What is sporadic dumping

The dumping from an economic and business point of view

Structure:

A. Preliminary remark
I. What is dumping?
1. Requirements
2. Types of dumping
II. Anti-dumping
III. Core of the work
1. Consequences of anti-dumping
2. From an economic point of view or a political imperative
3. Result

B. Dumping from an economic and business point of view
I. Preliminary remark
II. The economic purpose of anti-dumping
III. Effects of a domestic customs measure
1. General customs effects
(a) From the original state to free trade
(b) Welfare effects of free trade
(aa) Pensions in the original state (equilibrium price)
(1) Consumer surplus
(2) producer surplus
(bb) Free trade pensions (world market price)
(1) Consumer surplus.
(2) producer surplus
(cc) Conclusion
(c) Customs effects in free trade
(aa) protective effect
(bb) consumption effect
(cc) Foreign trade effect
(dd) Balance of payments effect
(ee) redistributive effect
(1) Consumer surplus
(2) producer surplus
(3) Conclusion
(ff) income effect
(gg) welfare effect
(hh) result
2. Special effects of dumping and customs duties in the original state
a) Welfare effects of dumping
(aa) Sporadic dumping
(bb) Ongoing dumping
(cc) Predatory dumping
(dd) result
b) Effects of the anti-dumping duty
(aa) Sporadic dumping
(bb) Ongoing dumping
(cc) Predatory dumping
(dd) result
3. Special effects of dumping and tariffs on free trade
(a) Welfare effects of dumping
(aa) Sporadic dumping
(bb) Ongoing dumping
(cc) Predatory dumping
(dd) result
(b) Effects of the anti-dumping duty
4. Final result of domestic effects
IV. Effects of dumping and customs duties in the exporting country
1. Effects of dumping
2. Effects of the anti-dumping duty
a) Long-term dumping
b) Sporadic dumping
c) Predatory dumping
d) Result
V. Effects on world trade
1. Effects of dumping
2. Effects of Customs
VI. Final result of the economic consideration

C. Conclusion

"Dumping, if not necessarily an unfair method of competition, is at least a quest ionable method."[1]

A. Preliminary remark

Indeed, the issue of dumping involves many problems which are politically and economically highly controversial. One of these problems will be highlighted in the following work. What it is is worked out after a brief explanation of the central terms. A comprehensive analysis of the subject area should then be carried out in the main part and an evaluation and a brief outlook should be given in the concluding remarks.

I. What is dumping?

First, as I said, the most important terms should be briefly discussed. So the first question is: "What is dumping?" For the members of the World Trade Organization (WTO)[2] The General Agreement on Customs and Trade (GATT) applies in accordance with Art. II, Paragraph 4. Article VI (1) of the latter defines dumping as an act by which goods from one country are placed on the market of another country below their normal value. As a result, significant damage must be caused to existing branches of the economy in the importing country (or the European Community) or the creation of a separate domestic branch of the economy must be significantly delayed. The low price always results - I may anticipate this much - from manipulation through unfair price reductions, but not from competition.[3] Thus, dumping is a spatial price differentiation.[4] The difference between the "normal price" and the sales price in the importing country is called the dumping margin. What the “normal price” actually is, how it is calculated and the procedure in which dumping is established, should not be discussed here.[5] For our purposes it is sufficient for the time being to say that dumping is international price differentiation.

1. Requirements

A distinction must now be made between different types of dumping, which are classified according to their purpose and duration. Before these can be presented, however, it must first be established that every dumping practice always requires two compelling conditions.

So there can only be dumping if, firstly, there is a shielded market from which the dumping company can operate and, secondly, there is imperfect competition in this market.[6] Both conditions are indispensable because in an unshielded market the dumping company would have to fear the re-import of the dumped goods or an influx of foreign competition. This would result in lower prices, which would rule out price differentiation. The criterion of imperfect competition on the export market (e.g. through monopoly or cartel agreements) is necessary to prevent domestic competition from forcing an adjustment of the high domestic price to the favorable foreign price.[7] That is why dumping is always ruled out within a single economic area.[8] On the other hand, if both of the above conditions are met, dumping is possible.

2. Types of dumping

We can now distinguish between three types of price differentiation. These are sporadic dumping, predatory dumping and persistent dumping.[9] Each practice has a different purpose and duration.

The sporadic dumping is often driven by the goal of "dumping" overproduction on a foreign market.[10] However, this only makes sense for a company if it is not due to price reductions on the domestic market and the resulting increase in demand[11] can earn more[12] Disposal of the goods is still the cheapest. A profit maximization calculation, or at least an intention to avoid losses, can be assumed here as the tendency of the dumping company.

Long-term dumping reveals the intention to maximize profits even more clearly. The attempt is made here to realize additional profits abroad - with perfect competition - that go beyond those that can be achieved on the home market - with imperfect competition.[13]

In the last type of dumping, predatory dumping, attempts are made to displace competitors on the import market by means of short or medium-term low prices and to build up a monopoly structure.[14] The predatory dumping thus takes place out of a strategy of conquest.

With these remarks, the concept of dumping is comprehensively described. We will come back to the different ways and the requirements at a later point.[15]

II. Anti-dumping

If one reads further Art. VI GATT, one encounters its Paragraph 2. This speaks of the levying of a duty on all goods that are dumped goods. Customs duties are taxes levied by a state (or the European Community) on the cross-border movement of goods.[16] The duty can be as high as the dumping margin found. It is a so-called anti-dumping measure, a measure that is intended to prevent or render ineffective, i.e. neutralize, the supposedly negative consequences of dumping.[17] The competence to impose such anti-dumping measures lies with the contracting parties themselves. This is different at Community level. This should be discussed briefly:

All members of the European Community are also members of the WTO. The Community has thus become a de facto contracting party, and has therefore also grown into the GATT regulations.[18] Because of the postulate of the common trade policy in accordance with Article 3 I lit. b EC, the allocation of competencies in Article 133 I EC and Regulation 2423/88[19] (Anti-dumping regulation) the Community, i.e. the Commission, is exclusively responsible for the imposition of anti-dumping duties insofar as the dumping leads to damage to companies in the Community and protective measures are necessary in the interests of the Community.[20] The defense against dumping is currently the most important autonomous trade protection instrument of the Community.[21] Whether the imposition of such sanctions is also permissible by the member states themselves within the framework of the emergency competence (Art. 294 of the EC Treaty),[22] should not be of interest here.

The term “anti-dumping” generally includes a tariff collection by the Commission or other states in order to ward off dumping. But there are also other measures to prevent dumping or to suppress imports. These are the so-called non-tariff barriers to trade.[23] For example, quantitative import restrictions (import quotas) or voluntary self-restraint agreements should be mentioned.[24] However, a presentation within the framework of GATT should be given here. This only provides for the levying of tariffs to prevent dumping. In addition, it can be assumed that the other trade policy instruments will not have any significantly different effects.[25] But we will not have to go into this further here. In the following, the term customs duty is used as a synonym for the term anti-dumping.

III. Core of the work

Now that the central terms have been roughly outlined, the

The content of the following presentation can be shown by delimiting the measures in question in relation to the topic.

1. Consequences of anti-dumping

Since it is about dumping from an economic and business point of view from the point of view of international commercial law, the question must be asked what is meant by this at all. International commercial law does not include dumping, only anti-dumping measures. There is political room for maneuver with regard to this. Dumping, on the other hand, is not part of commercial law, but is a mere fact that can be legally reacted to. In order to be able to analyze anti-dumping measures economically, the consequences of these measures must be considered. With this, the focus of the content is immediately given. The following sections deal with the effects of anti-dumping on the national and international economy. The primary aim is to show the effects on the importing country (or the European Community), because the anti-dumping authority acting in each case is only responsible for this.

2. From an economic point of view or a political imperative

For all defense measures, two sets of questions can be distinguished. The first deals with the economic usefulness of anti-dumping, the second with its political necessity. As part of this work, the first question to be asked is whether protective measures in the form of tariffs are economically expedient at all. This also corresponds to the topic complex and should represent the focus.

If this is answered in the negative, the question can be asked whether it does not seem necessary for political reasons to ward off dumping and whether anti-dumping is therefore a sensible trade policy instrument - although it is economically inexpedient. However, this question is not to be discussed here.

3. Result

In the following, one issue will have to be clarified comprehensively: It will be examined how an anti-dumping duty can be classified economically. Both the importing country and the exporting country and the global economy that may be affected are discussed.

B. Dumping from a business and economic point of view

I. Preliminary remark

The economic review of the anti-dumping measures will now be carried out in two parts. First and foremost is the determination of the purpose by which customs must be measured. Then it is determined how the imposed anti-dumping duty affects this very purpose. However, this requires a derivation of the situation that leads to a defense against dumping in the first place. That is why the customs inspection should show in detail what the original state of a closed economy looks like and how a dumping import affects this state. It will then be examined how the defense of dumping by protecting the affected market changes the situation that has been created. Since a dumping import is theoretically conceivable even in the case of free trade, this should also be presented on the basis of its effects and the effects of defense. A perfect market is assumed for the entire following presentation.[26]

II. The economic purpose of anti-dumping

The first thing to do is to determine the purpose of the anti-dumping law. As an economic analysis is involved, the economic purpose of the anti-dumping measures must also be taken into account. Several different points are treated as the ratio legis. However, it is questionable whether these also reflect the economic aspect. For example, damage prevention[27] Neutralization of the price difference[28] or protection from unfair and unfair competition[29] called. However, these purposes are more of a factual requirement (damage) and effect of intervention (neutralization) as well as a politically motivated goal (unfair competition).[30] The economic expediency of protective tariffs cannot be effectively measured against them. Rather, there has to be some other purpose that is an economically measurable quantity.

Taking action always requires a certain amount of motivation. This could lie in the fact that the respective acting defense authority wants to protect producers (sellers) and consumers (buyers). The protection of both groups seems to be difficult to implement, as there are mostly different, conflicting interests that cannot be satisfied by an act of the state, as it were. It should be assumed, however, that the protection of both interested parties is intended and that overall protection against loss of welfare is to be granted. If the anti-dumping authority intervenes, the measures taken can therefore be viewed as trade policy instruments that are intended to promote or maintain the welfare of the entire country.[31] However, it is questionable how an increase or loss of welfare can be determined. In this way, price changes can directly benefit buyers or sellers. A change in the overall welfare of a country is therefore implied by the change in the sum of consumer and producer surplus.[32] The change in the respective pension can be understood as a profit or loss for the respective group concerned, which arises from the fact that a product is traded more cheaply or more expensive than expected on the market. This can now serve as a starting point for an assessment of protective measures. Thus, the price differentiation and its defense are to be analyzed on the basis of their effects on welfare.[33]

III. Effects of a domestic customs measure

The following explanations first show the original state of an isolated economy and its welfare gains if it opens up to free trade. Then the general effects on the welfare achieved that a tariff protection brings with it are presented. This is necessary to gain a general understanding of tariff theory. Following the general presentation, the special welfare effects of dumping and anti-dumping in a closed and open economy are shown and compared with the general effects in order to ultimately be able to make a well-founded statement about the economic usefulness of anti-dumping - depending on the status of the economy If necessary, to show other ways of counteracting dumping that may reduce welfare.[34] The following explanations are based on the general tariff theory.[35]

1. General customs effects

a) From the original state to free trade

To simplify and to illustrate the effects of a tariff on the domestic market, the one shown below is intended illustration 1 serve. This shows a country on whose market for good X there is demand N and supply A. In the case of a closed market, the price mechanism would create an equilibrium with regard to supply and demand (G). The (equilibrium) price V would result from this. If the market opens up and takes part in world trade, domestic companies have to face global competition. Because of the competition, the favorable world market price would come into effect. This would be pa and would be 0A. With him, however, there would only be a domestic supply in the amount of AB, which could not meet the demand in the amount of AC. This makes sense because more people want to buy for a lower price, but not all companies are willing or able to offer at that price.

[...]



[1] So the opening sentence of Viner in 1923.

[2] A total of 146 countries belong to the WTO (as of April 3, 2003)
Bindingness of the regulations indicated.

[3] See the conditions for dumping and the unfairness argument that follows from it, below, pp. 2 and 31; See also GATT Geneva, July 1958, Anti-Dumping and Countervailing Duties, P. 9.

[4]Dieckheuer, P. 93; Klemmer / Kösters, P. 814.

[5] See in detail: lux, RIW 1991, p. 828 (830 ff.) For the EC; Toepke, RIW 1983, p. 761 (763 ff.) And Jander / Hess, RIW 1991, p. 582 ff. For the USA.

[6]Dauses, K II marginal number 3; Dieckheuer, P. 93.

[7]Dieckheuer, loc. cit.

[8]Dauses, loc. cit.

[9]Frenkel, WISU 1991, p. 685; Hesse, P. 4; Viner, P. 30; Cords, P. 244 ff.

[10]Dieckheuer, op. cit .; Klemmer / Kösters, P. 814; Viner, loc. cit.

[11] This is a question of the price elasticity of demand. See for example: Mankiw, P. 100; Friedman, P. 34.

[12]Frenkel, WISU 1991, p. 685 (686).

[13]Dieckheuer, loc. cit.

[14]Klemmer / Kösters, P. 814; Dieckheuer, loc. cit.

[15] See below p. 16 ff.

[16]Wool, P. 645; Samuelson / North House, P. 674; Mankiw, P. 203.

[17]Peters, P. 41.

[18]Streinz, Para. 598; Herdegen, Para. 425; Koenig / Haratsch, Paragraph 253.

[19]VO 2423/88 OJ 1988 No. L 209 p. 1 ff.; amended by VO 521/94 OJ. 1994 No. L 66/7 and VO 522/94 OJ. 1994 No. L 66/10.

[20]Klemmer / Kösters, P. 831.

[21]Grabitz and others / Nettesheim, P. 197.

[22]Kilian, Paragraph 162.

[23]Clement / Terlau, P. 437; Mankiw, P. 729.

[24]Klemmer / Kösters, P. 813; Heertje / Wenzel, P. 451.

[25]Rose / Sauernheimer, P.563; Clement / Terlau, P.438; Samuelson / North House, P. 676.

[26] This means, for example, the homogeneity of the goods (i.e. the lack of personal and material preferences) as well as an infinite speed of reaction to changes, complete market transparency and the rationality of market participants.

[27]Bellstedt, RIW 1983, p. 670.

[28]Beseler / Williams, P. 50 f.

[29]Fikentscher, P. 255.

[30] See below on page 31.

[31]Klemmer / Kösters, P. 801; Dieckheuer, P. 95; Heertje / Wenzel, P. 454.

[32]Hostel, WiSt 1992 p. 493; Mankiw, P. 168.

[33]Dieckheuer, P. 95.

[34] See below on page 23.

[35] See on the whole z. B. Woll, p. 645 ff.

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