Southern Perspective Shenzhen

In this economic climate, the world is using its old tricks again. In the recent Xinhua article, they explain a current anti-dumping investigation against China by the European commission.

First, what is dumping?

Dumping is when a company exports a product below the market price. In the claim above, the European Commission is starting an anti-dumping investigation against companies in China selling:

Steel wire rods

Seamless pipes

Sodium Gluconate

Road wheels

Anti-Dumping measures result in tariffs and duties on the product to raise the price to a reasonable market price. This all a very simplified explanation.

As I said in the beginning, in the current economic climate, the world is looking for ways to protect their country’s interests. An anti-dumping measure is definitely one way.

Stuart Newman, who is a legal advisor for the Foreign Trade Association representing EU importers comments:

“When we experience a financial crisis, we can assume there will be more requests for anti-dumping investigations from manufacturers,” he said.

The investigations do not automatically result in high duties for imports in the long run, Newman said, but they do increase the cost of imports and expenses for consumers.

“Although companies may not increase the prices of their products immediately, they have to swallow the cost, reducing staff and imports,” Newman said.

America is no golden child in this arena either. An interesting paper titled, Unfair Play: Examining the U.S. Anti-Dumping ‘War’ Against China, Francis Tanczos gives some scary statistic about how many case have been directed at China.

Due to the large volume of its exports, it is of little surprise that China has been the primary target of anti-dumping measures. The sheer number of anti-dumping cases against China has made it apparent that China is perceived as a threat to many other WTO members: over the past two decades or so, more than 30 countries have opened about 600 anti-dumping cases in the WTO against 4000 different types of Chinese products. Over this same two-decade period, the US had made 110 petitions and 68 orders against Chinese goods topping the list among the US’s trading partners for such measures. Currently, 25 percent of all WTO anti-dumping investigations are directed at China.

Is China playing unfair or are other countries trying to protect their economy by any means? I think it would be unfair to claim one or the other. There is truth on both sides of the matter. On one side, a lot manufactures are playing unfair with lower priced goods. On the other side, a lot of countries just use this measure as protectionism for their country’s industry.

There are no angels in this game, but we are locked into a “race to the bottom” for goods. The more communities’ desire for something, the more variety and pricing structures will appear to fill markets. A trip to the local mall will make this pretty clear. Meanwhile, to produce those same goods in your home country would result in less variety and be very expensive to the end user. It is an interesting conundrum we are in.

Free market or regulate the hell out of it?  In the wise words of Bart Simpson:

Ms. Mellon: Bart, what other paradoxes affect our lives?
Bart: Well… you’re damned if you do, and you’re damned if you don’t.

Well said…