Dumping of Exports and Antidumping Duties: Implications for the U.S. Economy

Publication Date: November 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

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Abstract:

Dumping in the United States is the selling of a product by a foreign producer at a price that is below the product's sale price in the country of origin, or at a price that is lower than the cost of production. Under U.S. law such an action is considered an unfair trade practice. If that action is found to cause "material injury" to a competing domestic industry, an antidumping duty equal to the "dumping margin" will be levied against the foreign good.

Until the 1990s antidumping actions were a protectionist device used almost exclusively by a few rich countries: the United States, Canada, Australia, and Europe. In the last decade, however, there has been an explosion of antidumping cases brought by many other nations. Rising use by other nations has also meant that the United States itself has become an ever more frequent target of antidumping measures.

From an economic perspective, for dumping to be harmful to the U.S. economy it must be part of a strategy of predatory pricing, aimed at monopoly control of a market. Such predatory behavior is certainly possible, but likely to be relatively rare. The practice of U.S. antidumping policy over the last 25 years has grown to encompass foreign firm pricing behavior that very likely has no predatory intent or effect. Indeed, it is comparable to behavior undertaken legally by domestic firms in the home market every day.

Several economic studies confirm that U.S. antidumping duties can be costly to the overall U.S. economy. Protected domestic producers gain, but consumers and the wider economy lose more. Using trade barriers, like antidumping duties, as preservers of "fairness" in international trade has merit if that trade and the foreign practices that support it undermine longstanding domestic social norms. But dumping is very unlikely to meet this criterion as similar behavior is widely practiced by domestic firms in the home market as well.

Antidumping laws are often politically popular and any significant circumscribing of their use would most likely hinge on finding more generous and equitable ways of dealing directly with those hurt by international trade that are less harmful to the efficient functioning of the economy.

There are also concerns that perpetuation and growth of antidumping initiatives may become a significant impediment to advancing a new round of multilateral trade liberalization.

This report will be updated as events warrant.