7_Dumping

dumping (cross border prize discrimination): you sell a product across the border cheaper than in your home country (price at home is higher than the export prize)

why would someone do that?

in the short-term you get losses, in the long-run you dictate prizes

-> dumping is generally, based on WTO laws, not legal/forbidden

1. There is dumping – meaning a product is sold in another country below its normal value (e.g. cheaper than in the home market).

2. The domestic industry in the importing country suffers material injury or is threatened with injury.

3. There is a causal link – the injury must be caused by the dumping.

The subjective theory of value is a concept from modern economics, not from Karl Marx. It says that the value of a good depends on how much satisfaction or usefulness (utility) it provides to an individual. In other words, a product is worth what someone is willing to pay for it, based on personal preferences. This idea is linked to economists like Carl Menger, William Stanley Jevons, and Léon Walras.

Karl Marx, on the other hand, followed the labor theory of value. He believed that the value of a good comes from the amount of labor needed to produce it. For Marx, value was created by work, not by how much people want something. This belief was central to his critique of capitalism, especially his idea that workers are exploited because they don’t receive the full value of what they produce.

1. Domestic price (Article 2.1):

   • Use the price of the like product in the exporting country’s own market -> preferred method

2. Export to a third country (Article 2.2):

   • If domestic sales are missing, too low, or distorted (e.g. not a real market situation), then the investigator can use the price the exporter charges in another country

3. Constructed value (Article 2.2):

   • If both options above don’t work, normal value is constructed using:

     • The exporter’s production costs,

     • Administrative and selling expenses, and

     • A reasonable profit margin.

price of the like product on the domestic market of an appropriate analogue country (“surrogate country”)

price at which the foreign producer sells the product to an importer in the importing countr

Zeroing is a method in anti-dumping cases where only prices below the normal value are counted. Higher prices are set to zero and not included in the average. This makes dumping look worse than it really is. The WTO has ruled that zeroing is unfair and violates trade rules.

Material injury means that local companies are badly affected by dumped imports. This can include things like falling profits, losing customers, cutting jobs, or closing factories. To take anti-dumping action, it must be shown that the damage is real and serious, and that dumping is the reason for it.

last point:

If several small countries (each under 3%) together make up at least 7% of the total imports,→ then an investigation can still happen.

two types of subisidies are forbidden by WTO:

*export subsidies: government gives you money to export more (unless it is a developing country)

*import substitution subsidies: government gives you money to use domestic components for the production of your product

a financial contribution ✅ • by a government or any public body within the territory of a Member ✅ • which grants a benefit

1. Enterprise specificity → The government gives a subsidy to a specific company or a few selected companies.

2. Industry specificity → The subsidy goes only to a specific industry or sector, like steel or agriculture.

3. Regional specificity → Only companies in a certain region or area of the country get the subsidy.

4. Prohibited subsidies (always specific): → These are automatically considered specific and not allowed:

   • Export subsidies (given only if goods are exported)

   • Import substitution subsidies (given for using domestic instead of imported goods)

     
     

Actionable subsidies are allowed, but other countries can complain if they are hurt by them. Non-actionable subsidies used to be okay for things like research or helping poor areas, but that rule ended in 2000. Prohibited subsidies (like money for exports) are always banned under WTO rules.

-> import duties imposed to offset unfair subsidies given by foreign governments to their exporters

✅ When Can They Be Applied?

A country must prove:

1. Subsidized imports exist, and

2. They cause material injury to the domestic industry, and

3. There is a clear causal link between the subsidy and the injury.

Milk crisis: EU subsidies led to overproduction and a price crash. To help farmers, the EU gave more subsidies, which made global prices drop, hurting farmers in developing countries.

Cross-retaliation: If developing countries can’t strike back with tariffs on goods, they can ask to retaliate in other areas (like services or intellectual property) to balance the harm caused by unfair subsidies.