Has the World Trade Organization been successful in dealing with instances of dumping and subsidies by the larger nations, such as China?

Title page

Has the World Trade Organization been successful in dealing with instances of dumping
and subsidies by the larger nations, such as China?
Dumping is the practice of carrying out unfair business activities in the hope of getting
advantage in the form of excess profits. It is when the businesses lower their prices to export
their goods and then sell those goods in an international market at cheaper prices to get a higher
profit by consuming a larger market share. The businesses, then raise their prices, once the
competition has been destroyed1. The World Trade Organization (WTO) has passed an Anti –
Dumping Agreement which states that all governments of countries to which goods or imported
or exported to are allowed to take action against such practices which genuinely cause harm to
the industry existing in the home country. They allow the member countries to act against any
threats to the industry in the country if the governments can prove that the dumping practices are
actually causing harm and also can calculate the extent of dumping i.e. the extent of differences
in the prices being charged which are ultimately leading to the downfall of the home country
manufacturers2. The WTO agreement on subsidies, referred to as the Agreement on Subsidies
and Countervailing Measures, give procedures and policies which explain that the subsidies
will be withdrawn in case it has been proven that these are causing harm to domestic producers3
(and this can be proven by the governments of the countries where the subsidies are being
imposed). The WTO cannot regulate the actions of the companies engaged in these practices. It
can only lend powers to the governments of the countries with regard to what they can or cannot
do. With all this being said about the policies being made by the WTO, the question now arises
whether it has actually been successful in implementation of these policies or not.
Dumping usually leads to the erosion of the domestic trade and the local market operators
existing in an economy. For any economy in the world, the implementation of the anti – dumping
laws would have had long – term trade implications in the future. The WTO has for very long
been in favor of giving the powers to the governments of nations to take control of dumping
practices but the question now arises as to whether or it has actively played a key role in the
process? According to the WTO, any member country seeking to control dumping has to create
1 Kimberly Amadeo, ‘Trade Dumping and Its Consequences’ (The Balance, 20 February
2019). https://www.thebalance.com/what-is-trade-dumping-3305835. Accessed 5 May 2019.
2 ‘Anti-dumping, subsidies, safeguards: contingencies, etc.’ (World Trade Organization).
https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm. Accessed 5 May 2019.
3 ‘Subsidies and countervailing measures’ (World Trade Organization).
https://www.wto.org/english/tratop_e/scm_e/scm_e.htm. Accessed 5 may 2019).

an administrative procedure to identify and measure the impact of the dumping effect in the
country. Firms in any country seeking to develop this procedure must have to overcome any
challenges that present themselves in the way. The anti – dumping policy of the WTO also states
that there should be sufficient proof with the governments that such dumping practice is actually
effecting the market performance in the country4. This proof means a “material injury” to the
country where the goods are being dumped and that the injury is actually due to the dumped
goods. For this collection of evidence, the WTO has allowed the governments to collect and
consult any kind of industry data including any market share data, price reports, views of market
leaders in the country, etc.
Now the question arises as to why there is a controversy surrounding the anti – dumping policy
of the WTO? The reason for this is that there is a difference in giving powers to the governments
to take action against the dumping practices and actually not allowing dumping by foreign
countries in the first place. The WTO in its policies, only gives an interface mechanism, but does
not allow for the countries to erase the need for this mechanism. The multilateral trading system
in today’s world would have been considered successful provided all the nations were getting an
equal benefit out of it. But this has not happened. This would have been possible only if the
WTO’s dumping and subsidies policies were active in nature. By not developing and
implementing any laws which prohibit or restrict dumping as a practice, and rather only allowing
the governing bodies to control its harmful effects, the WTO has ultimately led to friction being
created in the political as well as the market trading systems5.
The answer to the question for the purpose of this paper is no – the WTO has not been successful
in control of instances of dumping and subsidies in developing nations, such as China. In
countries where the goods are being dumped and the subsidies are being imposed, there is an
existence of price – discrimination. This discrimination is the difference in the prices of the
locally produced goods and the “dumped” goods. In the short period, dumping by larger nations
leads to a lower price of the imported goods and a higher chance of earning profits by comparing
prices with the local goods whereas in the long run it can lead to deter investment of the local
4 Chad Bown, ‘The World Trade Organization and Antidumping in Developing Countries’,
(2006) World Bank Policy Research Working Paper.
http://documents.worldbank.org/curated/en/590981468160773061/pdf/wps40140
BOX0311113B01tell0JS0when0done1.pdf. Accessed 5 May 2019.
5 David Palmeter, ‘A Commentary on the WTO Anti-Dumping Code’ (1996) 30 (4) Journal of
World Trade p. 43.