. increase in price. Griswold in his article “Industry Sets Steel Trap for US Economy” feels that domestic car buyers would be hurt by this increase in steel prices. Also, he believes that an increase in steel prices would make it tougher for huge industries such as General Motors and Caterpillar to compete in world markets. Plus, as the graph indicates, the US as whole incurs a net loss of b and d.This loss may or may not be made up with the net gain of e, the terms of trade gain.
While tariffs might benefit the steel industry, they hurt steel consuming industries. They may or may not hurt the US in general. Although most developing countries believe that antidumping can be legitimate in many cases and would like to use them more for their benefit, they have been vocal about their beliefs that developed countries unfairly are targeting them for antidumping measures. Speaking of behalf of developing countries, trade representatives from Brazil stated in a WTO General Council meeting: “In the period 1987-1997, developing countries were responsible for only 31% of investigations opened. At the same time, they were affected by 62% of the investigations. This situation is even less acceptable given the concentration of measures in some specific sectors where developing countries have developed a competitive industry.
One major trading partner [a reference to the USA], for example, in the last ten years, has opened 173 investigations in the steel sector, nearly half of all investigations opened by this Member”( Raghavan ).Thus, developing countries feel that developed countries are trying to keep the third world countries out of their markets. This could result in a stunt of economic growth for these developing countries, as they are unable to develop secure and stable long term industries. “The imposition or even the threat of imposition of AD duties has a serious adverse effect on the functioning of small and medium size firms, resulting in a fall in production, heavy unemployment and declines in incomes and increases in poverty levels.”( Raghavan).
To start the examination of a third world country’s argument, Graph 4 shows the definite losses that a small trading partner suffers (like India or another developing nation) when an tariff is slapped on its exports. Steel is the specific example in this case, though it need not be. Pw is the world price for steel; Pf is India’s domestic price as a result of the tariff.
The only gain for India is the consumer surplus gain of area 1.But that gain is more than negated with the producer surplus loss of areas 1,2,3, and 4. The net loss is 2,3, and 4. Thus, India overall is definitely harmed.
The producer surplus loss is particularly troublesome, since many of these industries are just starting out. The local economy is more dependent upon their success. The Offer curves graph shows one major result of a large country slapping a tariff on a small trading partner (in the specific market)- a decline in the terms of trade for the small country.In graph 5, the US imports steel from India and exports food. Line A is the original international price line with equilibrium achieved at point A. When the US slaps a tariff on steel, its Offer curve shifts backward to the Offer curve with tariff. Line B in now the new price line with equilibrium at point B.
The relative price pf/ps with a tariff is greater than pf/ps without the tariff.Thus, the terms of trade for India have declined for India. And as Ricardian theory shows, a long term decline in the terms of trade with result in a long term decline in real wages. This could mean the developing countries could get poorer and poorer.
The specific factor’s model (graph 6) shows how this decline in the terms of trade leads to a decrease in the wages of all Indian workers. Labor is the mobile factor in this example.Capital is the specific factor for steel. The original wage rate is w0. But due to the decrease in the relative price in steel, the value of the marginal product of labor in the steel decreases to the dotted line.
Thus the wage rate drops from W0 to W1. Less labor is used in the steel industry, resulting in less production.Graph 7 shows that both the returns to labor and capital have decreased. Graph 8 gives a more general picture. In this specific factor’s graph, capital is the mobile factor between industrialized nations and third world countries. As the third world countries relative prices decreases, there value of marginal product decreases (or is not as high as it would have been) as shown by a shift to the left to the dotted line. This movement shows that the developing countries are (relatively) losing capital to the industrialized nations.
This leads right into graph 9. If the industrialized nations capital to labor ratio is at k** as it would be in this possible case and the developing nations capital to labor ratio is a k, there can be no overlap in factor prices. This would mean that wages and rents in the developing nations could never be the same as in the industrialized world.
All these graphs show that there is real concern for third world nations if there is persistent antidumping measures taken against them by industrialized nations. The WTO has stated that in cases involving developing countries special attention should be paid to their economic situations when countries consider imposing antidumping provisions: “[ The WTO’s agreement]also calls for ‘constructive remedies’ to be explored.”(Raghavan) However, it is hard to say if this has ever been carried out. India feels that more specific rules should be made for developing nations: “Article 5.8 of the [WTO] AD agreement provides that the volume of “dumped” imports shall be normally regarded as negligible if the dumped imports from a country are less than 3%, unless countries individually accounting for less than 3% collectively account for more than 7%.
In view of the liberalization of global trade, and of more and more developing countries entering untapped markets for them, these percentages should be increased to 7% and 15% respectively.”( Raghavan). For third world exporters, they have many handicaps when it comes to fighting anti-dumping cases. One, there is utter paucity of exact information on anti-dumping laws, procedures as per WTO and as practiced by various countries. Two, there are very few legal experts and advisors in this field who have mastered not only the most complicated laws but even the procedures, and also have understood the various complicated technical aspects of WTO and the anti-dumping laws, international trade. Antidumping measures hit small and medium size firms very hard, because they often don’t have the resources to defend themselves.
It is also too expense for firms to pay the astronomical sum of money needed to defend one’s company in the complicated antidumping investigations.-estimated by the Indians to be around 100,000 dollars per investigation.One US legal form was 400 pages long. (Sule). The recent trade round in Seattle has done little to change any antidumping laws. No amount of arm-twisting could get the US to agree to negotiate the WTO’s antidumping laws. With the substantial political pressure from those in the steel industry and other labor unions, 228 U.S.
members of the House and Senate have signed a document insisting that Clinton and U.S. Trade Representative Charlene Barshefsky defend existing anti-dumping laws at the WTO meeting in Seattle. The legislation has enough support to pass in the U.S.
House of Representatives. Thus, US negotiators flat out refused to discuss any changes to the WTO current laws on antidumping.However, many countries such as Japan and some developing nations tried to tie any discussions of trade involving the Internet, a very important topic for the US, to discussions involving the antidumping laws. The US still refused.
The language from some in the Us government was very strong regarding the demands for talks about the antidumping laws, especially with regards to Japan . U.S. Under Secretary of Commerce for International Trade David Aaron told the WTO ” If [Japanese and others] don’t back down, then they’ll.
.sabotage the Seattle round.. We’re just not going to do [negotiate on antidumping]. We can’t do it. We won’t do it”(Reuters). Chile, representing a small developing country, issued their statement about the problem with antidumping laws, a view similar to that of Japan’s: “The aim is to remedy a situation in which anti-dumping measures have in most cases become a projectionist instrument that has nothing to do with anti-competitive behavior”( Schwartz).
Among other issues the antidumping controversy may have helped in the futility of the conference and Seattle. Although it was reported that some nations had put antidumping on the preliminary agenda for the next round of trade talks, of course, no finalized agenda was ever approved. So, to date nothing has been done to change or clarify the WTO’s antidumping laws. Moreover there have been few cases on antidumping that the WTO has ruled upon. Japan has filed complaints about antidumping measures placed on its cameras and supercomputers, but the WTO has yet to settle the disputes.
Also, South Korea recently filed a complaint with the WTO about Us antidumping tariffs against its flat computer screens, invoking the sunset rule that more than five years had elapsed since the US put on the restrictions.The WTO has yet to rule in that case either. Overall, it seems as if the WTO antidumping agreements need some refinement.
There is still much confusion as to whether countries are actually using its standards or not in their dumping investigations. There are many theoretical problems with some antidumping procedures. Allegations of unfair investigations abound. The WTO’s Antidumping Agreement was made to be very complex to help to deal with these problems, it may be too opaque to be able to determine the validity of some antidumping measures.
As the main part of this paper explores, the consequences of unnecessary or mistaken antidumping measures can be grave for both the exporting and importing countries. Tariffs and countervailing duties can hurt the domestic countries consumers and can have large negative effects on the small trading partners. This is especially problematic for developing countries that need access to industrialized markets to ensure they can obtain a basis for long-term economic stability and growth and clime out of poverty. The industrialized nations should want this to occur so they don’t have to perpetually give handouts to these developing nations.
Of course, in order give a lengthy description of one aspect that is not necessarily popular in the United States of antidumping , this paper restricted its examination to only half of the antidumping story; there are many arguments for the antidumping laws that are currently on the books.No one is suggesting that the US or any other industrialized nation let its industries be unfairly put out of business, if that is truly the case at hand. Still, as the Seattle Round demonstrates, the WTO’s antidumping laws seem to have satisfied to few countries. Given the spirit of its trade barrier reduction goals, the WTO should make sure it gets its antidumping rules right. Bibliography “Consultations on FTAA and WTO Negotiations.” Consultations with Canadians. 4 Oct.
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