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Session 11

Session 11 . Pushing Export. Dumping . Selling exports at a price that is “too low,” a price below “normal value” or “fair market value.” Either The export price is lower than the price charged for comparable domestic sales in the home market of the exporter. or

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Session 11

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  1. Session 11 Pushing Export

  2. Dumping Selling exports at a price that is “too low,” a price below “normal value” or “fair market value.” Either • The export price is lower than the price charged for comparable domestic sales in the home market of the exporter. or • The export price is lower than the full unit cost (including a profit margin).

  3. Specific Types of Dumping

  4. MC = AC MC = AC Demand Demand MR MR

  5. Actual Anti-dumping Policies The importing- country’s government should examine each case and consider benefits and costs before imposing anti-dumping duties or restrictions on dumped imports. The WTO rules permit countries to retaliate against if the dumping injures domestic import-competing producers. If the government in the importing country finds both dumping and injury, then the government is permitted to impose an anti-dumping duty.

  6. Proposal for Reform on Anti-dumping Policies • Anti-dumping actions could be limited to situation in whichpredatory dumping plausible. • The injury standard could be expanded to require that weight be given to consumers and users of product. • Anti-dumping policy could be replaced by more active use of safeguard policy*. *Safeguard policy is the use of temporary import protection when a sudden increase in imports causes injury to domestic producer

  7. Export Subsidies(Small Nation) Decreased Consumer surplus * Subsidy will increase the domestic price otherwiseall products will be exported. Increased Producer surplus Suppliers’ revenue with subsidy World Price Government subsidy on export Deadweight Loss Export without subsidy Export with subsidy

  8. Export Subsidies(Large Nation) Decreased Consumer surplus * Subsidy will increase the domestic price otherwiseall products will be exported. Increased Producer surplus Suppliers’ revenue with subsidy Initial World Price New World Price Government subsidy on export Deadweight Loss Export without subsidy Export with subsidy

  9. Switching an Importable Product into an Exportable Product Decreased Consumer surplus * Subsidy will increase the domestic price otherwiseall products will be exported. Increased Producer surplus Suppliers’ revenue with subsidy Government subsidy on export Import Export with subsidy

  10. Conclusion toward Subsidy • An export subsidy can expands exports and production of subsidized product. • An export subsidy can lowers the price paid by foreign buyers, relative to the price that local consumers pay for the product. • The export subsidy reduces the net national well-being of the exporting contry.

  11. WTO Rules on Subsidies • Subsidies linked directly to export are prohibited, except export subsidies used by the lowest-income developing countries. • Subsidies that are not linked directly to export but still have an impact on export are actionable. • Some subsidies are non-actionable.

  12. Should the Importing Country Impose countervailing Duties ? Exporting country is a large nation. Importing country Decreased Producer surplus Increased Consumer surplus Initial world price New world price when exporting country offered subsidy to its exporters. If the importing country employ the countervailing duty, this is the extra benefit from such duty.

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