The practice of offering products for sale abroad at prices lower than nominal value (defined as the price charged by a firm in the home market) is known as dumping. Together with the provision of subsidies to domestic enterprises, dumping is considered to be an unfair trade practice, against which the WTO provides rules and remedies. Whereas subsidies are provided by Governments, dumping takes place at the level of products and firms. As a result, actions regarding subsidies are taken against member governments while those relating to dumping, target individual firms and suppliers.
The rationale for anti-dumping provisions derives from the concern that dumping of goods abroad at prices lower than in the home market may harm producers in the importing country, with attendant consequences on competitiveness, employment and loss of revenues, including for the Government. On the other hand, both consumers and importers of industrial goods benefit from lower prices. But since consumers are not as well organised as producers, the pressures for anti-dumping measures are significantly greater and are more effective.

The Uruguay Round Agreement on Anti-dumping
The Anti-dumping Agreement is a highly complex instrument. Its concepts and rules have evolved over a long period of practice and application in GATT and now the WTO. The determination of dumping and the subsequent provision of counter-measures to protect domestic industry, requires proof that the dumped imports cause ‘injury’ because of dumping. The determination of injury is a complex process, requiring the establishment of causality on the basis of relevant evidence before the authorities. The initiation of an anti-dumping action requires proof that dumping has caused or threatens to cause, material injury to the domestic import-competing industry.

Although consumers and users of imports have the opportunity to present their own viewpoints in the investigation, the point of reference for a determination of ‘injury’ is to local producers and not consumers. To be sure, the importing country’s Government has the option of not taking any action, even after injury has been demonstrated, an important consideration in this regard being the welfare of consumers and of importers. In practice, however, Governments seldom base their decisions on the interests of consumers and/or importers, given the larger weight exercised by producers in trade policies.
As regards ‘injury’ to domestic producers, the agreement provides an illustrative list. This includes actual and potential decline in sales, profits, output, market share, productivity changes, capacity utilisation and return on investments. It also takes into account actual and potential effects on employment, wages, ability to raise capital etc. The list is not exhaustive but no single or combination of factors is considered decisive in the determination of ‘injury’.

Examination of dumping involves three steps:

i) Determination of the ‘export price’
ii) Determination of ‘normal value’
iii) Comparison of (i) with (ii) above.
The ‘export price’ is generally taken as shown in the documents and books of the exporter. In the event that such a price is not available or not reliable, the agreement provides for the calculation of a ‘constructed export price’. The ‘normal value’ price is the comparable sale price for a like product in the exporting country ‘ in the ordinary course of trade’.
Trade is considered not to be ordinary if, over an extended period of time, (normally one year) a substantial quantity of goods is sold at less than average total cost. If sales on the domestic markets are too small to permit a comparison, the highest comparable price in third markets is used. Alternatively, the exporting firm’s estimated costs of production, plus a margin for profits and costs relating to sales and administrative expenses, may be used to determine ‘normal value’ - the so-called constructed value.
Before initiating a dumping investigation, all known factors that are injuring the domestic industry must be taken into account. Among the factors that may be relevant in such a determination include:

• the volume and price of imports not sold at dumping prices
• contraction in demand and changes in the pattern of consumption
• trade restrictive practices and competition between foreign and domestic producers
• export performance and productivity of domestic industry

For investigations relating to dumping, the Agreement provides for a number of procedural safeguards. These are intended to avoid the initiation of unwarranted investigations which might disrupt trade, and to ensure transparency of investigations and decisions.
Among such provisions are included written applications and public notices at each stage of the investigations. Article 5.8, for example, requires immediate termination of investigations when the volume of imports in minimal or when the margin of dumping is de minimis (the margin of dumping is considered de minimis if it is less than 2 per cent, expressed as a percentage of the export price).
Article 6 provides additional safeguards by imposing obligations on the competent authorities concerning matters such as verification of information upon which the investigations are based, conduct of the investigation and participation of interested parties, such as consumers, in the process.
Once the competent national authorities have made an affirmative determination of dumping, Article 7 provides for the application of provisional measures, which may consist of the (optional) imposition of duties, that in any case, may not exceed the margin of dumping calculated in the investigations. The preferred remedy, however, is the deposit of a security through cash or a bond.
Article 11 also provides for duration, lifting and review of anti-dumping measures. An anti-dumping duty, for example, must normally be terminated not later than five years from the date on which it was first imposed.

Conclusions
The Anti-dumping Agreement is widely regarded as one of the least satisfactory of the Uruguay round Agreements. It is largely protectionist in both intent and application and has been used by developed countries largely against developing countries, for protecting its industries threatened with so-called cheap imports.
In consequence of tariff bindings at lower levels, anti-dumping measures have emerged as a major tool of protection in the developed countries. It has been widely used, in part because it can be invoked unilaterally and in part, because it singles out individual exporters. In doing so, it immediately discourages imports, as importers begin to shift to alternative sources of supply.
Exporters are exposed to considerable uncertainty. The very threat of a pending anti-dumping action is often sufficient to discourage exporters and investors in such industries. If exports are a significant component of domestic production, they have to search for new markets and may experience losses. They also fear the costs entailed in dealing with the complex legal provisions of the Agreement. In particular, they may have to pay back anti-dumping duties and meet the large legal and administrative costs involved. The burden of proof that they are not dumping is largely shifted to the exporters, since the injury test provides considerable leeway to national authorities undertaking the investigations.
Given the complexity of the legal provisions of the agreement, anti-dumping investigations require a large and costly administrative apparatus. As a result, only the developed and a handful of large developing countries have been able to undertake anti-dumping investigations. Indeed, between 1995 and July-2002, the largest numbers of anti-dumping measures have been taken by the developed countries, often targeting developing country exporters. For the majority of developing countries, on the other hand, the far-reaching consequences of the dumping of subsidised agricultural products by developing countries have escaped and circumvented international discipline.

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References:
1. UNCTAD: A Positive agenda for developing countries: Issues for Future Trade Negotiations. United Nations, Geneva, New York 2000. (Pages 287-308)
2. B.L.Das: The World Trade Organisation: A Guide to the framework for international Trade. Third World Network, Penang, Malaysia, 1999