Protectionism - Import Dumping
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 22 Mar 2021
Taking action to protect against import dumping is an argument in favour of protectionism.
Import dumping happens when businesses sell significant quantities of products abroad at below production cost or significantly below selling prices in the home market.
Example of Alleged Import Dumping - Steel and Solar Panels from China
China’s steel industry is experiencing significant excess capacity and China has being accused of dumping its steel products on the European Union, selling them for less than they are worth. That makes it harder for EU steel producers to compete.
Several years ago a similar dumping issue arose when Chinese manufacturers of solar panels were accused of import dumping into the European Union.
Protectionism using Anti-Dumping Tariffs
Anti-dumping duties (or import tariffs) raise the price of a product to help protect local producers.
Article VI of the General Agreement on Tariffs and Trade (GATT) permits special anti-dumping duties that are equal to the difference between the import price and the normal value of the product in the exporting country (the “dumping margin”).
Anti-dumping tariffs are allowed under WTO rules when cases of dumping have been established
There are three main options when introducing an anti-dumping import duty
- An ad valorem duty – a % of the frontier price. This is the most common form of import duty.
- A specific duty – a fixed value for a certain amount of goods, e.g. €100 per tonne of a product
- A variable duty – a minimum import price (MIP).