“Canada Launches WTO Challenge to U.S…..Mexico Widens Anti-dumping Measure…..Chi
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“Canada Launches WTO Challenge to U.S…..Mexico Widens Anti-dumping Measure…..China to Begin Probe of Synthetic Rubber Imports…..Steel Dispute Raises Issue of Free-Trade Credibility…It must be stopped,” are just a sampling of headlines around the world.
International trade theories argue that nations should open their doors to trade. Conventional free-trade wisdom says that by trading with others, a country can offer its citizens a greater quantity and selection of goods at cheaper prices than it could in the absence of trade. Nevertheless, truly free trade still does not exist because national governments intervene. Despite the efforts of the World Trade Organization (WTO) and smaller groups of nations, governments still carry foul in the trade game. Worldwide, the number of antidumping cases initiated averaged 234 per year over the past seven years, with cases at an all-time-high of 356 in 1999.
In the past, the world’s richest nations would typically charge a developing nation with dumping. But today, emerging markets, too, are jumping into the fray. China recently launched an inquiry to determine whether synthetic rubber imports (used in auto tires and footwear) from Japan, South Korea, and Russia are being dumped in the country. Mexico expanded coverage of its Automatic Import Advice System. The system requires importers (from a select list of countries) to notify Mexican officials of the amount and price of a shipment 10 days prior to its expected arrival in Mexico. The 10 day notice gives domestic producers advanced warning of low priced products so they can report dumping before the products clear customs and enter the marketplace. India set up a new government agency to handle antidumping cases. Even Argentina, Indonesia, South Africa, South Korea, and Thailand are using this recently popular tool of protectionism.
Why is dumping so popular? Oddly enough, the WTO allows it. The WTO has made major inroads on the use of tariffs, slashing them across almost every product category in recent year. But it does not have authority to punish companies, only governments. Thus the WTO cannot make judgments against individual companies that are dumping products in other markets. It can only pass rulings against the government of the country that impose an antidumping duty. But the WTO allows countries to retaliate against nations whose producers are suspected of dumping when it can be shown that: (1) the alleged offenders are significantly hurting domestic producers, and (2) the export price is lower than the cost of production or lower than the home-market price.
Alternatives to bringing antidumping cases before the WTO do exist. U.S. President George W. Bush relied on a Section 201 or “global safeguard” investigation under U.S. trade law in 2002 to slap tariffs of up to 30 percent on steel imports. The U.S. steel industry had been suffering under an onslaught of steel imports from many nations, including Brazil, the European Union, Japan and South Korea. Yet, nations still brought complaints about the action before the WTO. Similarly, in 2004 the U.S. government slapped around 100 percent tariffs on shrimp imported from China and Vietnam, charging those nations with dumping the crustaceans on U.S. shores.
Supporters of antidumping tariffs claim that they prevent dumpers from undercutting the prices charged by producers in a target market, driving them out of business. Another claim in support of antidumping is that it is an excellent way of retaining some protection against the potential dangers of totally free trade. Detractors of antidumping tariffs charge that once such tariffs are imposed they are rarely removed. They also claim that it costs companies and governments a great deal of time and money to file and argue their cases. It is also argued that the fear of being charged with dumping causes international competitors to keep their prices higher in a target market than would otherwise be the case. This would allow domestic companies to charge higher prices and not lose market share—forcing consumers to pay more for their goods.
1. “You can’t tell consumers that the low price they are paying for that fax machine or automobile is somehow unfair. They’re not concerned with the profits of some company. To them, it’s just a great bargain and they want it to continue.” Do you agree with this statement? Do you think that people from different cultures would respond differently to this statement? Explain your answer.
2. As we have seen, currently the WTO cannot get involved in punishing individual companies—its actions can only be directed toward governments of countries. Do you think this is a wise policy? Why or why not? Why do you think the WTO was not given authority to charged individual companies with dumping? Explain.
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Answer:-
“You can’t tell consumers that the low price they are paying for that fax machine or automobile is somehow unfair. They’re not concerned with the profits of some company. To them, it’s just a great bargain, and they want it to continue.” Do you agree with this statement? Do you think that people from different cultures would respond differently to this statement? Explain your answers.
Yes I do agree with the above statement: First of all, companies and traders perception do have a distinction thought and interest in business outcome compared to the receiving end of the supply chain, the consumer. For sure the consumer is not interested or concerned with the company’s benefits and profits his major interest is buying a commodity at a cheaper price which indicates their ability to bargain and get fair prices for the products they are purchasing. Companies who export goods are concerned with the profits they get from their sales more often when their merchandises are sold at a higher price. This feels unfair to the consumers since their major concerns are on how they can buy goods at a lower cost as they save some money for themselves regardless of the losses the retailer may experience.
People from different cultures would respond differently to the above statement, because some cultures have a belief that “cheap is expensive.” Whereas rich or wealthy people would prefer to go for some goods that are expensive, because to them it is not easy to substitute standards for high price, they don’t live on cheap staffs rather they fight to maintain their status quo. Furthermore these cultures belief those cheap goods are not long lasting, since they are either not genuine or qualified in quality and standard.
Answer:- As we have seen, currently the WTO cannot get involved in punishing individual companies – its actions can only be directed toward governments of countries. Do you think this is a wise policy? Why or Why not?
Yes I do think this is a sensible policy, because World Trade Organization is a big organization that works for the whole world so dealing with individual companies will be an expensive and time consuming activity which would lead to stocking of cases due to their multiple numbers of companies from different countries around the world. Additionally governments of these countries are at an improved position to work directly together with the organization since there could be countries with more than one company transacting businesses around the world.
World Trade Organization was not given the directive of charging individual companies since it’s a process that would take long time since the individual companies which file cases are so many yet previously cases according to down with dumping article, WTO allows countries to strike back against governments of countries that impose an anti-dumping duty. Another reason might be because some countries especially the developed countries influences policies WTO makes in their favor at the expense of the developing countries such as rich countries typically charging developing countries with dumping.
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