3. WTO and Dumping
4. EU and Dumping
4.1 EU and Dumping in general
4.2 EU and the Chinese shoe dumping case
4.2.1 Voices from Europe
4.2.2 Voices from China
4.3 Discussion of impacts
4.3.1 Price increase
4.3.3 Reduced choice
4.3.4 Further arguments
The press release of the European Commission of October the 5th was short, but the impacts and the story behind the release was more than eminent for Europe, China and Vietnam. On October the 5th the Council adopted a definitive anti dumping duty on imports into the EU of special leather footwear from China and Vietnam starting October the 7th. This measure will be installed for two years. The regulation is aimed at protecting the EU footwear market by imposing duties of 16,5% and 10% on leather footwear imports from China and Vietnam, respectively.
Before the installing of the measures the Commission initiated investigations in July 2005. In April provisional anti dumping duties had been adopted.
The following paper will tackle the topic of the anti-dumping measures adopted by the European Commission. First, I will go over the definition of dumping. After this, I will explain the role of the WTO in cases of dumping. In the next chapter I will talk about dumping cases in the EU from China in general. The next part deals with the case of anti dumping, concerning special leather shoes from China and Vietnam. Different voices from Europe and China will be covered, including the discussion of the impacts of the adopted measures.
In economics, "dumping" can refer to any kind of predatory pricing, and is by most definitions a form of price discrimination. Dumping in context of international trade law, is defined as the act of a manufacturer in one country exporting a product to another country at an unreasonable low price. This price is often below the costs of production.
A company using dumping often dumping accepts short term losses to gain long term advantages. Goals that can be achieved by dumping are as follows:
- To gain market share
- To eliminate other companies and to establish a monopoly
- To get access to a market
- To get a special customer,
Sometimes countries support their industry with subsidies and other measures to export their goods under the costs of production. These cases are often based on economic-political grounds.
The advocates of dumping see dumping as beneficial for customers. The main reason for this believe is that customers have to pay a cheaper price in case of dumping. However advocates of labourers and workers condemn dumping as it can also lead to an exploit of the workforces.
A standard technical definition of dumping is the act of charging a lower price for a good in a foreign market than one charges for the same good in a domestic market, such that the foreign market is "injured”. This is often referred to as selling at less than "fair value." True dumping is actually very difficult under free trade, and is condemned but not prohibited by the WTO.
Similar to antidumping duties are countervailing duties. Countervailing duties are used in cases when imports are subsidized by a foreign country and hurt domestic producers. According to WTO rules, a country can launch investigations and decide to charge extra duties. Like antidumping duties, countervailing duties are used to raise price of imported goods near or over fair value.
A problem of using either anti dumping measures or countervailing duties lies in a lack of knowledge regarding foreign cost of production. Members of the World Trade Organization can file complaints against anti-dumping measures.
In the context of GATT and later WTO (World trade Organization) dumping or anti-dumping refers to a trade agreement signed by the 149 (2006) members of the organization.
The Anti-dumping agreement has been signed alongside a Anti-subsidy agreement and a Safeguard agreement.
3. WTO and Dumping
The World Trade Organization is an international, multilateral organization, which sets the rules for the global trading system and resolves disputes between its member states; all of whom are signatories to its approximately 30 agreements.
The WTO was established in 1995. WTO sets global rules of trade between its members. The core of the WTO system are the WTO agreements which lay down the legal ground rules for international trade as well as the market-opening commitments taken up by its members. These agreements are negotiated and signed by all members of the WTO, and ratified in their parliaments.
The decisions of the WTO are mainly taken on a consensus basis. Members of the WTO can be governments or political entities such as EU. According to WTO rules, all WTO members may participate in all councils, committees, etc. In practice, most of the WTO's decisions are made in informal meetings, often called "Green Room" meetings.
The WTO has 150 members. The European Union is represented as entity of its 25 states.
The World Trade Organisation (WTO) allows three principal trade defence instruments. These are the safeguard, anti-subsidy and anti-dumping instruments:
Safeguards are emergency measures, they are designed to protect countries from unforeseen surges in imports that could cause serious injury to the domestic industry.
Subsidies are defined as financial assistance from a government to a company or group of companies. If the subsidy is used to push the export, it is prohibited under the WTO agreement. In other cases of subsidy a import country can demonstrate that the subsidised imports have caused damage to the domestic industry of the importing country. Anti-subsidy measures allow importing countries to take action against certain kinds of subsidised imports.
The WTO defines dumping as follows: 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.
The WTO has set up methods, how to compare the export price with a constructed normal value. In general the normal value is usually defined as the price for the like goods in the home market of the exporter.
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