What You Need To Know About Dumping Duties
First off, let’s define what dumping is: the process of exporting products into Australia at a lower price than the domestic market value. It usually comes in at a large volume, and can threaten the financial viability of the importing nation.
So dumping duties are: additional import duties or fees imposed on goods that are sold for export to Australia at less than fair market value in the country of export.
Is Dumping Legal?
The World Trade Organization (WTO) has not declared dumping as unfair competition, but many nations have looked upon it unfavorably. The WTO considers dumping legal in several circumstances.
Before dumping duties can be imposed, the Australian Government must receive a complaint from a local manufacturer that has suffered material injury, usually through loss of sales or market share, because of a product being dumped on the Australian market.
Once a complaint has been received, an investigation will take place. If the goods have been dumped, dumping duties will then be applied to the goods from the exporting country.
Pros and Cons of Dumping:
- Dumping allows products to be sold at a significantly lower price
- Exporting business gets a subsidy to sell lower than the market value
- Consumers get to enjoy products at a lower price
- Maintaining the dumping is quite expensive
- Subsidy cost adds to the export country’s sovereign debt
- Might need to deal with trade restrictions and tariffs
- The criticism by the international trade organizations
Counter-measures Towards Dumping
The only way to counter dumping and protect domestic industries is to use tariffs and quotas. There must be proper trade agreements between two countries for a legal trade ban on dumping. Otherwise, it might be really expensive and hard to prove the violation.
Are Dumping Duties Relevant?
Australian manufacturers will say the answer is yes, since it is the only mechanism that the government has in order to overcome the problems with goods that are dumped in international markets.
Should It Be Removed?
It depends, as it varies from different situations. In summary, dumping is used to increase market share in a foreign market by exporting a product to another country below the normal price. It is generally not harmful and prohibited unless there is material retardation in the domestic industries.
Although the WTO has not declared dumping as unfair trade, the risk lies in the potential monopoly situation where the exporter will be able to fully dictate the price and quality of the product in the market. Local businesses rely on anti-dumping laws to limit unfair competition from below-market-value imports manufactured abroad.
However, the WTO does not regulate the actions of companies engaged in dumping but focuses on how governments can react to the dumping. In general, the WTO agreement allows governments to act against dumping for cases with genuine material injury to the competing domestic industry.