Antidumping Duty and the Countervailing Duty - Regional Integration

Abstract

Traditional international trade involves a complex system of trade barriers to ensure the protection of domestic industry and its workers interests. The trade impediments and subsidies include protective tariffs, import quotas, non-tariff barriers such as licensing, and export subsidies. Originally, a country's economy acted independently of other nations. The growing trend ever since the establishment of GATT in 1947 is globalization.

Introduction

In globalization, a country acts as a part of a free trading community consisting of member nations around the globe. As a trading community, trade problems can easily be resolved through negotiations rather than a trade war (McConnell 104-105). The US government employs the use of protective tariffs and export subsidies to protect and aid domestic industry.

Types of Tariffs

The two types of tariffs used on imports are the Antidumping (AD) duty and the Countervailing (CVD) duty. These duties shield domestic industry from foreign competition. By raising the price of imports, domestic products become more attractive to the consumer, such as the phrase "Buy American!" Export subsidies are government payments made to domestic producers. The payments allow lower operating costs, enabling producers to compete on the world market with similarly priced goods and services. An example is US subsidization of agriculture to boost the US food supply on the world market (Import). The Department of Commerce (DOC) oversees the establishment and maintenance of trade orders, policies implementing tariffs, non-tariff barriers, import quotas, and subsidies. These orders are continually updated as new trade issues arise. Under the DOC is the International Trade Administration (ITA), which ensures the protection of domestic industry from international trade for both imports and exports. Within the ITA is the Import Administration (IA) that specifically handles the imports for ITA. Both the DOC and IA work together to form policies for antidumping and countervailing duties, and export subsidies.

Dumping

Dumping is the selling of a product on a foreign market at a price "less than fair value" (LTFV). This practice can cause material injury to the domestic industry producing a similar product. To counteract this problem, an antidumping duty (AD) is taxed onto specific imports to raise the price. An example is the duty on Belgium Sugar. Untaxed, Belgium sugar would sell on the US market for a lower price than domestic growers causing internal economic effects. Currently, there are several products, which have an AD order on them; barbed wire and barb less wire strands, welded carbon steel pipe and tubing, line and pressure pipe, oil country tubular goods, hot rolled carbon steel flat products, corrosion-resistant carbon steel flat products, cotton shop towels, solid urea, steel concrete reinforcing bars, sugar, cut-to-length carbon steel plate, stainless steel plate in coils, iron construction casting, carbon steel butt-weld pipe fittings, brass sheet and strip, frozen concentrated orange juice, industrial nitrocellulose, silicon metal, circular welded non-alloy steel pipe, stainless steel wire rod, silicomanganese, stainless steel wire rod, stainless steel bar, line and pressure pipe, new steel rails, pure and alloy magnesium, fresh Atlantic salmon, preserved mushrooms, chloropicrin, barium chloride, greig polyester cotton print cloth, natural bristle paint brushes and brush heads, petroleum wax candles, porcelain-on-steel cooking ware, tapered roller bearings, heavy forged hand tools w/wo handles, sparklers, sulfur chemicals, sulfanilic acid, helical spring lock washers, sebacic acid, paper clips, cased pencils, coumarin, fresh garlic, furfuryl alcohol, glycine, melamine institutional dinnerware, to obtain a complete product listing visit the antidumping website.

Countervailing duties are used to help industry compete against foreign subsidized industry. A country will subsidize an industry it determines cannot compete fairly on the open market without support. Thus, the country makes government payments to offset the operating costs and in turn, lowering prices. As an example, the Norwegian government subsidizes the Atlantic salmon. This causes the price of Atlantic salmon to drop on the open market. Domestic producers cannot compete with Norwegian prices. As a result, a CVD is imposed on salmon. The amount of products with CVD orders is small compared to AD orders. The products are: carbon steel flat products, stainless steel plate in coils, iron construction castings, brass sheet and strip, carbon steel flat products, new steel rails, pure and alloy magnesium, sugar, cut-to-length carbon steel plate, in-shell pistachios, grain-oriented electrical steel, seamless line and pressure pipe, oil country tubular goods, certain pasta, stainless steel wire rod, top-of-the-stove stainless steel cooking ware, structural steel beams, fresh & chilled Atlantic salmon, and cotton shop towels a more complete list can be obtained from the antidumping website.

Specialization and economic growth are the principal benefits associated with globalization. When a country becomes specialized, it is possible to increase total GDP (gross domestic product) using the same resources available. For a country to specialize, it is necessary to export goods and services that can be supplied on the global market at a competitive price. All else the country may need is imported from a country specialized in producing that certain good. For example,