Dumping On America.(Brief Article)

With a steel trade war brewing, you'll be hearing a lot in coming weeks about how Europeans and Asians are "dumping" on America. But what exactly does that mean? Literally, dumping is the export of goods at prices below their cost of production, but it is meant to evoke shifty foreigners conniving to undersell honest locals, even drive them out of business. It sounds bad, but makes little sense. The idea of dumping assumes an ideal world in which prices always cover costs, and are the same everywhere for all customers. The reality is that Americans "dump" on America all the time, selling below cost when times are hard, and charging whatever the local market will bear. No customer expects the same price on a car, insurance, apples or anything else from any two dealers. Any trade expert will tell you the same thing: the calculations America (or any other nation) goes through to prove foreign dumping are a convoluted exercise in manufacturing evidence.

The fuzzy math has done nothing to slow the coming conflict. In response to complaints from U.S. steelmakers, the U.S. International Trade Commission last week recommended a hike in steel tariffs of up to 40 percent. President George W. Bush will take those recommendations as a threat to the Paris steel summit this week. Major producers from Brazil to Japan are discussing ways to reduce a 250 million-ton excess in global steel-production capacity, which is undercutting prices and bankrupting manufacturers all over the world. Negotiators from Europe and Asia warn that the American tariff threats could provoke retaliation, even a "trade war."

From its beginnings, dumping has been a trade weapon designed and wielded primarily by the steel industry. America made dumping a crime at the end of World War I, when protectionism was seen as a security measure. In 1916 the United States created the Tariff Commission to calculate costs of production abroad, so the nation could retaliate against dumpers with "scientific tariffs." No one pretends such tariffs are "scientific" anymore, but they are still wrapped in the flag. After September 11, steel executives began arguing that steel should be protected from "foreign pricing"--no matter that the foreign effect on steel prices (unlike oil prices) is to drive them down.

This is an odd moment for a trade fight over anything. Last month negotiators agreed in Doha, Qatar, to a new agenda for global trade talks that had been stalled since the Battle in Seattle. The United States was the lone holdout against efforts to discuss dumping, but ultimately relented. The threat of a trade crisis ebbed--until now. Last week European Trade Commissioner Pascal Lamy called U.S. tariff threats a "perverse" signal "at a time when the ink is barely dry on [the Doha] agreement."

America is hardly the only nation that has embraced anti-dumping rules. The U.S. laws were rarely acted on until a 1979 revision allowed private citizens to file suit. Dumping complaints skyrocketed, and trade rivals retaliated in kind. Over the next 20 years more than 50 nations wrote antidumping laws. In the 1990s the number of dumping complaints jumped by 50 ...