Submitted By

Varunendra Pandey
406

DUMPING – MEANING AND TYPES

Dumping is a term used in the context of international trade. It's when a country or
company exports a product at a price that is lower in the foreign importing market than the
price in the exporter's domestic market. Because dumping typically involves substantial
export volumes of a product, it often endangers the financial viability of the product's
manufacturers or producers in the importing nation.

Dumping is an international price discrimination in which an exporter firm sells a portion

of its output in a foreign market at a very low price and the remaining output at a high
price in the home market Haberler defines dumping as: “The sale of goods abroad at a
price which is lower than the selling price of the same goods at the same time and in the
same circumstances at home, taking account of differences in transport costs”.

Key points

 Dumping occurs when a country or company exports a product at a price that is lower in
the foreign importing market than the price in the exporter's domestic market.
 The biggest advantage of dumping is the ability to flood a market with product prices that
are often considered unfair.
 Dumping is legal under WTO rules unless the foreign country can reliably show the
negative effects the exporting firm has caused its domestic producers.

 Meaning

Dumping is an international price discrimination in which an exporter firm sells a portion of

its output in a foreign market at a very low price and the remaining output at a high price in
the home market Haberler defines dumping as: “The sale of goods abroad at a price which is
lower than the selling price of the same goods at the same time and in the same
circumstances at home, taking account of differences in transport costs” Viner’s definition is
simple.
 According to him, “Dumping is price discrimination between two markets in which the
monopolist sells a portion of his produced product at a low price and the remaining part at a
high price in the domestic market.” Besides, Viner explains two other types of dumping.
One, reverse dumping in which the foreign price is higher than the domestic price.
This is done to turn out foreign competitors from the domestic market. When the product is
sold at a price lower than the cost of production in the domestic market, it is called reverse
dumping, second when there is no consumption of the commodity in the domestic market
and it is sold in two different foreign market, out of which one market is charged a high
price and the other market a low price. But in practice dumping means selling the product at
a higher price in the domestic market and at a lower price in the foreign market. We will
explain price determination under dumping in this sense.

 Types of Dumping

Dumping can be classified in the following three ways:

1. Sporadic or Intermittent Dumping

It is adopted under exceptional or unforeseen circumstances when the domestic production

of the commodity is more than the target or there are unsold stocks of the commodity even
after sales. In such a situation, the producer sells the unsold stocks at a low price in the
foreign market without reducing the domestic price.

This is possible only if the foreign demand for his commodity is elastic and the producer is
a monopolist in the domestic market. His aim may be to identify his commodity in a new
market or to establish himself in a foreign market to drive out a competitor from a foreign
market. In this type of dumping, the producer sells his commodity in a foreign country at a
price which covers his variable costs and some current fixed costs m order to reduce his
loss.

2. Persistent Dumping:

When a monopolist continuously sells a portion of his commodity at a high price in the
domestic market and the remaining output at a low price in the foreign market, it is called
persistent dumping. This is possible only if the domestic demand for that commodity is
less elastic and the foreign demand is highly elastic. When costs fall continuously along
 with increasing production, the producer does not lower the price of the product more in
the domestic market because the home demand is less elastic.

However, he keeps a low price in the foreign market because the demand is highly elastic
there. Thus, he earns more profit by selling more quantity of the commodity in the foreign
market. As a result, the domestic consumers also benefit from it because the price they are
required to pay is less than in the absence of dumping.

3. Predatory Dumping:

The predatory dumping is one in which a monopolist firm sells its commodity at a very low
price or at a loss in the foreign market in order to drive out some competitors. But when the
competition ends, it raises the price of the commodity m the foreign market. Thus, the firm
covers loss and if the demand in the foreign market is less elastic, its profit may be more.

 OBJECTIVES

To Find a Place in the Foreign Market

A monopolist resorts to dumping in order to find a place or to continue himself in the

foreign market. Due to perfect competition in the foreign market he lowers the price of his
commodity in comparison to the other competitors so that the demand for his commonly
may increase. For this, he often sells his commodity by incurring loss in the foreign
market.

To Sell Surplus Commodity

When there is excessive production of a monopolist’s commodity and he is not able to sell
in the domestic market, he wants to sell the surplus at a very low price in the foreign
market. But it happens occasionally.

Expansion of Industry

A monopolist also resorts to dumping for the expansion of his industry. When he expands
it, he receives both internal and external economies which lead to the application of the
law of increasing returns. Consequently, the cost of production of his commodity is
 reduced and by selling more quantity of his commodity at a lower price in the foreign
market, he earns larger profit.

New Trade Relations

The monopolist practices dumping in order to develop new trade relations abroad. For this,
he sells his commodity at a low price in the foreign market, thereby establishing new
market relations with those countries. As a result, the monopolist increases his production,
lowers his costs and earns more profit.

 Effects of Dumping

Effects of Dumping on Exporting Country

1. When domestic consumers have to buy the monopolistic commodity at a high price through
dumping, there is loss in their consumers’ surplus. But if a monopolist produces more
commodities in order to dump it in another country, consumers benefit. This is because with
more production of the commodity, the marginal cost falls. As a result, the price of the
commodity will be less than the monopoly price without dumping.
But this lower price than the monopoly price depends upon the law of production under
which the industry is operating. If the industry is producing under the law of diminishing
returns, the price will not fall because costs will increase and so will the price increase.

2. The exporting country also benefits from dumping when the monopolist produces more
commodities. Consequently, the demand for the required inputs such as raw materials, etc.
for the production of that commodity increases, thereby expanding the means of
employment in the country.

3. The exporting country earns foreign currency by selling its commodity in large quantity in
the foreign market through dumping. As a result, its balance of trade improves.
Effects of Dumping on Importing Country

1. If a producer dumps his commodity abroad for a short period, then the industry of the
importing country is affected for a short while. Due to the low price of the dumped
commodity, the industry of that country has to incur a loss for some time because less
quantity of its commodity is sold.
2. Dumping is harmful for the importing country if it continues for a long period. This is
because it takes time for changing production in the importing country and its domestic
industry is not able to bear competition. But when cheap imports stop or dumping does not
exist, it becomes difficult to change the production again.
3. If the dumped commodity is a consumer good, the demand of the people in the importing
country will change for the cheap goods. When dumping stops, this demand will reverse,
thereby changing the tastes of the people which will be harmful for the economy.
4. If the dumped commodities are cheap capital goods, they will lead to the setting up of a
now industry. But when the imports of such commodities stop, this industry will also be shut
down. Thus ultimately, the importing country will incur a loss
5. If the monopolist dumps the commodity for removing his competitors from the foreign
market, the importing country gets the benefit of cheap commodity in the beginning. But after
competition ends and he sells the same commodity at a high monopoly price, the importing
country incurs a loss because now it has to pay a high price.
6. If a tariff duty is imposed to force the dumper to equalise prices of the domestic and
imported commodity, it will not benefit the importing country.
7. But a lower fixed tariff duty benefits the importing country if the dumper delivers the com-
modity at a lower price.
 Case Study

Russia - Anti-Dumping Duties on Light Commercial Vehicles from

Germany and Italy

Short title Russia – commercial vehicles

Complainant European Union

Respondent Russian Federation

Third Parties China; India; Japan; Korea, Republic of; United States; Brazil;
Turkey; Ukraine

Agreements cited:
(as cited in request for Anti-dumping (Article VI of GATT 1994)
consultations)

Request For 21 May 2014

Consultations

Panel Report Circulated 27 January 2017

Appellate Body Report 22 March 2018

 Background

The anti-dumping duties on light commercial vehicles, introduced in May of 2013, target
imports from Germany, Italy and Turkey.
The measures concern light commercial vehicles between 2.8 tonnes to 3.5 tonnes in
weight, van-type bodies and diesel engines with a cylinder capacity not exceeding 3.000
cm3, designed for the transport of cargo of up to two tonnes or for the combined transport
of cargo and passengers.
The measures were adopted by the Eurasian Economic Union and currently apply on
imports to all its countries, i.e. Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. If
they are removed, there will be no such anti-dumping duties on imports from those EU
Member States into any of the members of the Eurasian Economic Union.
The case concerns Russia specifically, given that at the time the EU brought the case to the
WTO in 2014, Russia was the only member of the Eurasian Economic Union bound by the
WTO rules.
This is one of four WTO disputes that the EU has had to bring against Russia since its
accession to the WTO. The other cases concern an import ban on pigs and pork products,
excess tariffs on imports of paper and other products, and a recycling fee on cars. In the
cases of excess tariffs and the pork ban, two WTO panels found in 2016 that Russian
measures were violating the WTO rules.

 Consultations

 Complaint by the European Union.

On 21 May 2014, the European Union requested consultations with the Russian Federation
with respect to the levy of anti-dumping duties on light commercial vehicles from Germany
and Italy by the Russian Federation pursuant to Decision No. 113 of 14 May 2013 of the
College of the Eurasian Economic Commission.
The European Union claims that the measures are inconsistent with:
 Articles 1, 2.2, 2.3, 2.4, 3.1, 3.2, 3.4, 3.5, 4.1, 6.2, 6.4, 6.5, 6.5.1, 6.8, 6.9, 6.10, 9.2, 9.3,
12.2, 12.2.2, 18.4 and Annex II of the Anti-Dumping Agreement;

 Article VI of the GATT 1994.

 Panel and Appellate Body proceedings

On 15 September 2014, the European Union requested the establishment of a panel. At its
meeting on 26 September 2014, the DSB deferred the establishment of a panel.
At its meeting on 20 October 2014, the DSB established a panel. China, India, Japan, Korea
and the United States reserved their third-party rights. Subsequently, Brazil, Turkey and
Ukraine reserved their third-party rights.
On 8 December 2014, the European Union requested the Director-General to compose the
panel. On 18 December 2014, the Director-General composed the panel.
On 11 June 2015, the Chair of the panel informed the DSB that the panel's work had been
delayed as a result of a lack of available experienced lawyers in the Secretariat and that it
does not expect to issue its final report to the parties before the end of 2016.
Following the resignation on 1 December 2015 of the Chair and a member of the panel, the
Director-General on 11 December 2015 appointed a new Chair and a new member of the
panel.
On 27 January 2017, the panel report was circulated to Members.

 Summary of key findings

 The European Union challenges the imposition, by the Russian Federation, of anti-
dumping duties on certain light commercial vehicles (LCVs) from Germany and
Italy. The measure at issue is Decision No. 113 of 14 May 2013 of the Board of the
Eurasian Economic Commission (EEC), including annexes, notices and reports of the
Department for Internal Market Defence of the EEC (DIMD) and any amendments.
 At issue is the DIMD's definition of the domestic industry, the DIMD's selection of
investigation periods, and the DIMD's determinations on price suppressive effects, injury
and causation. The European Union also challenges certain procedural aspects of the
underlying investigation concerning confidential treatment of information, provision of
non-confidential summaries of information treated as confidential, and the disclosure of
essential facts.

 The Russian Federation requested that the Panel reject the European Union's claims in
this dispute in their entirety.
 Claims Concerning the Definition of the Domestic Industry

 The European Union claimed that the DIMD did not conduct an objective examination
based on positive evidence. This is because it defined the domestic industry as consisting of
one producer, Sollers, which accounted for about 87.8% of total domestic production of the
like product during the POI and excluded a known producer, GAZ, from the definition of
the domestic industry. The exclusion of GAZ from the domestic industry led to a risk of
materially distorting the injury analysis and resulted in the violation of Articles 3.1 and 4.1.

 The Panel found that the DIMD defined the domestic industry as Sollers only after it
received Questionnaire responses from both Sollers and GAZ. In this way, the DIMD risked
materially distorting its own injury analysis and therefore acted inconsistently with
Article 4.1. Because the DIMD made its injury and causation determinations on the basis of
information related to an improperly defined domestic industry, the DIMD also acted
inconsistently with Article 3.1, as a consequence of its breach of Article 4.1.

Claims Concerning Price Suppressive Effects

 The European Union claimed that the DIMD acted inconsistently with Articles 3.1 and 3.2
by failing to make an objective examination of the price suppressive effect of dumped
imports based on positive evidence.

 The Panel found that the DIMD acted inconsistently with Articles 3.1 and 3.2 by failing to
taken into account the impact of the financial crisis in determining the appropriate rate of
return in its consideration of price suppression. However, the European Union did not
establish that the DIMD acted inconsistently with Articles 3.1 and 3.2 because the DIMD
“mixed up” data expressed in USD and RUB without any explanation in its consideration of
price suppression. In addition, the European Union did not establish that the trends in
dumped import prices and domestic prices called into question the “explanatory force” of
dumped imports for price suppression, that the DIMD should have analysed whether the
market would accept additional domestic price increases, that the DIMD failed to examine
whether any price suppression was the effect of competitive pressure exerted by the other
domestic producer, that the DIMD failed to examine the relevance of the 2009 increase in
customs duties on imported LCVs from 10% to 25%, and that the DIMD did not
demonstrate that the alleged price suppression was “to a significant degree”.
 Claims concerning the confidential treatment of information

 The European Union claimed that confidential treatment by the DIMD of certain
information submitted by interested parties was inconsistent with Articles 6.5 and 6.5.1
because, with respect to each item of information in question, one or more of the following
occurred:

 the DIMD failed to require a showing of good cause for confidential treatment;

 the DIMD did not assess whether the cause shown was sufficient to warrant the confidential
treatment;

 there was no “meaningful” summary of the confidential information submitted; or

 No explanation of why a summary was not possible was provided.

 The Panel found that in respect of certain items of information treated as confidential by the
DIMD at issue in this dispute, the European Union demonstrated that the submitters of that
information did not show good cause for confidential treatment. On that basis, in respect of
all the information at issue, treated as confidential by the DIMD, the DIMD did not act
consistently with Article 6.5. The Panel did not find it necessary to address the claims of
the European Union under Article 6.5.1 to resolve this dispute.

 Developments in the case

On 20 February 2017, the Russian Federation notified the DSB of its decision to appeal to
the Appellate Body certain issues of law and legal interpretations in the panel report. On 27
February 2017, the European Union notified the DSB of its decision to cross-appeal.
On 13 April 2017, the Appellate Body informed the DSB that it would not be able to
circulate the Appellate Body report in this appeal by the end of the 60-day period, nor
within the 90-day time-frame provided for in Article 17.5 of the DSU. The Appellate Body
referred to the number and complexity of the issues raised in this and concurrent appellate
proceedings, together with the demands that these concurrent appeals place on the
WTO Secretariat's translation services, and the shortage of staff in the Appellate Body
Secretariat. The Appellate Body also informed the DSB that the circulation date of the
Appellate Body report in this appeal would be communicated to the participants and third
 participants after the oral hearing. On 8 March 2018, the Appellate Body informed the DSB
that its report in this appeal would be circulated no later than 22 March 2018.
On 22 March 2018, the Appellate Body report was circulated to Members.

At its meeting on 9 April 2018, the DSB adopted the Appellate Body report and the panel
report, as modified by the Appellate Body report.

 Implementation Of Adopted Reports

On 20 June 2018, the Russian Federation informed the DSB that following the expiration of
the measures at issue, the Russian Federation had fully implemented the DSB’s
recommendations and rulings in this dispute.