, tax breaks, or government-provided goods and services.

 Types of Subsidies:

1. Export Subsidies:

Support given to domestic producers to encourage exports by reducing their

production costs or offering incentives.

2. Domestic Subsidies:

Support provided to domestic industries to enhance their competitiveness or address

certain challenges.

 Art.3 of the WTO Agreement on Subsidies and Countervailing Measures,

breaks the subsidies into three groups

1. Prohibited (Art. 3) = Red Light

Export subsidies, this is always prohibited because if this product goes to the
international market then it distorts the price. (কারণ এই প্রোডাক্ট ইন্টারন্যাশনাল মার্কে ট এ
গিয়ে প্রাইস distortion করে)

2. Actionable (Art. 5) = Yellow Light

Actionable subsidies are not prohibited, but countervailable.

3. Non-actionable (Art. 8) = Green Light

Subsidies which are not specific within the meaning of Article 2. If subsidies for
research activities is less than 75% then that will be non-actionable subsidies.

 Concerns Related to Subsidies:

While subsidies can support domestic industries, they can distort competition and
negatively impact trading partners by giving subsidized products a price advantage.

 Remedies for prohibited subsidies (Art.4)

Consultation for mutually agreed solution.

Procedures to be followed:

a. Request consultation from another member state, stating proof of the subsidy's
existence and nature.
b. Enter into consultation as quickly as possible.
c. Arriving at a solution within 30 days of the request for consultation.

Reference of the matter to the Dispute Settlement Board (DSB) for immediate
establishment of a panel

 The panel may ask the Permanent Group of Experts (PGE) established to examine
if the contested measure constitutes a prohibited subsidy.
 The PGE will quickly evaluate evidence of the contested measure upon request. It
will allow the member to prove it is not a prohibited subsidy.
 PGE will submit its findings to the panel within the specified time.
 The dispute parties will get the panel's final findings.
 Within 90 days of composition and panel terms of reference, all WTO members
will receive it.
 If the measure is a prohibited subsidy, the panel will recommend for immediate
withdrawal. Panel will set mandatory withdrawal dates.
 The DSB will approve the panel report unless one party notifies its decision to
appeal or the DSB unanimously rejects it.
 The Appellate Body (AB) will rule on an appealing panel report within 30 days of
the party notifying the AB.
 Failure to report within 30 days: 60-day extension.
 If the recommendation is not followed, the DSB will allow complaining
members to take action. Request arbitration to evaluate preventative measures
suitability.
Countervailing

Countervailing measures, often referred to as countervailing duties, are trade remedies

implemented by a country to counter the adverse effects of subsidized imports. These
measures aim to level the playing field and protect domestic industries from the
impact of subsidized imports.

When countervailing?

Subsidies can unfairly reduce domestic production costs compared to imports,

distorting trade.

To prevent the economic advantage of the subsidy, WTO legislation allows

countervailing tariffs on subsidized products if they harm another member state's
domestic industry.

A government helping a domestic producer shouldn't harm foreign competitors. A

subsidy must be industry-specific or group-specific.