Anti-dumping

This article discuss the concept of anti-dumping under the World Trade Organization (WTO) rules, and considers the factors behind some of the current challenges facing world trade in this area. It commences by looking at the origin of the term “anti-dumping” in English and Chinese. It then outlines the WTO framework as it relates to anti-dumping, and identifies some of the factors behind the current challenges. Finally, it outlines the applicable anti-dumping provisions under Chinese law.

What is dumping?

Put simply, anti-dumping occurs when: (1) an exporter sells a product into an importing country at a lower price than the normal value at which the same (or like) product is sold on its own domestic market; and (2) the action causes material harm to the domestic industry in the importing country. Often the objective of dumping is to increase market share in a foreign market by undercutting competition and driving other sellers out of the market.

In both English and Chinese, the word “dump” has a negative connotation. In English, the word “dump” is considered to originate from the language known as Old Norse, and originally meant to “fall suddenly”. In modern English, it means to dispose of something in a careless or irresponsible way.

The word “dump” in Chinese (倾销) literally means to sell something on a biased or disreputable basis. Similar to the English word, the first character in the Chinese compound means to “collapse” or “fall”.

Various countries started to take action against anti-dumping in the context of imports long before the WTO was established in 1995. For example, Australia has had an anti-dumping system for over 100 years. China first issued anti-dumping provisions in 1994.

Anti-dumping is an important part of what is known as the “rules-based multilateral trading system” under the WTO framework. This system has a number of features. First, it is designed to provide a basis on which all members of the WTO can trade with each other on common terms – thus, it is multilateral, instead of bilateral, in nature. Countries have been trading with each other on bilateral terms for centuries. The important distinction with the WTO is that it provides common terms – or a baseline – for trade between all member states.

Second, the system focuses primarily on trade in goods and services. Although there are provisions that relate to investment, the framework governing the investment by citizens of one state in another state is generally covered by other legal instruments, including bilateral investment treaties. Because trade and investment are inter-related, trade and investment agreements are increasingly being discussed and agreed alongside each other. For example, in 2019, Australia and Hong Kong entered into a bilateral free-trade agreement (FTA) and an associated investment agreement, both of which came into effect in January this year.

Third, and importantly, the system is based on agreed rules, which include a mechanism to resolve disputes between member states in relation to the interpretation and application of those rules.

As the WTO notes on its website, the WTO framework is designed to make the international business environment for trade in goods and services stable and predictable. Stability in trade is considered to be a good thing, as experience shows that countries that trade with each other are less likely to go to war with each other. It reflects the idea that international trade contributes to international peace and security. Trade, therefore, has broader benefits that go beyond economic benefits.

The two main principles underpinning the multilateral trading system are reciprocity and non-discrimination.

Prior to the signing of the General Agreement on Tariffs and Trade (the predecessor to WTO) in 1947, trade was primarily undertaken on a bilateral basis and was characterised by protectionism, namely, efforts on the part of individual countries to protect their markets from foreign competition. Protectionism is often associated with nationalism and the negative forces that this combination can create. One of the benefits of a rules-based multilateral trading system is that countries develop a mutual interdependence and mutual benefits from pursuing trade on a free and open basis.

Of course, this does not mean that countries do not take action at various times to protect their own markets, and to retaliate and harm the markets in other countries (the current global situation is, unfortunately, an example of this). However, for every action that a country takes to harm or punish another country, there is

a potential consequence that harms or adversely affects its own markets. Accordingly, each country needs to be aware of the extent to which its actions against other countries might ultimately prove to be equally or more damaging to its own economy.

Protection can take various forms, including direct barriers such as import duties, and indirect barriers such as quotas, licensing requirements and subsidies.

A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at law.asia