Dumping laws and antidumping procedures sound technical and boring. The firms that use antidumping complaints to get protection from imports like it that way. Nobody else is much interested in what’s going on. Yet the stakes are large. Maybe we should follow the money—now that’s more interesting.

Here are three examples of antidumping in real life. One sad moral of these tales is that any exporter that succeeds in building market share is at risk of being accused of dumping, and defense against this charge will be very difficult.

A GAME OF CHICKEN When it comes to chicken, Americans prefer white meat. South Africans prefer dark meat.

Sounds like the basis for mutually beneficial trade. And it would be, if it weren’t for those pesky dumping laws.

U.S. chicken producers noticed the differences in demand. They began exporting dark-meat chicken to South Africa. This created extra competition for South African chicken producers, but South African consumers gained more than local producers lost. That’s the way trade works. In addition, U.S. chicken producers were happy. The price they received for their dark-meat exports was somewhat higher than the price they could get in the United States. This added to their profitability.

South African chicken producers scratched back. They charged U.S. producers with dumping by exporting dark-meat chicken at a price less than production cost. This is an ideal situation for a biased antidumping authority because there is no one way to determine this production cost. (What comes first, the dark meat or the white?) In 2000, the South African government determined that the U.S. firm Tyson was dumping by a margin of 200 percent

(its export price was only one-third of its estimated production cost) and Gold Kiss was dumping by an incredible 357 percent margin.

Something is fowl in South Africa. Good-bye gains from trade.

WHAT’S SO SUPER ABOUT SUPERCOMPUTERS?

In 1996 the Japanese company NEC won the contract to supply a supercomputer to a university consortium funded by the U.S. National Science Foundation, to be used for weather forecasting.

This was the first-ever sale of a Japanese supercomputer to an agency of the U.S. government. It seemed to be a major setback for Cray Research, then the major U.S. supercomputer maker. But Cray thought it saw unfair trade.

With encouragement from the U.S. Department of Commerce, Cray filed a dumping complaint.

NEC guessed that it was not likely to win with the Department of Commerce also acting as the judge, and it refused to participate in the case.

Based on information provided by Cray, the U.S.

government imposed antidumping duties on NEC supercomputers at the super rate of 454 percent

(and at the almost super rate of 173 percent for supercomputers from Fujitsu, the other major Japanese producer). With these antidumping duties in place, no one in the United States would be buying NEC or Fujitsu supercomputers.

Not so super for U.S. users of supercomputers.

Or for anyone in the United States who wanted accurate weather forecasts. NEC supercomputers were simply the best in the world for this purpose.

There’s one more twist in this wired tale. Hey, maybe it isn’t dumping after all. In 2001, Cray was in financial trouble, and its technology was lagging. In exchange for a $25 million investment by NEC and a 10-year contract to be the exclusive distributor of NEC supercomputers in North America, Cray asked the Department of Commerce to end the antidumping duty.

AMERICAN STEEL: THE KING OF ANTIDUMPING If antidumping were like the Super Bowl, the American steel industry would be the winner. In early 2014 nearly half of all antidumping duties in effect in the United States were on steel products. As a comparison, steel accounts for about 2 percent of U.S. imports. How did one industry that employs about 200,000 workers become the king of antidumping?

In the first half of the 20th century, the American steel industry was the world leader in output and productivity. In 1950 the United States produced about half of the world’s total steel output. Since then the situation has changed dramatically. Steel producers in other countries increasingly have sourced high-quality raw materials globally (for instance, iron ore from Australia and Brazil). These foreign firms focused on raising productivity and lowering costs. They often had support from their national governments. At the same time, the managers of the large integrated American steel producers made poor decisions, including lagging innovation of technological improvements and payment of uncompetitive high wages and benefits to unionized workers.

By 2013 American steel firms accounted for only about 5.5 percent of world production. Half of U.S. production was by minimills, another source of competitive pressure on the large integrated American firms (often called Big Steel).

American steel firms fought back. A large part of their strategy was the use of political lobbying and U.S. trade laws to attack imports. In the 1980s, to head off a large number of steel dumping complaints, the U.S. government forced the European Union and other countries to impose voluntary export restraints (VERs). As these VERs ended, on one day in 1992 American steel firms filed 80 dumping complaints against 20 countries. (Note that American steel producers buy about onequarter of all steel imported into the United States, in the form of raw steel slabs that they use to make finished steel products. Amazingly, raw steel slab is apparently never dumped into the United States, but all kinds of finished steel products are.)

American steel firms are well organized.

Statisticians at steel-producer organizations and at individual steel firms closely examine each month’s trade data. When they see an increase of imports in a specific steel product, the American firms are likely to file a dumping complaint. The American firms actually “lose” or withdraw at least half of these complaints. But they don’t really lose. For instance, in 1993, American firms filed dumping complaints against exporters of carbon steel rod. In the early months of the investigation, the price of this product in the United States increased by about 25 percent. Eventually, the American firms lost the cases or withdrew the complaints. An executive of a foreign-owned steel firm commented, “But who says they lost?

I would say they won. Whatever they spent in legal fees, they probably recouped 50 times in extra revenue. That is the great thing about filing:

Even if you lose, you win.”*

Since the early 1990s there have been several other bursts of dumping cases filed by American steel firms. In the aftermath of the Asian crisis of 1997, demand collapsed in the crisis countries

(especially Korea, Thailand, Indonesia, Malaysia, and the Philippines). Steel firms that had been selling to the crisis countries shifted sales to other countries. In 1998 imports of finished steel into the United States rose rapidly and prices for steel products typically fell by 20 to 25 percent.

A strong case can be made that 1998 was a fairly typical down phase in the global cycle of a competitive industry. Still, American firms swung into action. They filed four major dumping cases in 1998 and four in 1999. The International Trade Commission found injury to U.S. steel firms in six of these cases, and the Department of Commerce found dumping margins of up to 185 percent. In the large case involving cold-rolled steel, imports declined by 20 percent in the months after the case was filed, even though the U.S. firms eventually

“lost” the case when no injury was found.

As prices remained relatively low around the world, the U.S. steel firms continued to find new dumping. They brought five major cases in 2000 and six major cases in 2001.

In early 2002 President Bush imposed new general tariffs of up to 30 percent on imports of steel, and the number of new dumping cases decreased. Under pressure from U.S. steel users and an adverse WTO ruling, he removed these tariffs in late 2003. But then global steel prices rose by more than 50 percent during 2004, driven by rapidly rising demand in China and other developing countries. With strong world prices continuing into 2008, there were few new antidumping suits in the United States.
As the global crisis hit in 2008, the steel industry went into recession and the share of the U.S. market served by imports increased. The U.S. industry filed seven new dumping cases in 2009. After a few years’ lull, steel imports into the United States began to grow rapidly at the beginning of 2013, driven both by slowing demand for steel and excess capacity in the rest of the world and by strong demand in the United States (especially domestic demand for steel used in oil, natural gas, and automobile production). The great American steel machine that rolls out complaints about foreign dumping restarted, and the industry filed seven new dumping cases charging firms from 16 countries with dumping various steel products, the largest being tubular goods for oil production.
Steel remains the U.S. antidumping king, and the oil industry and many other users of steel in the United States pay the (higher) price.
DISCUSSION QUESTION For the U.S. cases alleging dumping filed in 2013, why might the number of these cases that actually result in the imposition of antidumping duties turn out to be relatively low?