What are anti-dumping and countervailing duties and why did they start?

Anti-dumping and countervailing duties are two types of trade remedies that aim to protect domestic industries from unfair competition by foreign exporters. They are imposed by the importing country’s government when it determines that certain imported products are being sold at prices below their normal value (dumping) or are benefiting from government subsidies (countervailing).

Dumping is a form of price discrimination that occurs when a foreign exporter sells a product in an export market at a lower price than in its home market or a third country market. This can cause injury to the domestic producers of the same or similar product in the import market, who have to compete with the dumped imports. Dumping can also distort the normal trade flows and affect the international price level of the product.

Countervailing is a form of subsidization that occurs when a foreign government provides financial assistance or incentives to its exporters or producers, such as grants, loans, tax breaks, or export credits. This can give an unfair advantage to the subsidized products in the import market, where they can undercut the prices of the domestic products or increase their market share. Countervailing can also create trade distortions and affect the global production and allocation of resources.

Anti-dumping and countervailing duties are intended to offset the value of dumping and/or subsidization, thereby leveling the playing field for domestic industries injured by such unfairly traded imports . They are calculated based on the difference between the export price and the normal value of the product (for anti-dumping) or the amount of subsidy received by the exporter or producer (for countervailing). They are applied on top of any normal customs duties that may apply to the imported product.

Anti-dumping and countervailing duties are not meant to be punitive or protectionist measures, but rather to restore fair trade conditions and prevent further injury to the domestic industries. They are governed by international rules and agreements, such as the World Trade Organization’s (WTO) Anti-Dumping Agreement and Agreement on Subsidies and Countervailing Measures, as well as national laws and regulations. Each country has its own authorities and procedures for conducting investigations and imposing duties on dumped or subsidized imports.

Anti-dumping and countervailing duties have been used by many countries as trade policy tools since the early 20th century, but their use has increased significantly in recent decades due to the growth of global trade and competition. According to the WTO, there were 5,386 anti-dumping measures and 659 countervailing measures in force as of June 2020. The main users of these measures include the United States, the European Union, India, China, Canada, Australia, Brazil, Turkey, and South Africa. The main products subject to these measures include steel, chemicals, plastics, textiles, furniture, paper, and agricultural products.