Dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. Anti-dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Dumping is a process where a company exports a product at a price lower than the price it normally charges in its own home market.
The anti-dumping duty is a tariff imposed on foreign-manufactured goods that are priced below the fair market value of identical items in the home market. Authorities all over the world impose anti-dumping duties on the foreign imports when there is a credible reason to believe that the items are being dumped in the domestic market. Generally, the anti-dumping duty is imposed to safeguard the local businesses and markets from the unfair competition by foreign imports.
Article VI of GATT and the Anti-Dumping Agreement
The GATT 1994 sets forth a number of basic principles applicable in trade between Members of the WTO, including the “most favoured nation” principle. It also requires that imported products not be subject to internal taxes or other changes in excess of those imposed on domestic goods, and that imported goods in other respects be accorded treatment no less favorable than domestic goods under domestic laws and regulations, and establishes rules regarding quantitative restrictions, fees and formalities related to importation, and customs valuation.
The World Trade Organization (WTO) plays a critical role in the regulation of anti-dumping measures. As an international organization, the WTO does not regulate firms accused of engaging in dumping activities, but it possesses the power to regulate how governments react to dumping activities in their territories. Almost all WTO member countries have adopted/amended their anti-dumping legislation largely in accordance with the GAIT provisions to deal with dumped imports. Some of the countries that are not members of WTO have also acquired their anti-dumping legislations.
Countries carry out anti-dumping probe to determine whether their domestic industries have been hurt because of a surge in cheap imports. The duty is aimed at ensuring fair trade practices and creating a level-playing field for domestic producers with regard to foreign producers and exporters.