International dumping policy is determined by the World Trade Organization.
Dumping occurs when a manufacturer exports goods to another country at a price below the market price, or below the cost of production. Dumping can damage industries in the importing country by forcing them to subsist at pricing levels below market. The World Trade Organization (WTO) does not prohibit dumping, but allows countries to take action when the practice damages competing domestic industries. In the General Agreement on Tariffs and Trade (GATT), the Anti-Dumping Agreement provides for an anti-dumping duty to be applied in order to bring prices on imported goods closer to market value.
The WTO Rules on Dumping
The WTO specifically allows anti-dumping duties when there is a genuine and definable adverse impact on the competing domestic industry. A government wishing to impose such a duty must be able to demonstrate that dumping is occurring, and be able to quantify the effect. GATT provides specific ways of calculating a product's normal value. After demonstrating that a product is being sold below normal value and in large enough quantity, the government must also present extensive evidence that the dumping causes material harm to a competing domestic industry.
Calculating Normal Value
The WTO provides three ways of computing the normal value of a product. The first is based on the price of the good in the exporter's home market. If for some reason this method is not viable, normal value can be computed based on the price charged by the exporter in a third country. If neither of these first two methods can be used, the value can be determined through evaluation of the exporter's production costs along with a profit margin.
Demonstrating Damage to Domestic Industry
Governments must provide convincing documentation that alleged dumping harms competing domestic industry. The WTO has a process for evaluating claims, including a detailed investigation that evaluates all relevant economic factors. Subsequent to the investigation, all interested parties have an opportunity to present evidence. If the WTO determines that dumping is occurring at significant and damaging levels, the manufacturer can choose to raise prices to normal levels or the importing government can impose the anti-dumping duty.
Anti-Dumping Efforts in the United States
In the United States, anti-dumping is regulated by the Department of Commerce's International Trade Administration (ITA) and the International Trade Commission (ITC). The ITA determines whether an import is priced below normal value. The ITC assesses whether there has been damage to competing domestic industry. Most often, claims are initiated when an interested party files a simultaneous petition with both the ITA and ITC. The People's Republic of China has been the number one target of anti-dumping claims in the U.S.
