Imposing Anti Dumping Measures – More Complex Than It Seems
1. Introduction
The main idea behind imposing anti dumping measures is the counteracting of unfair trade practices, especially unfair competition from foreign industries exporting their goods at lower than market prices, submerging the domestic market with goods at prices against which the domestic market cannot possibly compete. It is a protective measure in favor of the domestic industry and a necessity for survival of the domestic economy.
The “formula” for dumping is a priori very simple. According to the general Agreements on Tariffs and Trade (GATT), a product is dumped when it is exported to a foreign market at a price lower than sold locally, on the exporting country’s market. Local prices are compared to the exported prices and when those differ by at least 2%, the goods are considered being dumped. A sine qua non condition for imposing antidumping duties is the existence of material injury to the domestic market and a causal relation between the two.
However, beyond that rather straightforward definition of dumping there are many other considerations taken into account in order for the anti dumping duties to be imposed, or for filing an anti dumping complaint. Those considerations, not always mentioned by the lawmaker or in textbooks, is the subject of this article.
As a preliminary, however, hereinafter is a review of the procedural considerations for imposing anti dumping duties under Israeli legislation.
In order to bring the process in motion, the complainant must file an anti dumping complaint with the Commissioner on Trade Duties, whose office is part of the Israeli Ministry of Industry and Trade. Within 21 days, which can be extended to an additional 30 days, the Commissioner examines the facts in order to determine whether there is prima facie evidence of dumping. Such examination entails a review of all the elements of dumping and goes beyond the mere calculation of the difference between normal (i.e. the prices at which the product is sold on the exporting country’s market) and the domestic value. The Commissioner’s initial review of the complaint also examines whether the subject matter of the complaint, i.e. the exported goods, are identical or similar to the ones manufactured locally, the existence of injury to the local industry, which entails an analysis of domestic sales, market share, price of the product on the domestic market, operational profits, effect on employment, and the causal link between injury and dumping.
Upon completion of the investigation, the Commissioner writes a reasoned opinion on whether the complaint warrants the initiation of an investigation. Such opinion may be appealed before the Chairperson of the Advisory Committee.
A decision by the Commissioner to initiate an investigation brings about the second step of the handling of an anti dumping complaint, which is the imposition of provisional measures. Because such a decision has actual economical implication on the exporting industry, it is more encompassing than the decision to initiate the investigation, however, it is still based, as is the decision to initiate, on prima facie evidence. Such decision can be appealed before the Chairperson of the Advisory Committee, which in turn can be appealed before the District Court.
The third stage of the proceedings is the completion of the investigation and publication of final findings. The Commissioner gathers additional evidence, verifies such evidence and upon completion, submits his final findings to the Advisory Committee. All parties then appear before the Advisory Committee, who shall submit its findings and recommendations to the Minister of Industry and Trade.
Within 30 days after receiving the Advisory’s Committee’s recommendations, the Minister of Industry and Trade has the authority to impose a duty as well as the level of the duty, and may take into considerations other macro economic factors. He also has to obtain approval of the Minister of Finance and the Finance Committee of the Knesset.
The Minister's decision to impose a duty can be appealed at the District Court.
2. Special cases – Special considerations
2.1 The Complainant is a monopoly
When the complainant is a monopoly, the considerations for imposing anti dumping duties are more complex. The “unease” with monopolies stems from the fact that they by definition quell the competition and thus may bring to a rise of the product price on the domestic market, if there is no government supervision of prices. At first, the import of identical or similar products at dumping prices on the local market might seem as a blessing to consumers, finally allowing for competition and a reduction of prices. However, one has to consider that such competition brought about by dumping is not healthy competition bringing a benefit to the consumer, but has the effect of ultimately crushing the domestic industry. Such effect is even stronger when there is a sole producer on the market, which as a result of unfair competition can be completely eliminated.
Whereas generally one of the concerns for imposing anti dumping duties is the need to preserve the domestic producer so as to maintain the number of competitors on the market, in the case of monopoly the concern is different, if not more substantial. The concern is that if dumping goes “unpunished”, an entire industry may be eliminated, causing the domestic market to be totally dependent on imports.
Another school of thought, however, which views a monopoly as a dinosaur, whose dimensions are not fitting the modern, enlightened economy, might be more lenient towards allowing import of dumped products. A government official who espouses those ideas, is more likely to be sympathetic towards the exporting industry, therefore less likely to impose anti dumping duties. He might offer a compromise by e.g. restricting the amounts of dumped products to be allowed for import to a degree that would not cause damage to the domestic monopoly, however, provide for “healthy” competition. Because of the complexity of anti dumping proceedings initiated by monopolies, there are very few actual complaints which have been lodged by monopolies. One such case is a complaint lodged by the European Chemical Industry Council on behalf of Rhone-Poulenc SA, the only European Community producer of coumarin (Official Journal L 239, 07/10/1995). The complaint showed evidence of dumping of coumarin originating from China and causing material injury. The EU Commissioner considered the evidence sufficient to justify the initiation of a proceeding, and the Advisory Commission, having reviewed the evidence, concluded that it is in the interest of the Community to impose anti dumping measures. One of the arguments of the Advisory Committee in this case in favor of imposing anti dumping duties was to avoid the serious risk of having an entire domestic industry shut down, making it entirely dependent upon imports.
Another complaint filed by a sole producer in the European Community market was against imports of monosodium glutamate originating from Indonesia, Korea and Taiwan. In this case, the Advisory Committee decided that there is enough competition from non dumping exporters in order to preserve competition in the domestic market, and warranted the imposition of anti dumping duties.
The case of monopolies is very particular indeed. Since the imposition of anti dumping duties is effected in order to protect the domestic market’s interest, it can be argued that allowing imports – even at lower than cost prices – would be beneficial to the local economy. On the other side, allowing imports at dumping prices could very possibly crush an entire domestic industry, leaving the market entirely dependent upon foreign imports for a specific industry.
2.2 Effects of Filing an Anti Dumping Complaint
It might be beneficial for a domestic producer to file an anti dumping complaint, even when the chances of actually obtaining relief are slim. The lodging of an anti dumping complaint is a warning sign to the “dumper” that his days of dumping might be counted. Instead of getting into lengthy and also costly proceedings, the exporter at dumping prices might simply choose to cease its exports to the country from which the complaint originated. Such is the case when the dumper is a large multinational corporation, who can easily shift its exports to a different country. Operating in that manner is probably more cost effective than continuing to export to the country from where the complaint originates.
3.3 Macro Economic and Political Considerations
An antidumping complaint is in effect a complaint of an economic nature from one country (or union of countries in the case of the EU) against another. It is in some sorts a declaration of war, using economic sanctions as its weapon. Thus, government authorities might in some cases be very reluctant to consider granting anti dumping duties or even allowing the publication of the existence of dumping. The Commissioner might be subject to enormous pressure, ranging from low to top government officials which might be as high as the Minister of Industry and Trade. Such pressure by the Minister might be exercised even at the level of the Commissioner’s decision to publish his findings regarding his investigation of the case. Although the Israeli anti dumping law only allows interference of the Minister at the last instance, i.e. after review of the case by the Advisory Committee, in reality, such intermeddling occurs already at very early stages of handling the complaint. The Commissioner might be in a situation in which he wants to act but is hindered to do so because of political pressure exercised on him. In such case, one might attempt to file a complaint against the Commissioner with the High Court of Justice, claiming that he is not acting in the line of his duties under the law. However, such complaint has very low chances of succeeding since it will be difficult to prove any misconduct by the Commissioner. A more effective strategy might be the enrolment of the press denouncing undue interference by politicians and painting them as non-supportive of the local economy. Ultimately, a positive outcome is most surely the result of painstaking negotiations the complainant and the government officials.
3 Conclusion
This article gives only a glimpse of the complexity of anti dumping proceedings. Where at first the procedure seems clear and simple, it is in effect a more complex issue involving considerations such as favoring or not favoring a complete market economy, some strategic “playing” by the complainant, who might get the desired result even without obtaining the imposition of duties, as well as macro and political considerations which might get in the way of imposing anti dumping duties.