Explore BrainMass

WTO and Dumping Cheap Goods

Many domestic manufacturers have called for protection from foreign firms coming into their country and dumping cheap goods. While consumers enjoy the benefits of low cost products, companies lose millions of dollars. Many firms have lobbied their own national government to pass "anti-dumping" legislation.

Explain how the WTO implements new trade and national competitive advantages among the nations of the world. Provide examples to support your answer.

Solution Preview

Article VI of the General Agreement on Tariffs and Trades (GATT) ruled that a product is considered as being "dumped" when it is introduced into the commerce of another country at less than its normal value.

Another study specifies that a product is said to be dumped (less than its normal value) if the price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or, in the absence of domestic price, is less than either:

a. The highest comparable price for the like product for export to any third country in the ordinary course of trade, or
b. The cost of production of the product in the country of origin plus a reasonable addition for administrative, selling and general costs (SGA), and profits.

Binding tariffs, and applying them equally to all trading partners (most-favoured-nation treatment, or MFN) are key to the smooth flow of trade in goods. The WTO agreements uphold the principles, but they also allow exceptions - in some circumstances. Three of these issues are:

a. actions taken against dumping (selling at an unfairly low price)
b. subsidies and special "countervailing" duties to offset the subsidies, and
c. emergency measures to limit imports temporarily, designed to "safeguard" domestic industries.

However, article VI of GATT does not prohibit dumping. It only condemns dumping that causes injury and it authorizes the importing member to take measures to offset injurious dumping.

In the implementation of international trade, WTO intends to supervise and liberalize ...

Solution Summary

This solution looks at the unfair practices of dumping cheap products in other countries and how they are affected economically.