7.5 Proposals for Reform of the WTO Rules Related to Dumping

WTO rules allow an importing country can impose anti-dumping duties if dumping and material injury to the domestic industry are found. However, this policy reduces the economic well-being of the importing country and the world. Moreover, anti-dumping policy is heavily used by domestic producers to obtain protection from import competition. It is, therefore, reasonable to consider ways in which resort to the use of anti-dumping duties can be reduced.

Three proposals for reform of the WTO rules relating to dumping are being considered. First, anti-dumping actions may be restricted to situations in which predatory dumping might be taking place. Predatory dumping, because it involves the exercise of monopoly power, is likely to reduce economic well-being in the importing country and in the world most significantly. This proposal focuses on the type of dumping that is most likely to lead to inefficient resource allocation. Persistent dumping provides net benefits to the importing country and allows for less inefficient global resource allocation.

Second, material injury is judged based solely on damages suffered by domestic producers of the imported product. It is more appropriate to consider a wider measure of economic well-being, taking into account the benefits (or losses) received (or incurred) by consumers of the imported product. As seen earlier, consumers in the importing country gain more than producers gain from dumping and the country, as a whole, benefits.

Third, a more active use of safeguard policy can be used instead of anti-dumping policy. Safeguard policy is the use of temporary import restrictions (e.g., extra tariffs, import quotas) when sudden surges in imports cause or threaten to cause injury to domestic producers. The WTO Agreement on Safeguards establishes rules for the application of safeguard measures by member countries. The idea is to give the import-competing industries some time to adjust to growing import competition. With safeguard policy, temporary protection pushes import-competing producers to become more efficient. In the United States, it is common for safeguards to be scaled back during the period for which they were imposed to gradually prepare the domestic industry for heightened competition. In the United States, safeguard policy has not been invoked very often. In 2018, the U.S. government imposed temporary safeguard tariffs on imports of washing machines and solar panels (Pugel, 2020).

References

Pugel, T. A. (2020). International economics, (17th ed.). McGraw-Hill.