78 | East and South Asia and the Pacific (ESAP) Report

dumping duties. Dumping is considered to exist if the export price of a product is less than the comparable price of the product or like product in the domestic market in the or­dinary course of trade. However, when the average export and domestic prices of a product are calculated, domestic sales prices below total cost are considered beyond the or­dinary course of trade and therefore, excluded. But, all ex­port prices are included. This, artificially, raises the domestic price. Also, if no home market prices can be found, the sales price in a third country—the so-called surrogate country— can be used for comparison. Since, different countries have different levels of economic development and comparative advantage in different sectors, the arbitrary choice of a sur­rogate country may easily lead to finding of dumping. For example, while investigating dumping by the Chinese firms, the US authorities often use, as "surrogate" country, market economies with higher cost of labor and raw material or countries where economic reform is proceeding more slowly and production in many sectors is less efficient than in China. This will naturally lead to the non-market economy being considered to be dumping. This practice has been now done away with by the EU in case of Russia but still prevails for other so called non-market economies and even Russia in non-EU markets (Silberston, 2003). Even use of constructed value price in the absence of availability of home market or third country prices is prone to inherent subjectivity as the costs which go into constructed value price vary greatly among countries and companies. The concept of injury is also problematic if domestic and import markets are simul­taneously expanding, but the domestic market is expanding at a slower rate and the imported products are garnering the lion's share of the market. Further, the presence of dumping may not indicate injury but rather may be related to other local and international factors. Therefore, it is very difficult to establish a strong link between dumping and injury (Sil­berston, 2003).
     Even selling below total cost is a normal business prac­tice in some situations. For example, a firm may have to sell below total cost in order to attract skeptical customers or to meet existing competition in a foreign market, without any intention to dominate the market, especially if the prod­uct is new and un-established. It is unreasonable to subject such practices to anti-dumping investigations. Further, the anti-dumping laws are also country-specific instead of being firm-specific as the country does not really represent costs of particular firm and all firms from a country should not be targeted. Another problem with the practice of these laws is that though the agreement recommends "lesser duty" than the margin of dumping if that suffices to prevent in­jury, many developed countries do not follow it and impose duty equal to margin of dumping as there is no obligation under the agreement which only refers to the desirability of the practice (Reich, 2003). Many firms and countries resort to back-to-back anti-dumping petitions in order to benefit from trade effects of anti-dumping litigation which discour­ages imports in their markets (Zanardi, 2004).
     Besides, the use of anti-dumping duties to protect domes­tic industry from imports may be misplaced if the difficulties of domestic producers result from their own inefficiency. In this situation, the anti-dumping duties tend to penalize the more efficient foreign producers. Also, because of the dif-

 

ficulties in finding out the origin of a product due to global sourcing, it is problematic to identify the agency responsible for dumping. The anti-dumping agreement also does not define the concept of export price and the globalization of production further leads to difficulties in determining ex­port price as products are the result of global souring. There are even problems with defining domestic industry (Didier, 2001).
     Then, there is also an overlap and a contradiction be­tween anti-dumping laws and the competition policy. Since anti-dumping   actions   aim  at  reducing   anti-competition practices, they are a part of the competition policy. But, sometimes actions like price undertakings are anti-compe­tition and in conflict with the competition policy of WTO (Bhattacharyya and Gupta, 2001). Some firms may also re­sort to anti-dumping in order to foster collusive agreements between/among domestic or foreign firms as this action will give relief from foreign competition or a domestic firm will use this threat to negotiate a collusive agreement with a for­eign firm. This kind of practice was found in the USA (Bhat­tacharyya and Gupta, 2001).

3.2.6     Options
The above discussion shows that despite the WTO agreement on anti-dumping measures, there will be widespread use of these measures against developing country exports as well as dumping into these countries. Anti-dumping is also seen as a necessary valve in the presence of trade liberalization and globalization to protect domestic firms from foreign competition. There is a need to introduce competition con­siderations, end practices of cumulation of market shares in injury determination (except in cases where there is evidence of collusion) and introduce some form of counterfactual analysis in measuring injury margins (Tharakan,  1999). Anti-dumping duty should be imposed only if it is estab­lished that there was a predatory intent on the part of the exporting country. If the market is already rapidly declining, dumping   by   any  exporter   can   be   ignored   (Silberston, 2003).

3.2.7     Commodity Prices
Prices of primary commodities or commodities like coffee, tea, sugar, cotton, etc., in international trade are subject to two kinds of problems. The first is that there are often substantial, even violent short-term price fluctuations. Just a 10 to 15% swing in production can lead to major price changes. The second problem is that there is a tendency for a long-term or secular decline in the terms of trade for com­modities.
     These price fluctuations and secular decline in terms of trade have substantial effects on the producers of these com­modities. The producers in developing countries are often small-scale producers, dependent on income from the com­modity for their livelihoods. A sharp fall in price means a substantial fall in income. Income may fall below not only what the producers are normally accustomed to but also below the minimum required to pay debts acquired in the course of production. This is the micro-economic effect of price falls in commodities.
     The market for commodities is again most often domi­nated by a few large buyers. It is a classic monopsonistic