A Call for Anti-Dumping Law
By Shiv Raj Bhatt
If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product. Thus, the “dumped product” can be defined as a product introduced into the commerce of an importing country (e.g. Nepal) at a price less than its normal value (production cost).
The act of dumping seems very attractive and beneficial for importing country, if we overlook its long-term impacts. Simply, it is beyond our imagination that getting a product at lower price may harm us or consumers in importing country. But, in most cases (of dumping), it happens, albeit in the long run.
How? First, it can be claimed that the act of dumping restricts fair competition. The exporters (usually giant multinationals who dump their products) want to capture the market of importing country by selling products in low price; even lower than their production cost. The intention behind “bearing losses” is to kick-out domestic firms from the competition and to monopolize the product market in importing country. The small firm of importing country cannot sustain its business, if a giant firm wants to kick it out from the business. This phenomenon is generally known as “injury” to the domestic firm in anti-dumping related literature. The domestic firm(s) is the first victim of dumping, but in the long run, consumers too are victimized. They have to pay higher price once the giant firm (who dumped) succeeds to monopolize the product market by kicking-out the domestic firm(s).
To restrict such unfair and uncompetitive practices, the World Trade Organisation (WTO) allows governments to act against dumping where there is genuine injury to the competing domestic industry. But, in order to do so the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price), and show that the dumping is causing injury or threatening to do so. GATT (Article 6) allows countries to take action against dumping. Typically anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the “normal value” or to remove the injury to domestic industry in the importing country.
Therefore, as allowed by the WTO, a country can introduce an anti dumping law to restrict the dumping activities in its territories. The main instrument that can be used is the “anti-dumping duty” on goods imported from foreign countries at dumped price. The objectives of imposition of anti-dumping duty on goods imported from foreign countries is to redress injury and to prevent material retardation of the establishment or growth of the domestic.
Unfortunately, at present, Nepal does not have an “anti-dumping law” to protect domestic industry from unwanted and unfair business activities of giant foreign firms and to protect consumers from higher monopoly prices. Therefore, it is expedient to protect the domestic industries from the harmful effects and injuries caused by dumped and subsidized goods which enter Nepal. The anti-dumping law is thus, not only needed for the country’s industrial progress, but also for consumers’ welfare.
Nepal , while joining the WTO, made a voluntary commitment to introduce anti-dumping law with full WTO compliance prior to July 2004 (same date was also committed for recently enacted Competition Act). Various groups and institutions were actively engaged (for advocacy and pressure building) for timely introduction of the Competition Law; but the stakeholders have lost their voices for anti-dumping law. The immediate stakeholder in this case is the business community, the first victim of any dumping activities. Therefore, the business community should lead the agenda of timely implementation of the anti dumping law. But, they must acquire the support of the civil society and consumers groups to materialize the issue promptly. The government, which is responsible to enact the law, will be active only if the said groups collaborate.
(Bhatt is Trade Policy Analyst, Enhancing Nepal’s Trade Related Capacity Programme, UNDP/Government of Nepal. Views expressed in this article are those of the author and do not necessarily represent those of UNDP or the Government of Nepal.)
