Subsidies for Dumping

Abstract

With the promotion of free trade, by the WTO, the Member States have started reducing the trade barriers, both in the agriculture and industrial sectors. As a natural consequence of phasing out of these trade barriers, consumer’s access to the imported products has indeed become easier; the choices for the products have increased and because of the market competitiveness, the prices of the products have become relatively lower. Despite the promotion of these free trade objectives, the market system of the Member States have to face new forms of challenges, such as unfair use of trade-subsidies, strategic use of subsidies as a background support for predatory-pricing and also for dumping the products in the market of other countries. What further seems incompatible with the principles of free trade, is that Member States, by discarding the WTO objectives, have started reacting in an over-competitive manner in order to prevail in the market. Taking into consideration the trade statistics, it is evident that the business firms from both the Developed and Developing nations, in order to maximize profits try to out-manoeuvre in the free trading system, by resorting to the trade practice of dumping or using subsidies for dumping. Such practices have raised the issue of connection between Subsidies and Dumping for financial objectives. The issue of interrelationship between Dumping and Subsidies was raised in the case of United States-Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/R and in the case of China—Countervailing and Anti-Dumping Duties On Grain Oriented Flat-Rolled Electrical Steel from the United States, WT/DS414/R. Trade practices with such characteristics and strategy base, can be an abrogation of the WTO objectives, and are considered as unfair trade practices. Such like practices are apparent both in industrial and agricultural sector. Discussing the trade practice of dumping in general, it can be stated that dumping is a strategic business practice through which products are exported at a cheaper price than their ordinary price in the domestic market or exported at less than the fair value. Now the question arises of how such types of practices are feasible. Such business objective, seems feasible as a result of well-considered measures, for instance by the means of predatory pricing policies of the firms or alternatively, it can be said, the companies being supported to cover the market risks through one or the other form of subsidies.