WTO Law on Dumping and Anti-Dumping Measures

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WTOLaw on Dumping and Anti-Dumping Measures

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ExecutiveSummary

Internationaltrade encompasses among other things the exchange of goods andservices from one country to another. Globalization and digitizationhave also resulted to the convergence of the world businesspractices. Nations are able to provide to others what they areendowed with in exchange of obtaining those goods and services theydo not produce (Lester, 2012). The resulting effect is division oflabour in the international scenes. Additionally, the concept ofinternational trade and division of labor is well-explained byunderstanding the factors behind trade. It is notable that variousproducts have unique requirements to be produced. These uniquerequirements may be found in one nation, thus placing it at acompetitive position internationally (Trebilcock, 2012). Thepositioning the specific nation fetches internationally is referredto as comparative advantage. It is a scenario dominated by theprinciple of production and availability of resources as comparedbetween two nations.

Theconcept of international trade gives rise to other areas of studysuch as comparative advantage theory, and trade protectionism.Economic trade scholars have defined comparative advantage as thepower of one nation to produce a specific quantity of goods or offera given level of service at the expense of producing anothercommodity or offering another service (Golley, 2011). The relativelylower costs of production of the commodities guide the nations in thedecision-making process. Moreover, the theory of comparativeadvantage has given rise to very many limitations which have to bechecked through protectionism. Protectionism in the world ofinternational trade simply stands for the barriers created by a givennation towards trading with another nation (Peter, 2013). It is aimedat checking the movement of goods and services in the internationaltrade scene. From the point of a researcher/scholar, it would beparamount to enact laws to control the trade among and betweennations. World trade organization has drafted several clauses inregard to the best trade practices to be adopted by trading nations.Among the drafted clause, is the law governing dumping of goods andservices and the corresponding antidumping measures to check trade(Lester, 2012).

Structuraloverview of WTO

Thevarious economic integrations that took place historically in theinternational trade encountered many challenges. Principal challengeswere trade barriers in some nations, and also the presence of closedeconomies (Steger, 2010). As a result of these problems, aninternational agreement was signed by member nations in the year 1947and named as General Agreement on Tariffs and Trade. The body had thesupervisory role in the international trade, as well as provision ofall the entities of liberalization. Member states used the forum tonegotiate on the various challenges that faced them in their tradepractices. WTO was born from the many negotiations that took placebetween the years 1986 and 1994. Majority of the people refer to thenegotiation as Uruguay round negotiations. It was formed to succeedGATT in all the aspect of doing business internationally (Peter,2013).

Tradefacilitation by the clauses laid down by WTO has been a success tothe international trade. The body is guided by well-defined visionand mission statements, all geared towards a fair international tradeground. Both GATT and WTO have had roles in the positioning of tradeliberalization concept among the member states (Bermann, 2006). Theregulation of nontariff barriers in the international trade isanother component of the two bodies which currently work as one.After its formation, the trade body was charged with theresponsibility of settling any trade dispute among trading nations.It also had the responsibility of formulating new trade practices andprovision of training to developing nations worldwide (Golley, 2011).

TheWTO governing body comprise of a secretariat through which complaintsare recorded. The secretariat seeks for further guidelines from theentire committee members before issuing any feedback to theplaintiff. WTO also has an anti-dumping committee which normallymeets twice in a year. The committee is charged with the role ofanalyzing any dumping case reported to the secretariat (Meléndez,2011).

Theoreticalframework

Internationaltrade is a factor of many variables, all which work in aninterdependent manner. Fairtrade movement is one of the variables ofinternational trade operated by nations worldwide. Businesses thatapply and follow the labour guidelines have been rewarded for thepractice. From an international trade point of view, imposing thefair-trade rule is of great help and will curb the businesses fromviolating the labor practices (Lester, 2012). Some of the guidelinesinclude: – the introduction of price floors in the internationalmarket to cushion businesses from the fluctuation in the prices oftheir commodities and also certification which ensures businesses paythe right wages to their employees. A trade theorist will argue that,prices of commodities are determined by the forces of demand andsupply and even also the price for labor will also be determined bythe supply of it (Trebilcock, 2012).

Secondly,there is a comparative advantage theory. It is a variable that isparamount in the study and exposition of the concept of internationaltrade (Steger, 2010). Economic trade scholars have defined it as thepower of one nation to produce a specific quantity of goods or offera given level of service at the expense of producing anothercommodity or offering another service. The relatively lower costs ofproduction of the commodities guide the nations in thedecision-making process. Moreover, the theory of comparativeadvantage has given rise to very many limitations which have to bechecked through protectionism (Delimatsis, 2007). The principlebehind this theory is the concept of specialization and division oflabour. As noted by the works of Professor Adam Smith 1776, when thenation is endowed by unique resources, it should competitivelyexploit them for its benefits. He, therefore, advocated the divisionof work into stages and specialization in the various components ofthe work. His absolute advantage theory, however was diluted byRicardo’s comparative advantage theory (Peter, 2013).

AdamSmith elaborated on the theory of absolute advantage to the nation inthe international trade. He noted that, when nations trade, it is notonly the nations that benefit from that trade, but also theindividual citizens of those nations. The absolute advantage theoryis founded on the concept of natural resources endowment (Bermann,2006). It is argued that the nation will be positioned strategicallyahead of others in the trade if it can be in a position to produce agiven amount of products using a given amount of resources thatanother country cannot be able to produce.

Onthe other hand, Ricardo’s theory of comparative advantage is basedon the concept of opportunity cost. David Ricardo based his argumenton the foundation of the cost of production (Yueh, 2009). It isargued that a country will be competitive if it can be able toproduce a given quantity of products using the costs that could haveproduced a similar quantity of another commodity but at a higherprice. This concept is based on the concept of opportunity cost andthe production process (Andersen, 2009). This theory diluted theworks of Adam Smith.

Thethird component variable of international trade is tradeprotectionism. Protectionism in the world of international tradesimply stands for the barriers created by a given nation towardstrading with another nation (Golley, 2011). It is aimed at checkingthe movement of goods and services in the international trade scene.This has mainly resulted from the fact that many nations have optedto adopt specialization in their production of certain goods, andthus placing them at a global competitive position. This is acomponent that arises from the application of comparative theory ofeconomic trade. National governments use tariffs to create barriersto trade internationally (Bermann, 2006).

Conceptualframework

Dumpingis a concept that has dominated the international world scene. It isthe intentional selling of goods in a foreign nation at a price thatis far much lower than it is charged in the domestic scene. Scholarshave elaborated on the economic implications of this trade practice(Andersen, 2009). Many have viewed it as source of monopoly in theforeign market scenes. Its effects in the short run period arebeneficial in a way to the receiving nation however, the long runeffects may be tremendous. It may be a source of unemployment throughclosure of industries manufacturing the dumped commodity. It may alsohave a negative implication to the balance of trade of the twonations involved. The world trade organization is the body chargedwith checking and controlling international trade practices.

BothGATT and WTO give a definition for the term dumping. It is outlinedas the application of discrimination in terms of pricing goods in aforeign market as compared to the local market of export (Steger,2010). Emphasis is laid on the normal value price and export valueprice. However, the concept may turn out to be sophisticated, andthus will require an in-depth analysis of many price componentsbefore arriving at the conclusion that there is a case of dumping.The mostly affected nations are the developing ones as they lackexpertise and proper structures to check such challenges.

WTOprovides a technical outline of the anti-dumping information. Theseare measures geared towards protecting those nations affected by thecases of dumping in the international trade. Other than the formationof WTO, the Marrakesh declaration commonly known by many as theUruguay Round negotiations, bore many fruits in the internationaltrade. There was the signing of the agreement to protect theproduction and selling of goods and services in the internationalmarket. The declaration also outlined the procedures to be followedin the event of a trade dispute among the member states (Bermann,2006). WTO has been on the forefront campaign to open all the closedeconomies. This is geared towards facilitating the free flow of goodsin the international market. There are, however, cases where the bodyhas fought for the maintenance of trade barriers. This mainly happensin the case of protecting consumers of the target nations.

Theresponsibility of controlling dumping heavily rests on the governmentof the affected nation. WTO has only the role of supervision and donot control dumping directly. It is however, notable that the bodyprovides the guidelines to be followed by the governments of theaffected nations to counter the problem of dumping (Andersen, 2009).This is mainly referred to as anti-dumping measures. Article VI ofthe GATT act provides for the anti-dumping measures in theinternational trade. It is also provided in the WTO’s anti-dumpingAgreement. A notable change happened to the original Tokyo Roundanti-dumping code through revision to the Uruguay negation round.

WTOagreement on international trade comprises of various factors such asanti-dumping, subsidies and safeguards. All these components arefunctional to al the member states regardless of their geographicallocation or their economic status (Bernasconi, 2005). The body has aduty to supervise the actions taken by individual member states inthe international trade. One of the main areas of supervision is thecase for anti-dumping. The body clearly stipulates the actions to betaken to the nation involved in the trend. The agreement is abidingand its enforcement depends on the extent of the effects of thepractice.

Legalityof International Trade Practices

Legally,WTO does not have the powers to act on a nation applying dumpingtrade practice in the international trade. However, in any givencircumstance, it is responsible in the provision of the master planto be followed by the affected government (Footer, 2006). Theaffected government must prove beyond reasonable doubt that itsuffered from the dumping practices. If the investigations prove thatindeed there was a loss resulting from the practice, WTO has thecapacity to advise the government to take the proper legal action(Lester, 2012).

Additionally,the agreement providing the anti-dumping guidelines offers strictconditions to the matter of dumping. It states that a thoroughinvestigation should always be conducted before a case for dumping isproved. In such a scenario, the investigating team will have tocompare the prices of the goods in the two markets (Andersen, 2009).It is, however, paramount to note that the prices are compared basedon the normal value at the country of import and export value at thecountry of origin. This is done to facilitate a normative rather thana descriptive scenario of dumping. In the event it is proven afterinvestigation that there was an infringement of the agreementcontrolling dumping, the exporting nation will be advised to set theprices as per the country of import (Bohanes, 2006).

Accordingto the anti-dumping agreement, the member states are supposed tocarry out an annual investigation of any presence of dumping andprovide a detailed report. The volume of the goods involved issupposed to be evaluated to test the level of significance to theeconomy of the importing nation. There should also be a clearchecking of the margins of the dumping as compared to the exportprice. In the event that a dispute arise in the process ofinvestigation or reporting, it is advisable to seek for the help ofWTO to settle down the dispute. Under the banner of consultation, theparties involved are supposed to resolve the issue in an amicablemanner with a given period of time. In the event of the lapse of 60days, the plaintiff may seek for the help of the advisory committee(Golley, 2011).

TheWTO governing body comprise of a secretariat through which complaintsare recorded. The secretariat seeks for further guidelines from theentire committee members before issuing any feedback to the plaintiff(Yueh, 2009). WTO has also an anti-dumping committee which normallymeets twice in a year. The committee is charged with the role ofanalyzing any dumping case reported to the secretariat.

DumpingCases

Thefirst filed and decided case involved the Canadian government andChinese Taipei, on 20thof June, 2014. The affected nation (Chinese Taipei) accused Canadaover the matter of dumping of steel pipes. The matter was reported toWTO for further intervention and guidance (Alexander, 2008).

Secondly,there is the filedand decided case of the government of Indonesia towards the issue ofbiodiesel from EU on 10thJune, 2014. The government of Indonesia wrote to the secretariat ofWTO regarding the need for a consultation on the mentioned matter.Indonesia based the argument on a specific provision contained in2009 anti-dumping measure. It also cited a case of presence ofinconsistency in the treatment of the provisions set (Barbour, 2010).

Recommendations

Inchecking the problem of dumping, trading nations should adopt theconcept of economic integration. This involves the performance oftrade among countries in a free and smooth manner without anybarrier. It has the advantage of encouraging employment among thenations involved through the mobility of labour factor o production(Bohanes, 2006). Economic integration also encourages competitionthus resulting in the production of quality goods. It is also asource of foreign investment which benefits the nations involved. Thefree flow of goods will reduce cases of dumping because of the laiddown rules.

WTOshould be empowered to act directly on those nations that violate theanti-dumping law. This will facilitate quick resolution of anypending disputes among nations. It will also help developing nationsas they are the one who suffer most from the problem of dumping(Trebilcock, 2012). The agreement should be revised on an annualbasis based on the filed and decided cases. This will enhance theefficiency and relevance of the feedback offered by the anti-dumpingcommittee.

Also,there should be application of modern technology in the controllingand investigating dumping. The world has witnessed technologicaldynamism which provides ease in the working environment. As a resultof this, international trade should also incorporate thenew-technological channels (Footer, 2006).

Oneof the major measures to counter dumping is through the applicationof protectionism. A government suffering from anti-dumping will applytrade barriers such as quotas. This is whereby the importation ofgoods is limited to a certain volume per year. When the set figure isreached, no more importation will allowed. It is meant to cover theinfant local industries as well as growth of new skills (Trebilcock,2012).

Worldtrade organization has drafted several clauses in regard to the besttrade practices to be adopted by trading nations. Among the draftedclause, is the law governing dumping of goods and services and thecorresponding antidumping measures to check trade (Barbour, 2010).The topic of dumping is crucial in the study of international trade.It is evident that the responsibility of controlling dumping heavilyrests on the government of the affected nation. WTO has only the roleof supervision, and do not control dumping directly. It is however,notable that the body provides the guidelines to be followed by thegovernments of the affected nations to counter the problem ofdumping. This is mainly referred to as anti-dumping measures. ArticleVI of the GATT act provides for the anti-dumping measures in theinternational trade. It is also provided in the WTO’s anti-dumpingAgreement (Bermann, 2006).

Also,it is clear that WTO has the role of providing the anti-dumping rulesfrom a technical perspective. All the measures are incorporated inprotecting member states in the international trade. The variousarticles contained in the WTO charter guides those nations that areinvolved in international trade. There is the stipulation of themandates of each and every member in the trading scenario. Allmembers should derive the associated benefits of being members to theworld trade governing body. Any case that has been decided and it isrecorded at the body’s books, should be used for further guidingother similar cases.

Referencelists

Alexander,K., &amp Andenæs, M. T. (2008). TheWorld Trade Organization and trade in services.Leiden: Martinus Nijhoff Publishers.

Andersen,H. (2009). EUdumping determinations and WTO law.Alphen aan den Rijn: Kluwer Law International.

Barbour,E. C. (2010). Tradelaw: An introduction to selected international agreements and U.S.laws.Washington, D.C.: Congressional Research Service, Library ofCongress.

Bermann,G. A., &amp Mavroidis, P. C. (2006). Tradeand human health and safety.Cambridge: Cambridge University Press.

Bernasconi-Osterwalder,N., Magraw, D., Oliva, M. J., Orellana, M., &amp Tuerk, E. (2005).Environmentand Trade: A Guide to WTO Jurisprudence.London: Earthscan.

Bohanes,J., Sacerdoti, G., Yanovich, A., &amp Conference. (2006). TheWTO at ten: The contribution of the dispute settlement system.Cambridge [u.a.: Cambridge Univ. Press.

Delimatsis,P. (2007). Internationaltrade in services and domestic regulations: Necessity, transparency,and regulatory diversity.Oxford: Oxford University Press.

Footer,M. E. (2006). Aninstitutional and normative analysis of the World Trade Organization.Leiden [u.a.: Nijhoff.

Golley,J., &amp Song, L. (2011). RisingChina: Global challenges and opportunities.Canberra: ANU E Press.

Lester,S. (2012). Worldtrade law: Texts, materials and commentary.Oxford [u.a.: Hart.

Meléndez,O. R., &amp Shaffer, G. C. (2011). Disputesettlement at the WTO: The developing country experience.Cambridge [etc.: Cambridge University Press.

PeterVan Den Bossche, (2013) TheLaw and Policy of the World Trade Organisation: Text, Cases, andMaterialsCambridge: CUP.

Steger,D. P. (2010). Redesigningthe World Trade Organization for the twenty-first century.Waterloo, Ont.: Wilfrid Laurier Univ. Press.

TrebilcockM., Howse R., and Eliason A., (2012). TheRegulation of International TradeLondon: Routledge.

Yueh,L. Y. (2009). Thelaw and economics of globalization: New challenges for a world influx.Cheltenham, UK: Edward Elgar.