INTRODUCTION

In the world today, businesses are constantly competing with each other to gain the market share in their product category.  This competition between businesses has brought about the term known as dumping.  Dumping causes countries like the United States to develop antidumping laws, which seek to prevent products manufactured overseas from being sold by foreign firms in the U.S. at "less than fair value."  These laws were designed to achieve free trade between countries and be beneficial to U.S. consumers.  However, in reality their effect is anything but beneficial to the U.S. consumer.  According to Policy Analyst Thomas A. Johnson (1998), "antidumping laws are confusing and arbitrary, and in many instances merely allow American firms to secure punitive tariffs against competing importers where no unfair trade practices are involved.  Worse, these laws drive up the costs of imported components used by other American enterprises, making their products less competitive in world markets"  (Johnson, 1998, p 5).  As a result of antidumping laws, American consumers are paying higher prices for both imported and domestic goods, and American workers are finding fewer employment opportunities in less competitive American companies.

HOW DUMPING IS DETERMINED IN THE U.S.

The Department of Commerce and the U.S. International Trade Commission (ITC) together start the investigation process of a dumping case.  Writer Tam Harbert (1998), lists the steps in starting an antidumping case as (Harbert, 1998, p. 7):

1.  U.S. company submits a petition to the International Trade Administration at the Department of Commerce, alleging that a foreign company is dumping its product in the U.S.

2.  If the Commerce Department determines that sufficient evidence exists, it will proceed with an investigation.

3.  The ITC then may start its own investigation to determine whether there is injury to any domestic companies.

4.  If the ITC finds there has been material injury to a U.S. company, the Commerce Department will determine whether the product in question is being sold in the U.S. at "less than fair value," or at a lower price than that sold in the home market or a third country market.

5.  If the Department issues a preliminary finding that sufficient evidence of such pricing practices exists, it will direct the U.S. Customs Service to suspend the importation of the product, or require U.S. importers of the product to post a deposit.  This bond must be paid to the U.S. government in the event that a final determination finds that the product is being sold at less than fair value.

6.  The ITC, at this point, must determine if there is any actual material damage to U.S. companies caused by the alleged dumped imports.

7.  If the ITC determines that the dumping has caused injury to a U.S. manufacturer, the products then are subjected to "antidumping duties" equal to the amount of the determined margin.  If, however, the ITC finds that there is insufficient evidence, the case is dismissed.

PROBLEMS WITH U.S. ANTIDUMPING LAWS

When an American business accuses a foreign business of dumping in the U.S., the Commerce Department must compare the price of the good in the home market of the foreign firm and the price it is sold for in the U.S.  If the U.S. price does not reflect "fair market value," which was determined by the Commerce Department, the foreign business can be found guilty of dumping.  According to Johnson (1998), complex and Arcane Methods.  The problem is that the methods the Commerce Department employs are complex, arcane, and plagued with conceptual and technical problems.  And because so many aspects of estimating the fair market value are subjective, it is easy for the Commerce Department to "prove" dumping when in fact no dumping has occurred"  (Johnson, 1998, p.6).  However, the federal government claims that antidumping laws help fight unfair trade practices by foreign businesses, in reality there are so many problems associated with determining the existence of dumping that the rules themselves turn out to be unfair.  Here are just a few of the many difficulties caused by antidumping laws:

1.  When a U.S. company charges a foreign company with dumping, the Commerce Department assumes that the products in question are similar.  "For example, if U.S. farmers charge Colombian farmers with dumping, it is presumed that the American farmers are accusing the Colombians of dumping the identical crop to that produced by the Americans.  Yet many U.S. dumping cases against foreign products are initiated by American companies marketing products significantly dissimilar to the products allegedly dumped"  (Seaver, 1999, p. 5).

2.  When the Commerce Department decides if a product is being dumped, they must first determine the dumping margin between the price the product is sold for in the foreign market and the U.S. market.  For this to occur both of the prices must be calculated in U.S. dollars.  This creates a problem because some business agreements between a foreign and U.S. company use fixed exchange rates.  So the selling price of the product in the foreign country will change according to the current exchange rate, but the production cost will remain the same.  The problem occurs because U.S. government sometimes will use the current exchange rate, instead of the exchange rate used by the foreign business.

The procedures used by the Commerce Department to determine if dumping has occurred are unfair and in many cases result in harm to U.S. businesses as well as higher costs to the U.S. consumers.  The U.S. can do several things to take the pressure off U.S. businesses and consumers.  First, they should start a study on the damage done to American businesses and consumers by antidumping laws.  "Anti dumping duties cost the U.S. economy millions, perhaps billions, each year in higher prices, lost jobs, and declining competitiveness" (Leclerc, 1999, 16).  Another solution would be to stick with the Antidumping Act of 1916, which was to prevent predatory pricing by foreign businesses.  This Act required American businesses to prove that the foreign business was pricing their product with the intent to drive U.S. companies out of business.  If this could not be proven, then the antidumping law would not be applied to the foreign business.  This solution would take the majority of the workload of the Commerce Department and ITC, which would allow better decisions to be made.

CONCLUSION

The United States government is raising costs for American consumers and also taking the competitiveness out of the American business industry.  Many of the people who support antidumping laws say that the laws are needed to prevent foreigners from destroying American jobs and industries.  However, these laws in most instances cause more damage and create more problems than they solve.  "Thanks to duties imposed as a result of antidumping laws, U.S. manufacturers of such products as computers, medical equipment, and machine tools are paying increased prices for the components they import to manufacture their products, raising production costs and making their exports less competitive in world markets.  In some cases, such as computer components, U.S. companies have effectively been denied needed supplies" (Wieland, 1996, p. 9).

DEFINITION OF KEY TERMS
1.  Antidumping- Laws which seek to prevent products manufactured overseas from being sold by foreign firms in the U.S. at "less than fair value."

2.  Dumping- When a foreign company sells their products or services in a market at a price which is below their cost of production in order to gain market share.

3.  Dumping margin- the difference between the price of the "dumped product" and the price the product would sell for if it were being sold at a "fair" price, according to calculations by the ITC.

REFERENCES

Harbert, Josef H. (1998).  Getting Dumped On.  Electronic Business, Internet Article.
http://www.eb-ma.com/registrd/issues/9809.html

Johnson, Thomas A. (1998).  Impacts on Competition.  McGill Law Journal, 44 (1), 4-17.

Leclerc, Jean-Marc (1998).  Reforming Anti-Dumping Law: Balancing the Interests of
Consumers and Domestic Industries.  Internet Article.
http://www.journal.raw.megm.ca.hmtl

Seaver, James (1999).  Combating Injurious Imports Under the WTO Agreements:  A
Domestic Producer's Guide.  Internet Article.
http://www.kslaw.com/menu.html

Weiland, Mark (1996, August 8).  Oil Fight gets Ugly: Commerce Department Weighs Small Producers' Claim. Daily News, p. 4-12.
 

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