Anti-dumping laws versus free trade

Free-trade advocates fear President Bush has let the protectionism genie out of the bottle by his recent decision to support trade barriers against imported steel. His move was squarely at odds with his oft-stated support of free trade. Critics charge that his caving in to quotas was prompted by political considerations, rather than economics.

Students of the democratic process explain that steel companies and steel workers who get big benefits from the higher prices protectionism brings have more influence than does the general public, each member of which will be hurt only a little.

Trade treaties act as a check on protectionism – making it more difficult, but not impossible, to give benefits to organised interests. But trade treaties have plenty of loopholes, which tend to grow larger all the time – allowing, for example, anti-dumping laws to expand into popular substitutes for tariffs.

Anti-dumping laws allow a country to impose countervailing tariffs or quotas on imported goods that domestic producers complain are dumped on the market at an "unfair" price – including, for example, low priced steel from abroad.

Between 1980 and June 1999, the U.S. launched 768 anti-dumping actions, and every time it did so, experts say, it encouraged other nations to follow suit.

Until the late 1990s, the U.S., Europe, Canada and Australia brought nearly all anti-dumping cases – but then bringing anti-dumping actions suddenly became popular among developing nations.

Countries such as those in South America, along with India, South Africa, South Korea, Turkey and Poland – which had filed few, if any, anti-dumping actions in the 1980s – jumped in with scores and scores of such actions.

A major reason the practice is spreading is that it is difficult to give one industry protection without encouraging other sectors to also seek protection. And then free trade and competition wither and die.

Source: Virginia Postrel (Reason magazine), Economic Scene: The Curbs on Steel Trade Demonstrate the Faults of Courting Special Interests, New York Times, June 14, 2001.

For text http://www.nytimes.com/2001/06/14/business/14SCEN.html
For more on Antidumping laws http://www.ncpa.org/pd/trade/trade8a.html