Antidumping -- remedy or protection?<\/p>\n
This is the first of two articles on antidumping actions
\nwritten by Herry Soetanto, director for multilateral cooperation
\nof the Ministry of Industry and Trade, and Alfons Samosir, the
\nministry's deputy director for trade defense\/remedy, based on a
\npresentation at a seminar in Jakarta on May 11.<\/p>\n
JAKARTA (JP): Dumping is usually defined as price
\ndiscrimination between domestic and foreign markets. The price
\ndiscrimination may cause problems for the domestic industry in
\nthe importing countries as the exporting companies sell their
\nproducts at lower prices in the export market than in the home
\nmarket.<\/p>\n
Dumping is a kind of marketing strategy and is thus not
\nprohibited. Nevertheless, since the early 20th century, countries
\nhave believed that dumping is unfair and can be condemned if it
\ncauses serious injury or threat to the domestic industry in
\nimporting countries.<\/p>\n
There are three main elements -- the dumping itself, the
\ninjuries and a causal link between the two -- to be tested before
\nan importing country can take a protective action by imposing
\nantidumping duties.<\/p>\n
Before the 1947 General Agreement on Tariffs and Trade (GATT)
\ncame into effect, dumping problems were handled by countries
\nthrough their own national antidumping laws.<\/p>\n
This situation created big problems because the methods to
\ndetermine the dumping margin and injury, and procedures for
\ninitiation of investigations, were substantially different across
\ncountries.<\/p>\n
Consequently, national laws had the potential to become
\nsignificant barriers to international trade.<\/p>\n
GATT 1947 was the first multilateral agreement dealing with
\nantidumping as contained in Article VI. This article, which
\ncovered not only antidumping but also countervailing duties, was
\nintended as a guideline for contracting parties to GATT to
\ninitiate investigation of dumping practices.<\/p>\n
The article says antidumping duties could only be imposed if
\ndumping caused or threatened material injury to an established
\nindustry of a contracting party or materially retarded the
\nestablishment of a domestic industry.<\/p>\n
Since this article had no comprehensive provision governing
\nprocedures to initiate and to conduct investigations, the
\ncontracting parties felt it failed to comply with the interests
\nof all members.<\/p>\n
Therefore, the article could not be used as guidelines for
\ntheir national legislation.<\/p>\n
During the GATT's Kennedy Round (1963-1967), antidumping was
\none of the issues proposed for discussion to reach a
\ncomprehensive antidumping agreement. Unfortunately, it never
\nhappened. The issue was then brought up in the agenda of the
\nTokyo Round (1973-1979) which successfully concluded negotiations
\non a code on antidumping measures.<\/p>\n
The new antidumping code spelled out in greater detail the
\nconditions that had to be met. It covered such matters as
\ndetailed questions in determining whether a product was actually
\nbeing sold below its normal value, the allowed profit margin,
\nincreased imports and other issues.<\/p>\n
Although the code was negotiated multilaterally -- as were
\nother codes under the Tokyo Round -- not all contracting parties
\nsigned the code. This situation created a new problem in
\ninternational trading relationships among members.<\/p>\n
Therefore, the code, along with other codes at the Tokyo
\nRound, was vigorously negotiated in the Uruguay Round (1986-
\n1994), and resulted in the Agreement on Implementation of Article
\nVI of the GATT 1994, known also as the Antidumping Agreement.<\/p>\n
Actually, dumping practices are not prohibited by World Trade
\nOrganization (WTO) rules and are a common means for foreign
\nsuppliers to penetrate new markets.<\/p>\n
Hence, Article VI's paragraph 1 of GATT 1994 emphasized that
\ndumping might be remedied only if it caused or threatened
\nmaterial injury to an established industry of a contracting party
\nor materially retarded the establishment of a domestic industry.<\/p>\n
Problems in international trade relations are continuing even
\nthough the conclusion of the Uruguay Round (1986-1994) has
\nsuccessfully reduced tariff levels of industrial products by 33.3
\npercent.<\/p>\n
Developed countries have agreed to reduce their tariffs on
\nindustrial products from an average of 6.3 percent to 3.8 percent
\n(a 40 percent reduction) and the proportion of industrial
\nproducts which enter the developed markets under Most Favored
\nNations (MFN) zero duties is more than double, from 20 percent to
\n44 percent.<\/p>\n
For certain industrial products, applied tariffs are now about
\nzero percent to 5 percent in developed countries. The significant
\nreduction of industrial tariffs has led to an increase in
\nantidumping causes because tariffs can no longer be used as an
\ninstrument for protection.<\/p>\n
During the Uruguay Round, many member countries such as South
\nKorea, Japan, Hong Kong and certain developing nations were
\nworried that several countries like the United States and those
\nin the European Union (EU) would more frequently use this
\ninstrument to protect their domestic industries.<\/p>\n
The fears have come true. Since the agreement came in to force
\nin 1995, antidumping allegations, including the abuse of this
\ninstrument by developed countries, have increased steadily.<\/p>\n
Most developing countries are of the view that antidumping
\nactions have mostly been used as disguised protection since the
\n1970s.<\/p>\n
The original intention to improve the antidumping code of the
\nTokyo Round was because several important elements in its rules
\nand procedures lacked comprehension, detail and transparency.<\/p>\n
According to scholars like Michael J. Trebilcock and Robert
\nHowse, antidumping actions were the most popular measure for
\ntrade remedies of the 1980s, as compared to countervailing duties
\nand safeguard actions.<\/p>\n
By the end of 1989, 28 countries had adopted antidumping laws.
\nIn 1998, 83 countries had notified the Committee of Antidumping
\nPractices of their domestic antidumping laws. Nearly 1,200
\nantidumping actions were initiated between July 1980 and June
\n1988.<\/p>\n
During this period, the most active countries to initiate
\ndumping actions were the United States, those in the European
\nUnion, Australia and Canada, which accounted for 97.5 percent of
\nall actions brought (30 percent by U.S. producers, 27 percent by
\nAustralians, 22 percent by Canadians and 19 percent by
\nEuropeans).<\/p>\n
Antidumping actions against newly industrialized countries,
\nespecially East Asian countries, including Japan and China, were
\nmost often initiated by the United States, Australia and the
\nEuropean Union.<\/p>\n
Indonesia is one of the East Asian countries which has
\nencountered many antidumping actions. Since 1990, there have been
\n77 antidumping actions taken against Indonesian exporters. Of
\nthese actions, 15 were initiated by Australia, 15 by the European
\nUnion, seven each by the United States and New Zealand, five each
\nby India and the Philippines, four by Canada and three by South
\nAfrica.<\/p>\n
Most antidumping investigations initiated against Indonesian
\nexport products are targeted on paper, textiles and clothing,
\nsteel, float glass, food, plastic and rubber products.<\/p>\n
Although the Uruguay Round successfully negotiated a
\ncomprehensive Agreement of Antidumping Measures with tighter
\nrules and disciplinary measures, antidumping increased.<\/p>\n
Since tariffs can no longer be used to protect domestic
\nindustries, antidumping legal instruments could be used to offset
\ninjury. But antidumping actions (which are now becoming non-
\ntariff barriers) have become a new type of protectionism rather
\nthan a remedy.<\/p>",
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