Anti-dumping:

It was briefly mentioned in the preceding Unit, that a firm is said to dump its product if it exports the product at an artificially  low price. There are criteria for determining the price below which  the exported product will be considered to have been dumped  into the importing country.  Generally if the export price is lower than the price of a like product in the exporting  country, the product is said to have been dumped. The difference between the export price and  the price in the exporting country is said to be  the dumping margin. In case it is not possible or practical  to compare these two prices, alternatives have been provided for determining dumping. For example,  in such cases dumping may be determined on the basis of comparing the export price with the cost of production plus administrative and selling expenses and a reasonable profit.

It is presumed  that a firm, while indulging in dumping, is trying to eliminate competition by undercutting its competitors;  and  as  such, dumping  is considered to be an unfair practice.

Remedial action against dumping is generally  taken  by  imposition  of  an anti-dumping duty by the government of the importing  country. Before taking such action, the government has to establish in an objective and transparent investigation that there is dumping and also that it is causing or threatening to cause material  injury to  the domestic  industry. The process of determining material injury to  the domestic industry is similar to  that in case of subsidy

The  developing countries have  quite frequently been  the targets of anti- dumping action in major developed countries and have been subjected to severe harassment. In  fact there are frequent complaints that the developed countries have been using anti-dumping action as an instrument of protection for their industry. Merely starting the investigation on dumping is sometimes enough to disrupt exports from the developing countries as all this creates an atmosphere of uncertainty. In  recent  years,  some  developing countries, especially  India, have also been frequently  resorting to anti-dumping actions.