Key issues & Learning objectives 1. Definitional/conceptual issues What is the legal definition of dumping? What is the business logic of “dumping”? (if any) 2. Functional issues How are AD regulations administered in reality? (criteria, etc…) How much politics is there?

AD investigations sorted by complaining country (continued) Source : Journal of World Trade, 32(5), 5-71,1998; Rowe & Mauw, Global Trade Protection Report 1999.

Investigations - complainants vs. defendants Source : Journal of World Trade, 32(5), 5-71,1998 Affected countries Reporting (complaining) countries

Investigations by sector Source : Journal of World Trade, 32(5), 5-71,1998

EU member states positions on AD cases, Source: Adapted from Evenett Vermulst FrPt ItSp Gr Ger UK Nth Sw + Dk Fl Ir Aust. Bel Lux

La propagande… … et la réalité

According to the GATT antidumping code’s Article VI:1, dumping is said to have occurred if: “[…] if the export price of the product exported from one country to another a) is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or, b) in the absence of such a domestic price, is less than either 1. the highest comparable price for the like product for export to any third country in the ordinary course of trade, or 2. the cost of production of the product in the country of origin plus a reasonable addition for selling costs and profit.”

Firm AFirm B Firm DFirm C C OUNTRY 1 C OUNTRY 2 C OUNTRY 3 Alternative (sufficient) definitions of dumping on country 2’s market: price AC < price AB price AC < price AD price AC < average cost

Dumping margin calculations: old method Exporter’s domestic market (Turkey) Exporter’s foreign market (EU) Prices Transaction 1120 Transaction 2 95 Transaction 3 85 __________________ Normal value100 Prices Transaction 1120 Transaction 2 95 Transaction 3 85 ______________________________

Dumping margin calculations: zeroing Exporter’s domestic market (Turkey) Exporter’s foreign market (EU) Prices Transaction 1120 Transaction 2 95 Transaction 3 85 __________________ Normal value100 PricesDumping margins Transaction 1120 n/a Transaction Transaction ______________________________ Average dumping margin 10

Dumping margin calculations: new method Exporter’s domestic market (Turkey) Exporter’s foreign market (EU) Normal values MFA cat MFA cat MFA cat Average Dumping export margins prices MFA cat MFA cat n/a MFA cat n/a

Assessing “causation” from employment data Employment data for the complaining firms Beginning of the alleged dumping lag Is the slope difference statistically significant?

1. Definitional/conceptual issues The correct criteria for predatory dumping are a) Ex ante: dominant position, no restraint on monopoly power b) Ex post: loser’s exit and exploitation of monopoly power by the winner. By these criteria, there is very little predatory dumping going on (notable exceptions: transatlantic airlines cartel, Japanese semi- conductors,…) “Natural” (non-predatory) pricing strategies can be actionable under current anti-dumping rules: a) pricing more aggressively where you have no brand recognition b) pricing more aggressively where demand is more elastic. Key messages (1)

Key messages (2) 2. Functional issues AD regulations give considerable discretion to investigating authorities as to a) Measurement of dumping b) Measurement of injury c) Assessment of causation The degree of political involvement varies, but can be considerable.