There are good and ethical reasons for a business to file an antidumping petition (ADP), but there are also unethical reasons for filing these petitions. U.S. businesses have apparently used both motivations. The purpose of this article is to provide a test for judging the ethicality of filing antidumping petitions and applying that test to recent situations in the U.S.
Ethical judgments are basically about fairness and justice. The approach used for making ethical judgments in this article recognizes the appropriateness and importance of markets and critiques the fairness of ADPs within the objectives of the capitalistic markets. When outcomes of using legal rather than market remedies are unethical, the general welfare of society is harmed.
If all ADP filings were unethical, the article could simply devolve into an attack on ADP legislation in general, but such is not the case. Thus, this article represents an attempt to sort the cases and outcomes of ADPs to help make ethical judgments about them.
To achieve the article's objective, a brief overview of ADPs is provided followed by a description and justification of an ethical test for filing an ADP. Two extended cases, one ethical and one unethical, are then presented to illustrate how the ethical test can be applied. The article then turns to an evaluation of the general impact on society from filing ADPs followed by an ethical evaluation of the observed outcomes from such filings.
AN OVERVIEW OF ANTIDUMPING PETITIONS
According to the U.S. Department of Commerce definition, "dumping" occurs when a good is sold for less than its fair value. This generally means that it is exported for less than it is sold in the domestic market, or third country markets, or it is sold for less than production cost (ITC 2900, 1995). Since 1897, the U.S. effectively has had antidumping laws on the books and these laws have enabled the U.S. government to punish firms in other countries that send such exports to the U.S. However, it was not until 1916 that Congress passed a law specifically targeting dumping. According to the Antidumping Act of that year, for dumping to occur, a predatory intent by the exporter must be shown. In other words, the exporter must intend to sell its products in the U.S. at below production cost in order to cause material injury to an existing U.S. company. (Johnson, 1992) The law was a response to the "unfair competition" implied by the alleged dumping practices of the highly cartelized and heavily protected German industries of the period. (Staiger & Wolack, 1994) This law came in an era in which the federal government also enacted antitrust laws to prevent American enterprises from pursuing similar predatory practices against their domestic competitors, this law was essentially an international extension of Section 2 of the Sherman Act.
With the Antidumping Act of 1921, Congress loosened the requirements to permit federal action to keep out foreign products, not only if foreign companies engaged in predatory pricing, but merely if their products were deemed to be priced lower than similar American products, regardless of whether predatory pricing was an issue. This Act forms the basis for America's current antidumping law. The Antidumping Act was incorporated into the 1930 Tariff Act and later amended by the 1979 Trade Act, the 1984 Trade Act, and the 1988 Trade Act. These revisions made it easier to restrict foreign imports that are sold at lower prices than similar American products.(1) This revision allows more ethically questionable actions to occur, as well as producing situations that: (1) are legal in international markets but (2) would be illegal in domestic markets.
The U.S. antidumping law is generally consistent with international trade law. The Kennedy Round of the General Agreement on Tariffs and Trade (GATT), held between 1963 and 1967, resulted in the GATT Antidumping Code. This code sets out guidelines under which countries may act against foreign firms that practice predatory pricing, resulting in material injury to an industry based in the importing country. GATT itself does not establish specific definitions of what constitutes dumping or acceptable acts against countries that dump; it simply creates the guidelines on which countries can adopt their own laws to prevent dumping. The code was amended during the Tokyo round of GATT, held between 1973 and 1979. Of the 103 members of GATT, however, only 25 have signed this amended code. The Tokyo Round agreement mandates that all antidumping investigations be reported immediately to GATT, now the World Trade Organization (WTO), and that a semiannual report on antidumping cases be forwarded by the signature countries to the WTO. According the code, each signatory can legislate and administer its antidumping code, as long as it conforms to GATT standards. As recently as 1992, GATT has found the U.S. violating the intent of international guidelines to which the laws of signatory countries must conform. Specifically, GATT accused the U.S. of making it too easy for American enterprises to obtain punitive tariffs against foreign products. The U.S. so far has ignored these GATT warnings (Johnson, 1992).
This reaction to GATT warnings isn't surprising. The original intent of American AD law was to prevent predatory pricing. The law was amended to prevent price discrimination and/or less than cost sales. The immediate and obvious problem is that foreign sellers in the U.S. market can be legally prevented from pursuing pricing strategies, which would be perfectly legal for U.S. firms (Dick, 1991). In essence, some companies have "captured" the regulations for their own advantage. Thus, while the announced aim of AD law is to protect U.S. industry from predatory dumping, a popular current aim seems to be protectionism.
While this misdirection seems to be the reason for the continued existence of AD laws in their current form, obfuscation is what keeps them going. The administration of AD laws in the U.S. has now become a complex process that only a few businesses people, economists, and lawyers understand. However, the businesses that utilize these laws for the purpose of protectionism seem to be well aware of their purpose.