Full Final Project of RM

8/8/2019 Full Final Project of RM

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Research Methods for Business

( Final Project )

EFFECTS OF DUMPING ON

INTERNATIONAL ECONOMY


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Effects of Dumping on International Economy

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This Project is DedicatedTo our LovingParents

AndRespected TeacherSirAmirRashid


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Submitted to:

Sir Amir Rashid

By:

Khalil-ur-Rahman (028)Hassan Akram (024)

Hafiz Muhammad Ahmad (020) Muhammad Saleem (052) Atif Javid (012)Hira Pervaiz Malik (086)Usman Khalid (084)


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Acknowledgement ...........................................................................................................06

CHAPTER 01: The Problem and its Background

Introduction . 08

Background Information ..09Theoretical Framework 10Independent VariableDependent VariableModerating VariableIntervening Variable

Statement of Problem ..15Hypothesis Development .15

Definition of HypothesisKinds of Hypothesis

Research Objective ..16

Significance of the Research 16Definition of Terms ..16DumpingInternational EconomyProtectionSubsidiesCartelsNatural Resources

CHAPTER 02: Review of Related Literature

Article # 01Dumping: The Beginning of the End? 19

Article # 02Is the Global Free Trade at Risk? .21

Article # 03Speakers Corner Principles for Food Trade 24

Article # 04The Dumping, not the Response, is the Issue ...26

Article # 05Dumped Foreign Steel is no Boon to American Consumers 27

Article # 06The WTOs Broken Promise 28

Article # 07Dumping as a Method of Competition in International Trade ..30

Article # 08Anti-Dumping: A Villain in International Trade ..32

Article # 09Chinas Development Benefits U.S. Economy .34


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CHAPTER 03: Research Design

Research Design 37 Methods of Research .37Respondents of the Study ..38

CHAPTER 04: Presentation, Analysis and Interpretation of Data

Data Presentation Specifications ...40Round off the Data 40

Ceiling of the valueFlooring of the value

Computation ..40Tabulation and Interpretation of Data ...41

Table 4.01 .41Table 4.02 .41

Table 4.03 .42Table 4.04 .43Table 4.05 .43Table 4.06 .44Table 4.07 .45Table 4.08 .45Table 4.09 .46Table 4.10 .47Table 4.11 .47Table 4.12 .48Table 4.13 .49Table 4.14 .49Table 4.15 .50

CHAPTER 05: Findings, Conclusions and Recommendation

Summery of Findings 52Conclusions ...54Recommendations .54

Questionnaire...56

Bibliography 58


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-: Acknowledgement :-

First and foremost, we must praise the ONE, worthy of all praise, ALLAH

THE ALMIGHTY, the source of all wisdom and creation, for HIS immense

bounties and never- ending mercy.

Our special praise to the HOLY PROPHET HAZRAT MUHAMMAD

(Peace Be Upon Him) who is forever a torch of guidance for mankind.

Coming to this esteemed institution was a great opportunity for us where

we had a chance to work and learn under the supervision of trained instructors,

who are enablers of Eco-balance, fruitful over arched trees, who work in an

environment of close coordination and instant cooperation. This institute gave us

a vital chance to learn to place our self in the ever-growing world of Business

Administration and to be a part of it we are also very thankful to our institution

COMSATS for providing such an intelligent, talented and Professional teachers,

who generates what we need. They have steady, deep-rooted, generous nature,

regardless of color, cast and creed.

We also wish to acknowledge from the inmost core of our heart of hearts,

the invaluable guidance, and significance support and meaning cooperation

provided by

Sir Amir Rashidadvisor of the project, without his guidance the project would

have remained mere a dream.

We owe a deep debt of gratitude to the different economics department

faculty members from different institutions of Lahore for helping and providing us

the information required completing the project.

May ever-ending success and ever-lasting happiness be the lot of them all

(Aaameen)


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CHAPTER 01

THE PROBLEM AND ITs

BACKGROUND


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Introduction:

The world economy has the trend to move towards the free trade from last two

decades and the trend has boosted recently. The concept of Free trade has supported the

international economy by increasing the interconnectivity of the world economies. This

phenomenon of free trade gives rise to certain questions and also has certain limitations

and advantages for the countries around the world. This phenomenon emphasizes the

specialization of different countries in the fields in which they have more resources for

production than the other countries. This specialization will give trend to dumping which

is a threat to the domestic industry around the world. People think that the phenomenon

of dumping is to be hindered to save the domestic industry. So the trend of dumping

gives rise to the concept of protection. It is said that the protection not only saves the

domestic industry but also protect the countries condition.

When the concept of dumping is exercised it is said that it will affect the economy

of the countries around the world either positively or negatively. So these two entities of

dumping and protection are the main concern in this regard.

There are some important components of economy that will obviously be affected by

practicing dumping. One of the components is gross domestic product (GDP) and the

other is the gross national product (GNP) of that country. They are also effected

positively or negatively to effect the over all economy condition. The other economic

factors like employment rate and currency value are also affected. It is said that the

dumpers country gets all the benefits that are losses for the country where it is dumping.

Todays economy has become a knowledge economy and the people around the

world are more knowledgeable about the international affairs. They want to have more

choice when they intend to buy. The cheaper goods are one of the most preferred choices

for the customer around the world. So they would like the foreign cheaper products to be

imported in their domestic market. The dumpers sell their specialized products in that

country at lower prices than the domestically produced goods to capture more market,

which they will obviously do because of their low costs. It is said that these low cost

goods are a gift for customer but they destroy the industry and economy. Government

wants to reduce the imports to improve the domestic industry and the balance of payment


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to support the economy. The government implements tariffs and quotas and certain

antidumping laws to enhance the price of foreign imported goods than the domestically

produced goods and to reduce the demand of imports to protect their industry.

Back ground information:

Dumping and anti-dumping cases can be dated back to very early days in

international trade. However, for a long time, very few cases of repelling imports through

anti-dumping actions took place. This situation continued until 1950s when more anti-

dumping cases began to take shape. From January 1, 1995 to June 30, 2003, the period

witnessed 2284 anti-dumping investigations launched by the WTO members.

Dumping and anti-dumping cases can be dated back to very early days in

international trade. However, for a long time, very few cases of repelling imports through

anti-dumping actions took place. A country might launch two or three such cases at the

most in a year.

This situation continued until 1950s when more anti-dumping cases began to take

shape. Statistics by then Ministry of International Trade and Industry (now Ministry of

Economy, Trade and Industry) of Japan recorded an annual average of 30 international

anti-dumping lawsuits in 1950s and 1960s, about 40 in 1970s, and a surge to 174 in

1980s.

From January 1, 1995 to June 30, 2003, the period witnessed 2284 anti-dumping

investigations launched by the WTO members.

Frequently being put under anti-dumping scrutiny, developing countries and

regions began to take up anti-dumping actions to counterattack the brunt to their own

local industries brought about by unfair trade.

India, Argentina, Brazil and South Africa are typical examples in this aspect.

From January 1995 to June 2003, developing countries and regions launched more than

half of the anti-dumping investigations. India led the world with its 344 attempts,

exceeding the US 308 cases. On the other hand, the developed world generally also

intensified their anti-dumping campaign.

Take the US for instance, in 2001, the US launched up to 74 anti-dumping

investigations as against its 14 cases in 1995. Products involved in the cases were mostly


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labor-intensive ones, such as metal and metal products, chemical product, mechanical and

electrical products, and textiles.

The WTO defines that a dumping case is a trade behavior in which a country

market its products in another at a price lower than their normal value, thus bringing

damage to related industry in the import country.

Theoretical framework:

Independent variable:

Dumping

Dependent variable:

International economy

Moderating variable:

Protection

Free trade

Intervening variable:

Natural resources

Government subsidies

Cartel

The theoretical frame work helps us determining the relationship among the

variables. It also specifies direction of the relationship. Here the independent variable is

dumping that is our primary concern. Now dumping is going to affect the international

economy which is our dependent variable. When the dumping is practiced it affects the

international economy. So we are able to determine the relationship among the variables.

The phenomenon of dumping allows different countries around the world to get more

market share in international market that comprises of countries around the world.

Dumpers provide the product at the prices lower than the price prevailing in the domestic

market in a specific country. Consequently the people start buying that product. So the

imports of that country will increase. This will obviously affect the economy and to

determine this impact we need to break down economy into certain components due to its


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subjective nature. So this effect can be measured by measuring the impacts on

components of economy like GDP, GNP, currency value and the unemployment. The

local industry will obviously be affected. All these factors will affect the economy of that

country. So economy being a dependent variable will be affected by dumping.

The moderating variables here are protection and free trade. The protection affects

the intensity of the relationship among dumping and international economy. By

implementing the protection means we will impose certain tariffs, quotas, taxes and

duties on dumped goods. This will increase the prices of dumped goods and people will

not buy them. This will provide protection to local industry as well as economy and any

type of dumping will not be able to affect the economy. If the international free trade

does not take place there would be no free transfer of goods and the dumping will than be

eliminated.

The intervening variables here are natural resources, government subsidies and

cartels. The country that has the more natural resources available to produce a product

cheaper than what the other countries does it will be more convenient for it to produce

cheaply and dump the product in the international market and earn more market share.

This is also called comparative advantage of that country on other countries. The

subsidies given to a specific industry by the government also gives rise to cheaper

production. This will enhance the chances of dumping effects on economy more.

The industrial cartels in a country also give rise to dumping practices. The industrialists

in a specific industry come together and sell at same price at home market to abolish

competition. This allows them to sell expensive in home market to earn required revenue

and then they are able to sell cheaper in foreign markets to earn more market share. This

is how more dumping takes place.


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-: Figure 1.01 :-


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-: Figure 1.02 :-


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-: Figure 1.03 :-


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Statement of the problem:

The research attempts to determine that is international economy affected by

practicing dumping and to find out its useful or adverse affects on international economy.

Hypothesis Development:

As we have define the important variables in a situation and also established

relationship among them through logical reasoning in the theoretical framework. Now we

are in position to test whether the relationships that have been theorized do in fact hold

true or not. For this purpose we formulate some statements from the variables and their

relationship to perform tests. Formulating such testable statements is called Hypothesis

development.

Definition of Hypothesis:

A hypothesis can be defined as a logically conjectured relationship between two

or more variables expressed in the form of a testable statements. Relationships are

conjectured on the basis of the network of association established in the theoretical

framework formulated for the research study. By testing the hypothesis and confirming

the conjecture relationship, it is expected that solutions can be found to correct the

problem encountered.

Hypothesis:

Null Hypothesis :( Ho)

A null hypothesis is that,

The dumping affects the economy.

The alternative Hypothesis: (Ha)

The alternative hypothesis is that,

The dumping does not affect the economy.

Kind of Hypothesis

Our hypothesis is non-directional kind because the relationship of variables does not

show any direction or proportion.

This research specifically provides an answer to the following questions that are

as follows:

1) - Do the dumping affect global economy?

2) - What are the possible impacts of dumping on international trade?


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3) - What are the suitable protections that are implemented by countries around the

world?

4) - The impact of dumping on different components of economy like GDP, GNP,

currency value and employment?

5) - How are countries around the world affected by dumping?

6) - Why protectionists are threatened by dumping?

Research objectives:

The research objective will be as under:

Effects of dumping on global economy

Impacts on international trade

Significance of the research:

The study covers the effects of application of dumping on international economy.

Countries around the world are involved in trade to stabilize their economies. They are

much concerned about the trends being followed in international trade, consequently they

try to protect or benefit their economies from good or bad impacts of these trends. They

take the precautionary measures accordingly.

Countries around the world may be able to get help from this study about the

effects of dumping on their economies and mould their trade policies to stabilize their

economies.Definitions of the terms:

Dumping:

Dumping has been defined as selling abroad below cost or at a lower price than

that prevailing in the home market of the exporter. The producer of a specific product

dumps his product in the foreign market to get more market share in the foreign market.

International economy:

It refers to the expansion of economies beyond national borders characterized by

free trade in goods and services, in particular, the expansion of production by

transnational corporations to many countries around the world. The global economy

includes the globalization of production, markets, finance, communications, and the labor

force.


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Protection:

The term protection is defined as Restriction of international trade by a

government in order to shelter domestic producers from foreign competitive pressures.

Protectionism supports the policy of charging foreign traders a tax, or tariff on imported

goods.

Subsidies:

Government grants to local producers to assist in the production of particular

crops or goods. Opponents of this kind of assistance argue that it is an inefficient use of

resources as it makes the production of certain goods economically viable, when they

otherwise would not be. This leads to unfair competition and lower returns for those

producers producing the good without assistance, and rewards those whose production

processes may be inefficient.

Cartels:

A combination of independent business organizations formed to regulate

production, pricing, and marketing of goods by the members.

Natural resources:

Resources occurring in nature that can be used to create wealth. Examples include

oil, coal, water, and land.


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CHAPTER 02

REVIEW OF RELATED

LITERATURE


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-: Article # 01 :-

Dumping: the Beginning of the End?

Oxfam Briefing Paper. June 2004

Despite their WTO commitments to reduce trade-distorting subsidies, the

European Union and the United States have used loopholes and creative accounting to

continue dumping products on world markets. In the case of US cotton subsidies, the

dispute settlement body of the WTO concluded that such practices hurt developing

countries and are in violation of WTO rules. This landmark case sends hope to millions

of impoverished cotton farmers in West Africa. And it might be the beginning of the end

for US and EU dumping.

Since the ministerial conference in Cancun, cotton has been a major item on the

WTO negotiation agenda. Cotton symbolizes the unfairness of current subsidy practices

of the United States, as does sugar for the European Union. In West Africa alone, 10

million people depend on cotton for their livelihoods. US cotton dumping, causing a

sharp decline in world cotton prices, has impoverished all of these farmers. Following a

complaint by Brazil at the WTO, a dispute settlement panel has found that US cotton

subsidies are contrary to WTO rules. This decision is a giant step forward in the fight

against dumping. The WTO panel found that $3.2 billion in US cotton subsidies and $1.6billion in exports credits (for cotton and other commodities) are against WTO rules. This

represents almost all cotton subsidies and close to 50 per cent of all export credits used by

the USA in 2002.

The panel found that the USA used hidden export subsidies to circumvent its

WTO commitment to reduce export subsidies. These subsidies are therefore contrary to

WTO rules and must be removed:

While the USA domestic support subsidizes for cotton in the marketing year 2002/03 had

a significant price suppressing effect which has caused serious unfairness to Brazils

exports. This means that the USA will have to reform its current practices.

Moreover, the USA misreported certain programs as non trade distorting when in fact

they were


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Wider implications:

The panel ruling will have profound political implications that go beyond the

specific case of the USA and cotton.

The key demand of West African countries for a drastic reduction in US cotton

subsidies has also been fully justified.

The example of cotton proves that most subsidies currently used by the USA and

the EU are damaging to developing countries. If they are serious about development, the

EU and the USA must agree to improved rules that will effectively end export dumping

and reduce trade distortions.

Under current rules, with the expiry of the peace clause, all subsidies can now be

challenged by developing countries in the Dispute Settlement Understanding (DSU) on

the grounds of serious prejudice. While this case only pertains to cotton subsidies, the

same principles could apply if developing countries were to bring similar challenges

about other highly subsidized crops such as soybeans or rice.

Following the Canadian dairy and the US cotton panels, it is now legally

established that developed countries failed to abide by subsidy rules that they had crafted

during the Uruguay Round, Hence, developing countries have won an important moral

and legal victory, gaining a stronger position in multilateral negotiations.

Why the USA should implement the ruling

The USA will undoubtedly appeal this ruling. If it loses in appeal, which is likely,

the USA will be at a crossroads. It can either choose to implement the meeting in good

faith or face possible trade sanctions by Brazil. However, the USA would have a lot to

lose by failing to implement this ruling in a meaningful way.

An overall reduction of the ambition of the agreement on agriculture as

developing and Cairns countries would conclude that the USA is not interested in reform.

A lost chance to reduce EU subsidies. Non-implementation would give a signal

to the EU that they can do the same with sugar or that they can continue to postpone the

elimination of export subsidies.


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A lost opportunity to respond to legitimate demands made by West African

countries to eliminate trade-distorting cotton subsidies. This would be a continuing

source of problems for the USA at the WTO.

A weakening of the WTO rules-based system, of which the USA is a major

beneficiary.

Oxfam also urges the EU and the USA to negotiate in good faith new rules in the

current WTO agricultural negotiations that would put an effective end to dumping.

------------------------

-: Article # 02 :-

Is the global free trade at risk?

By Mehmood-ul-Hassan Khan

Cross-border trade flows are the glue of globalization. Globalization is a

phenomenon that has remade the economy of virtually every nation, reshaped almost

every industry and touched billions of lives, often in surprising and ambiguous ways.

Despite the dawn of world trade organization [WTO] from January 1, 2005 major

economic super powers of the world are taking anti-free trade policies. The imposition of

GSP by the EU on Pakistans textile exports, and anti -dumping duties imposed by

different countries on the products of our country showed the other side of picture of free

trade. The EU imposes Seafood ban on imports from Pakistan and French farmers ask for

the subsidiary from the government.

Global economy and especially national economies have taken over by tight and

to some extent rigid concept of nationalism. It is seemed that concept and functionality of

free trade is now at risk. Although free trade increases wealth in the long run and on the

whole through the operation of comparative advantage but it is seemed that US, EU,

China and now Japan is the new addition to that tally of "Protectionism" or anti-free trade

concept. In the recent past especially, US provoked to follow the policies of pure and

severe nationalism rather than principles of international economics. Protective measures


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against the textile products of China by EU and US started the great blame game of

economic with the blend of nationalism. The China national offshore oil corporation

[CNOOC] withdrew its bid for US Oil Company. Unocal, citing unprecedented political

opposition and now Tokyo, acting within the guidelines of a WTO decision against

Washington on steel tariffs, moved to impose punitive tariff on some goods produced in

the US are the latest few prime examples of economics with the smell of blind

nationalism. To appease concerns by that, the US and EU and China have already

abolished export tariffs on 81 categories of textile products.

The establishment of USs, the "Mecca of Corporate Gospel", has forced the

Chinese National Oil Company to withdraw its bid for the purchase of Unocal. On the

direct pressure, Bush administration and politicization of a economics Unocal finallyrefused to accept a Chinese firms take-over bid on flimsy grounds, (threat to national

security) although its offer of $18.5 billion was higher than rival Chevrons which was

$17.3 billion. It was no doubt a blasphemous act, and against the true and simple spirits

of free trade. Switzerland and Japan are the main investors in American corporations but

nobody in Washington would like to call them a threat to US security.

The CNOOCs bid to take over Unocal collapsed, after both houses of the

republican controlled congress, agreed to propose a bill that would require the

departments of defence, energy and homeland security to investigate the bid before it was

vetted through normal administrative procedures. The congressional pressure, which

promised to delay a successful CNOOC take-over, was the result of a full-scale lobbying

campaign by Unocals other suitor Chevron that gained the support of security hawks as

well as legislators in Chevrons constituencies, and spread to lawmakers playing to

sentiments

The undue and powerful congressional opposition along with power politics of

Bush administration in the whole process of Unocal bid shocked the confidence of

international trade mechanism. It was fuelled by the mobilization of popular sentiment

against China over US job losses, which made congressional opposition to CNOOCs bid

politically measure and the administrations compliance in it politically prudent.


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The US has a long history of protectionism and there was a time in the distant past

when its import tariff was as high as 49 per cent. A recent case in point is re-imposition

of tariffs and quotas on Chinese textiles by Washington when the age-old quota regime

had just ended with a view of protecting its textile industry. At present, US investment in

China is 13 times greater than Chinese investment in the US. If overseas mergers and

acquisitions were really to pose any threat to a countrys security, then it is China, which

should be feeling worried. Wal-Mart now operates 47 stores in China and intends to

spread throughout the country, destroying local businesses in towns and villages. Beijing

has raised no alarm, nor described it a threat to its peoples livelihood. McDonalds

already has 600 outlets and KFC 1,000. McDonalds and Starbucks are already in the

Beijings centuries-old palace complex.

On August 3, 2005, Tokyo announced its imposition of punitive tariffs on a range

of US goods. Including ball bearings and aircraft components, in retaliation for the failure

of congress to repeal the Byrd Amendment, which diverts the proceeds of US tariffs

placed on foreign steel that has been determined to have been dumped on the US market

directly to domestic US steel producers. Tokyo had argued successfully before the WTO

that the Byrd Amendment violated international trade agreements because it, not only

penalized Japanese producers, but also rewarded their US competitors. Japan became the

latest major US trading partner to impose sanctions to protest a US anti-dumping law,

taking the unprecedented step of levying punitive tariffs on 15 US goods including steel.

The tariffs will cost US exporters more than $50 million and be set at 15 per cent from

September 1, 2005 in line with similar moves by Canada and the EU against the so-called

Byrd Amendment. With the retaliatory measures, Japans imports from the US could fall

by up to $52.1 million a year, the ceiling approved by the WTO.

Since the WTO decision, the Bush administration has sought to have the Byrd

Amendment revoked, but congress has dragged its feet. As in the CNOOC affair,

powerful US business interests are on both sides of the steel tariff issue, with US steel

producers predictably in favor of keeping the Byrd Amendment in force and steel

consuming industries in favor of its repeal. In the case of the Byrd Amendment, the

purely economic balance of power would seem to favor the forces for repeal, since steel


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consumers are more financially powerful and greater in number and political influence

than steel producers.

Signs of growing economic nationalism in the US are on the rise. There is popular

resistance to liberalization of global markets finds reverberation in congress. As rising

economic powers throughout the world become more competitive, the US is bound to

lose comparative advantage in many industries, setting off moves for protection that will

be opposed by industries that gain or maintain advantage.

------------------------

-: Article # 03 :-

Speakers Corner Principles for food trade

George Kent

The governance of international trade in food should give special attention to the

concerns of those most vulnerable to food insecurity. As specified by the World Food

Summit in 1996, "Food security exists when all people, at all times, have physical and

economic access to sufficient, safe and nutritious food to meet their dietary needs and

food preferences for an active and healthy life. This essay raises some key issues, not toresolve them, but to assure that they are on the agenda.

Subsidies and dumping:

Many countries subsidize selected food producers, directly or indirectly, resulting

in overproduction in those sectors.

To relieve the glut, some of these countries "dump" the products into poor

countries. Reducing tariffs on primary commodities makes it easier for rich countries to

dump their primary commodities into poor countries.

Dumping can do severe harm to food producers in the receiving countries. Since

much of the employment in poorer countries is in small-scale food production, dumping

can reduce the incomes of large parts of the population, thus reducing their food security.

Large shares of the subsidies that are provided go to larger producers who are well off

and have reasonable alternatives.


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They receive subsidies primarily as a result of their political power rather than

their need. This "welfare for the rich" should be sharply reduced or eliminated.

However, the subsidies to poor, small-scale producers who have few alternative means of

livelihood are a different matter.

These producers may be inefficient by common economic criteria. However,

subsidizing them may be good public policy, in those subsidies to small-scale food

producers are part of the social safety net. For this purpose, subsidies to small-scale food

producers who produce for local consumption (not export) can be very cost effective.

While subsidies to small-scale producers are not economically efficient, they may be

socially efficient.

Discriminatory tariffs, discriminatory pricing:

Many other issues are being neglected, especially issues affecting poor countries.

There is currently a pattern of "escalating tariffs" under which tariffs are pushed down on

primary commodities but left high on processed foods. Reducing tariffs on primary foods

but not on processed food is discriminatory, preventing poor countries from engaging in

more profitable value-added (processed) food industries. The liberalization of food trade

through the reduction of tariffs should be accomplished in a way that does not

discriminate against poor countries.

Even without discriminatory tariffs, the pressure on poor countries to open their

domestic markets to foreign food suppliers can be very harmful to them. Local food

producers in poor countries may not be able to compete with the imports. The result that

their incomes plummet, destroying their food security. The effect of cheap imports can be

devastating.

In the idealized marketplace, the prices for the same product of the same quality

would be the same throughout the world, with variations only due to transportation costs.

The United Nations Development Program observes, . . . rich producers are paid more

than poor onesfor identicalgoods.2 Their labor is paid less as well.

Richer countries promote trade liberalization in a way that suggests it would be beneficial

to all, but it is not equally beneficial. Trade tends to provide its greatest benefits to those

who are more powerful. It contributes to the widening of gaps between rich and poor


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On balance, food flows from food deficit countries to countries that have more than

enough. The poor feed the rich.

The foreign exchange that compensates for the outflow of food could be used to

meet the food needs of the poor, but often it is not. The poor are politically weak, and do

not control how foreign exchange earnings are used.

The priority of human rights food is so essential to human nutrition; health, and general

well being, food trade should be managed on the basis of the obligation of all states and

other actors to respect human rights, particularly the human right to adequate food.

------------------------

-: Article # 04:-

The Dumping, not the Response, is the Issue

By Greg Mastel

Director, Global Economic Policy Program

The author is of the view that America should highlight the issues underlying

dumping such as cartels and subsidies that promote dumping practice at different WTO

plate forms to eliminate dumping. The actual problem is not to discuss the nature of

protection or antidumping law but to eliminate such practices that support it.

The focus should be the problem of dumping, not antidumping duties. The typical

example is Japan dumping in US steel industry which is being restricted by new duties

imposed by US law. The steel Japan exports to the United States are dumped. Third-party

pricing data indicates that Japanese domestic prices for many steel products are as much

as several hundred dollars per ton more than the export price for the same steel.

The Japanese steel industry use dumping as a way of building market share in the

world steel market. The domestic Japanese steel market is heavily cartelized that allows

Japanese companies to charge high prices and build profits in the protected home market

and use them to effectively subsidize sales to the United States. Mexican companies use


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the domestic profits to finance dumping in US and this dumping causes serious injury to

U.S. firms and puts U.S. workers out of their jobs.

The author wants to convey that we should think of reducing some of the core

causes of dumping like subsidies and cartels more importantly as well as discussing

antidumping at WTO plate forms. If these core issues are addressed there will be a lesser

need to establish and implement antidumping laws

------------------------

-: Article # 05 :-

Dumped Foreign Steel is no Boon to American Consumers

By Greg Mastel

Director, Global Economic Policy Program

The author is of the view that some critics have condemned the US government

decision to protect the US steel industry and economy from the dumped steel by foreign

countries like Japan, Russia and Brazil. These countries are selling steel in US at below

the cost of or below the cost at home market. The critics are of the view that it gives the

opportunity the consumer to enjoy cheaper steel that shows their shortsightedness.

Actually this low price will destroy the US steel industry and this will have diverse

effects on economy.

So the author here gives us three reasons for why should we counter this dumping

effort. He explains that first of all the dumping is an illegal practice and United States has

had laws against dumping for most of this century endorsed by the World Trade

Organization.

The second very important reason is that US government should help and support

its steel industry by subsidizing as most of the countries are doing around the world. The

world steel market is deeply distorted by subsidies, cartels and national industrial policies

that support dumping. In a recent study it is found that consumer benefits of dumping


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were rapidly outweighed by the negative impact of the economic losses in the steel

industry.

Finally, the steel industry is an internationally competitive and valuable

component of the U.S. economy. Further, steelworkers are so productive that they are

able to command wages almost twice as high as those of the average U.S. job.

So the dumped foreign goods can be a gift to consumer but its destruction for the

economy in disguise.

------------------------

-: Article # 06 :-

The WTO's Broken Promise

By David Moberg

It was supposed that development" of the world's poorer nations would be at the

top of the agenda of World Trade Organization members. The agriculture was planned to

be focused on since the vast majority of people in poor countries still work the land as

small landowning peasants or as rural laborers but it seemed more likely that any new

agreement would further enhance multinational corporations' control over global

agriculture and not the economies of developing countries or, least of all, the well-being

of the world's poorest people. Because the United States wanted to protect its domestic

agriculture programs thats why the topic was not given much importance. At the last

WTO meeting in Doha, Qatar, trade ministers agreed to increase agricultural producers'

access to markets (especially for poor countries selling to richer countries) and to

decrease domestic financial support for agriculture. Both the European Union and the

United States promote the ideology of free trade, but both also want to keep their farmsubsidy programs in place. For that, poor countries attack them as hypocrites who want to

pry open markets and "dump" their products at destructively low prices and at the same

time keep their own markets closed to Third World products. It is found that freer trade

"has cost the poor jobs and income, has increased rural poverty and inequality, and has

wiped out small farms and communities." Even when increased agricultural trade brings


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more revenue to some countries, it is the very big farmers and multinational. Agricultural

policies in the United States and Europe cause trouble for those developing countries that

do open their markets by encouraging dumping that is, selling goods below the cost of

production.

Dumping may be related to the existence of domestic subsidy programs, but it

isn't the same thing. It would be possible to guarantee that U.S. farmers are paid at least

the full cost of production, to limit crop production, and to prevent crops from being

exported at a below market price. Doing this would reduce the volume of U.S. exports

and allow farmers in the United States and in most other countries to come out ahead

financially.

Government support payments compensate for only a small part of that shortfall

for most farmers. And those payments were concentrated among the largest and richest

farmers, leaving smaller-scale farmers-those that don't go bankrupt-to rely on income

from jobs off the farm to make up for their losses.

Cargill-and the handful of other companies that dominate the global grain trade-

profit from selling this cheap grain, and processors, like Archer Daniels Midland, or end

users, like food giants from Coca-Cola to Tyson's, benefit from these low-cost

agricultural products. But such dumping simply leads to low prices and fewer markets for

the products of farmers and peasants elsewhere in the world-like Mexican peasants

flooded with cheap U.S. corn.

European milk is dumped in Central America, destroying its indigenous dairy

industry, and the dark meat that is less prized in European and American chicken markets

is dumped in Senegal or other countries, wiping out flourishing domestic poultry

industries. The milk is subsidized, but the chicken isn't. Both cases of dumping have the

same deleterious effects.

In the eyes of some free trade theorists, the consuming countries should be

delighted at getting cheap food at less than "L the cost to produce it. Some countries can

benefit, especially if they do not have a big farming economy (like Saudi Arabia). But by


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destroying the still-large agricultural sectors in most other countries, low price imports

depress domestic agricultural markets around the world-markets that are needed for

development. If all dumping were halted, developing country economies would be

strengthened, as people in the rural sector would have more income to buy goods, educate

children, and improve their livelihoods. And the transition of the workforce out of

agriculture could be managed more humanely.

------------------------

-: Article # 07 :-

Dumping as a method of competition in international tradeJacob viner

The university journal of business vol.1no, 2 (February 1923)

There are different type of dumping which have different point of view and

classified differently .there are open ,concealed, reverse and export dumping .for the

purpose of economy it is classified into motive and degree of continuity of the dumping .

In this situation if the producer may find that its seasonal stock is not running

successfully at the labeled price .so there are three situations which he can face

1. he can hold the surplus stock to sell it in other season2. by minimizing the prices he can increase the sale3. Sell the product in unimportant market at best prices.

Now if he keeps stock for next season then he has to bear cost of storage and security

so in order to avoid that cost he will look another option

By minimizing the prices of his product may be not earn profit which he has been

estimated .so he do not want to deprive of the estimated profit.


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Now only one option he has which can not affect to much ion the profit and no worry

of storage and that is to sell his product in unimportant market

This type of dumping may be occurring when we anticipate selling product at good

price in foreign market. These types of goods can be shipped with the expectation that the

y will sell at good price in foreign as compared to home market. now if there is situation

that the producer producing the product in the environment in which the prices are low so

he has to sell his product at that price but he know that the prices of that product is high

in other market t but he sells only to retain the market for future .if there is new producer

of particular product in the market the new will sell at low prices because in order to

compete other in the prices and retain the market.

A concern may sell at dumping prices in a given market in order to eliminate the

competition in the market. the country which produce the products dump the products

.this most dangerous type of dumping in the world as china is doing to day .this is big

threat for American commerce department .because their domestic products are totally

disturbed .their domestic industries are at verge of end because their cost of production is

high as compared to the prices of product which china and other countries dump.

In order to keep monopoly of product some producers keep their prices low .if they raise

the prices can be threat full for them because there is chance of competitor in the market.

So in order to keep monopoly for long time producer may adopt this strategy .dumping

may be used as defense against cutthroat competition.

If a manufacturer may decide to maintain his domestic prices at high level and to de

foreign order he keep the prices of foreign prices low for balance of his potential output

in preference to operating only a part of capacity .a increase in the domestic prices may

be unprofitable especially if the domestic demand for his product is inelastic, in absence

of resort to dumping. In this way he can extend his plant so as to obtain the economies of

large scale production.

------------------------


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-: Article # 08 :-

Antidumping: A Villain in International Trade

From Sarut Wittayarungruangsri

Now one question can be answered. How unfair is dumping? Dumping is actually

fair. The thing is this question was put wrong at the beginning and the beginning was

long time ago. Looking back through time, the first antidumping law was meant to

remedy unfair trade, namely dumping, but it has become clearer over time that there is

nothing wrong with dumping. It benefits people in poor countries by offering lower

prices and new varieties of merchandises. Despite its evil name, dumping does a good

job. If the world is looking for free trade, accepting international price discrimination is

one step to be taken.

What has actually gone wrong is antidumping. Today it is nothing but a pure

protection in disguise, and it has proved itself a bad policy. Why?

Where dumping takes place, a domestic industry may file a petition against

foreign dumping firms. The details of antidumping process vary across countries, but in

general before antidumping duties can be imposed on allegedly dumped imports, two

conditions have to be fulfilled. First, dumping margin must exist. The margin is the price

difference between the normal value and that charged by alleged dumpers in the domestic

market. Second, there must be evidence that the domestic industry is materially injured

by dumping. When both are satisfied, the government can impose antidumping duties,usually equal to the sizes of dumping margins, on imports from the dumping firms.

In a way, antidumping duties work like import tariffs. This implies that the

domestic industry can strategically use this instrument to target only foreign firms it
http://economics.about.com/cs/guestbios/a/sarut.htmhttp://economics.about.com/cs/guestbios/a/sarut.htm


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views as competitive rivals. And, being selective, antidumping measures also generate

more negative effects than tariffs do.

Consumers are clearly worse off because they have to bear the cost of duty.

Imports become more expensive. Furthermore, there is no guarantee that the domestic

producers will keep their prices at the initial levels. Depending on price elasticity, they

can obtain higher profits by setting a new price higher than before but lower than those of

dumped products.

Things become worse when dumped imports are intermediate goods. One may

think about steel for example. It is certain that consumers who purchase steel as a final

good are worse off. But now there are more people negatively affected by the duties.

Corinne Krupp and Susan Skeath, from Duke University and Wellesley College

respectively, examine whether productions in downstream industries are significantly

undermined by the duties imposed in their upstream counterparts. And the answer is yes.

Controlling for other factors, the downstream productions are deteriorated by the duties

imposed on upstream products. This is due to higher prices of their intermediate inputs.

This is not yet the end of the story. There are also consumers of the downstream

industries out there.

This issue may not be serious if most dumped imports are not intermediate but

final ones. Alas, looking at the WTO database, the two industries most involved with

antidumping activities are steel and chemical. One can easily imagine how large the

effect of antidumping measure would be.

The burden of antidumping measure seems to benefit no one but the domestic

producers whose foreign rivals face an antidumping action. To evaluate if antidumping is

an appropriate policy or not, we need to know whether the increase in profits of the

domestic firms is large enough to offset the decrease in welfare of all others in the

country. Both common sense and formal estimation say no. Douglas Irwin, an economics

professor at Dartmouth, argues that antidumping is only second the Multifibre

Arrangement as the most costly of all US import restrictions. Worse than that,


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antidumping measures can paradoxically hurt the domestic producers themselves. This is

due to trade diversion effect.

As antidumping is selective, while the dumping firms sell less in the domestic

country, exporters from other countries may find an opportunity to compete in the market

more aggressively. The evidence supports this argument quite well. A number of papers

consider the two heavy users of antidumping measures, the US and the EU, and find

strong trade diversion effect. In the US, the increase in imports from non-dumping

countries tends to be larger than the fall in those from the dumping ones. In the EU, this

type of effect is weaker; however, it is still strong enough to cast doubt whether the EU

producers really benefit from antidumping practices.

------------------------

Article # 09 :-

'China's development benefits US economy'

Xinhua

Published Date: 28-08-2005

In this article the person is interviewed named Xinhua, he said that chinas

economy development will be benefited for the U.S. economy. China and U.S. are two

engines of the world economic growth. Chinas development will have numerous

beneficial effects on U.S. economy. But in case of anti-dumping laws the competition

will vanished out and the growth will not effect the efficiency and productivity.

By the Grimson, who has been working in anti-dumping field, there are some

reasons by these reasons U.S. economy will get benefit that are as follows:

Chinese products are low priced so the people of U.S. can buy easily. By this the

living standard of people will enhance with controlling inflation rate.

If Chinese economy will develop than the American goods and services demand

will also increase in China.


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If China as a manufacturing superpower will push up, the U.S. businesses will

improve their productivity and efficiency in the competition environment.

He also said that it is not right for U.S. manufacturing bodies to blame Chinese

manufacturing bodies in U.S. manufacturing jobs.

According to the statistics U.S. manufacturing sector share of the U.S. economy

has fallen from 32 percent in 1960to 22 percent in 1980 and 14 percent in 2002.

By Grimson the decline in the U.S. manufacturing jobs is before the emerging of

china as a trade power.

He also explains that less than half of the U.S. trade in 2004 is related to trade

with East Asian countries including China. The trade deficit with rest of the world is

three times more as with china over the pas ten years.

It is essential for two countries (here U.S. and china) to handle trade dispute in an

objective, transparent fashion, abiding by fundamental principles of fairness in addition

to only the direct letter of international and domestic law. And unilateral action is not the

ideal way to solve the problem. By him the Chinese economy growth is unprecedented.

China is progressing very rapidly in past several years. Every country has

opportunity to learn from the mistakes of other countries, so China did the same and gain

lesions in the area of urban planning and environment.


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CHAPTER 03

RESEARCH DESIGN


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Research Design:

This chapter contains discussion on the methods and procedures that are being used in

this study. It will help us to understand the various tools being used in conducting the

research. It will represent the various aspects of our research design.

Purpose of the study: descriptive study

Study Setting Non-Contrived

Unit of Analysis Individual

Sampling Design Sample size (n)

Time Horizon One shot (cross sectional)

Collection Data

Method Questionnaire

Scale use Likert scale

Method of Research:

The information is collected through questionnaire. The questionnaire contained

questions related to the effects of dumping on economy. We were able to collect

sufficient information with the help of these questionnaires. These questionnaires were

developed on the basis of our understanding which we developed by reviewing the

literature from different books and internet. The articles reviewed and related studies

developed by different authors were of a great help while conducting this research.

The method of research mainly used in this study is descriptive method which is

described as followthe descriptive research is a study that obtains facts about existing


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conditions or details and significant relationship between current phenomena. It describes

and interprets prevailing conditions of the relationship that exist or do not, beliefs or

point of views that are going otherwise, effects are being felled, or trends that are

developing .

Respondents of the Study:

For collected information we visited five different institutions from the

institutions situated in Lahore. Our respondents were people from the economics

department of these institutions. We randomly selected ten (10) economics experts in

these institutions and they filled the questionnaires. We had to brief them about our frame

work and float the relevant information so they might feel more at ease in filling the

questionnaires.

We have to choose an appropriate scale for the questionnaires so it may be

convenient for us to get respondents opinion and then to determine the outcomes. It also

makes it easy to understand the questionnaire on the part of respondents. We have used 5-

points likert scale and the numbers assigned to them were as follows:

1 = Strongly Disagree

2 = Disagree

3 = Indifferent

4 = Agree

5 = Strongly Agree

Our purpose of using this is to determine how strongly the respondents agree or

disagree to our statements. The numbers assigned does not show weights. People selected

the options according to their choices. The difference between any two points on the

scale remains the same.


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CHAPTER 04

PRESENTATION,INTERPRETATION,

AND ANALYSISOF DATA


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-: Data Presentation Specification :-

We have selected a five point Likert scale that carries five options and each option is

assigned a specified number for its identification. These numbers does not represent the

weights. All options are of equal importance and weights.

Strongly Disagree 1

Disagree 2

Indifferent 3

Agree 4

Strongly Agree 5

Rounding off the Data:

If the values calculated from mean are not in an absolute form then we are going

to round off the data in two dimensions.

1- Ceiling of the value:

If fraction value of mean is equal or above .5then the mean value will

be ceiled into the next absolute number.

2- Flooring of the value:If fraction value of less .5then the mean value will be floored into the

previous absolute number.

Computation:

We have calculated the Arithmetic Mean () with the help of formula given

below:

= fx /f

Where:

= Arithmetic Mean

= Sum of Values

f = Frequency

x = Options


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Tabulation and Interpretation of Data:

Frequency Distribution of the data according to respondents view about effects of

Dumpingon economy (Q # 1).

-: Table 4.01 :-

Responses (x) Frequency (f) f* x Percentage

1 0 0 0

2 0 0 0

3 0 0 0

4 8 32 80%

5 2 10 20%

Total f= 10 fx = 42 100%

Calculated Mean () Value:

= 4.2

Interpretation:

Table 4.01 shows that out of 10 respondents 80% (8) has selected option 4 that

represents Agree and 20% (2) has selected option 5 that represents Strongly Agree.

The trend observed from mean () calculation shows that most of the respondentsagree

that the Dumping affect the economy.---------------------------------------

Frequency Distribution of the data according to respondents view about increasing free

trade gives rise toDumping.

-: Table 4.02 :-


1 0 0 0

2 1 2 10%

3 0 0 0

4 9 36 90%

5 0 0 0

Total f= 10 fx = 38 100%


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= 3.8

Interpretation:


represents Agree and 10% (1) has selected option 2 that represents Disagree. The

trend observed from mean () calculation shows that most of the respondentsagree that

the increasing free trade gives rise to Dumping practices.

---------------------------------------

Frequency Distribution of the data according to respondents view about the dumping

limits the international trade

-: Table 4.03 :-


1 0 0 0

2 3 6 30%

3 1 3 10%

4 6 24 60%

5 0 0 0

Total f= 10 fx = 33 100%


= 3.3

Interpretation:


represents Disagree, 10% (1) has selected option 3 that represents Indifferent, and

60% (6) has selected option 4 that represents Agree. The trend observed from mean ()

calculation shows that most of the responses areIndifferent which shows that they

neither agree nor disagree that the dumping limits the international trade.

---------------------------------------


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Frequency Distribution of the data according to respondents view about dumping is

possible with-out natural recourses.

-: Table 4.04 :-


1 0 0 0

2 6 12 60%

3 3 9 30%

4 1 4 10%

5 0 0 0

Total f= 10 fx = 25 100%


= 2.5

Interpretation:


represents Disagree, 30% (3) has selected option 3 that represents Indifferent, and


calculation shows that most of the responses areIndifferent which shows they neither

agree nor disagree.---------------------------------------

Frequency Distribution of the data according to respondents view about subsidies by

government supports dumping

-: Table 4.05 :-


1 0 0 0

2 1 2 10%

3 2 6 20%

4 7 28 70%

5 0 0 0

Total f= 10 fx = 36 100%


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= 3.6

Interpretation:


represents Disagree, 20% (2) has selected option 3 that represent Indifferent, and


calculation shows that most of the respondentsagree that subsidies support the

Dumping practices.

---------------------------------------

Frequency Distribution of the data according to respondents view about dumping harm

the domestic industry

-: Table 4.06 :-


1 0 0 0

2 0 0 0

3 0 0 0

4 6 24 60%

5 4 20 40%Total f= 10 fx = 44 100%


= 4.4

Interpretation:

Table 4.06 shows that out of 10 respondents 60% (6) has selected option 4 that represents

Agree and 40% (4) has selected option 5 that represents Strongly Agree. The trend

observed from mean () calculation shows that most of the respondentsagree that the

Dumping harm the domestic industry.

---------------------------------------


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Frequency Distribution of the data according to respondents view about domestic

industry cartels support dumping

-: Table 4.07 :-


1 1 1 10%

2 2 4 20%

3 1 3 10%

4 6 24 60%

5 0 0 0

Total f= 10 fx = 32 100%


= 3.2

Interpretation:


represents Strongly Disagree, 20% (2) has selected option 2 that represent Disagree,

10% (1) has selected option 3 that represents Indifferent, and 60% (6) has selected

option 4 that represents Agree. The trend observed from mean () calculation shows

that most of the responses are indifferent which shows they neither agree nor disagree

that domestic industry cartels support Dumping.---------------------------------------

Frequency Distribution of the data according to respondents view about dumping

increase imports

-: Table 4.08 :-


1 0 0 0

2 1 2 10%

3 0 0 0

4 8 32 80%

5 1 5 10%

Total f= 10 fx = 39 100%


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= 3.9

Interpretation:


represents Disagree, 80% (8) has selected option 4 that represents Agree, and 10%

(1) has selected option 5 that represents Strongly Agree. The trend observed from mean

() calculation shows that most of the respondentsagreethat the Dumping increase

imports.

---------------------------------------

Frequency Distribution of the data according to respondents view about dumping should

be protected

-: Table 4.09 :-


1 0 0 0

2 3 6 30%

3 0 0 0

4 5 20 50%

5 2 10 20%Total f= 10 fx = 36 100%


= 3.6

Interpretation:


represents Disagree, 50% (5) has selected option 4 that represent Agree, and 20% (2)

has selected option 5 that represents Strongly Agree. The trend observed from mean ()

calculation shows that most of the respondentsagreethat the Dumping should be

protected.

---------------------------------------


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Frequency Distribution of the data according to respondents view about anti-dumping

laws are a good form of protectionism

-: Table 4.10 :-


1 0 0 0

2 0 0 0

3 1 3 10%

4 9 36 90%

5 0 0 0

Total f= 10 fx = 39 100%


= 3.9

Interpretation:


represents Indifferent, and 90% (9) has selected option 4 that represent Agree. The

trend observed from mean () calculation shows that most of the respondentsagree that

the Anti-Dumping laws are a good form ofprotectionism.

---------------------------------------

Frequency Distribution of the data according to respondents view about protectionists

are threatened by dumping

-: Table 4.11 :-


1 0 0 0

2 0 0 0

3 0 0 0

4 9 36 90%

5 1 5 10%

Total f= 10 fx = 41 100%


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= 4.1

Interpretation:


represents Agree, and 10% (1) has selected option 5 that represent Strongly Agree.

The trend observed from mean () calculation shows that most of the respondentsagree

that the protectionists are threatened by Dumping.

---------------------------------------


good for customer as well as economy

-: Table 4.12 :-


1 1 1 10%

2 7 14 70%

3 1 3 10%

4 0 0 0

5 1 5 10%

Total f= 10 fx = 23 100%


= 2.3

Interpretation:



10% (1) has selected option 3 that represents Indifferent, and 10% (1) has selected

option 5 that represent Strongly Agree. The trend observed from mean () calculation

shows that most of the respondents aredisagreethat Dumping is good for customer as

well as economy.

---------------------------------------


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Frequency Distribution of the data according to respondents view about dumping affect

the economy negatively

-: Table 4.13 :-


1 0 0 0

2 0 0 0

3 0 0 0

4 4 16 40%

5 6 30 60%

Total f= 10 fx = 46 100%


= 4.6

Interpretation:


represents Agree, and 60% (6) has selected option 5 that represent Strongly Agree.

The trend observed from mean () calculation shows that most of the respondents

stronglyagreethat the Dumping affect the economy negatively.

---------------------------------------

Frequency Distribution of the data according to respondents view about dumping affects

the economy positively

-: Table 4.14 :-


1 2 2 20%

2 6 12 60%

3 2 6 20%

4 0 0 0

5 0 0 0

Total f= 10 fx = 20 100%


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= 2.0

Interpretation:



and 20% (2) has selected option 3 that represents Indifferent. The trend observed from

mean () calculation shows that most of the respondentsdisagreethat the Dumping

affect the economy positively.

---------------------------------------


beneficial for economy as it enhance competition among domestic and foreign

producers

-: Table 4.15 :-


1 0 0 0

2 6 12 60%

3 1 3 10%

4 3 12 30%5 0 0 0

Total f= 10 fx = 27 100%


= 2.7

Interpretation:


represents Disagree, 10% (1) has selected option 3 that represent Indifferent, and


calculation shows that most of the responses are indifferent which shows they are neither

agree nor disagree that the Dumping is beneficial for economy as it enhance

competition among domestic and foreign producers.


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CHAPTER 05

FINDING, CONCLUSIO,

ANDRECOMMENDATIONS


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This chapter presents the summary of finding of the study as gathered from questionnaire,

the conclusions as well as the recommendations drawn out from the intensive study

conducted by the researcher.

Summary of Findings:

The study attempts to determine the effects of Dumping on economy.

According to our research we are able to find out that dumping do affect the

economy. It tells us the dumping affects the economy negatively by affecting its

different components.

The study represents that increasing free trade is responsible for increasing the

dumping practices and the trend will increase in future. The dumping can also

restrict the international free trade as the conflict can take place among the trading

countries or partners when any one of them dumps. But situation can be vice a

versa because some countries would still like to enhance their trade with other

countries.

We are able to determine that dumping can be practiced by a country whether ithas sufficient resources or not. The subsidies given by the government really

helps dumping because producers has to pay less tariffs and quotas and they can

produce more cheaply in foreign countries.

Dumping harm the domestic industry as foreign low priced goods that are being

dumped earn more market share and local industry is unable to retain the

customer as they can never sell at such a low price. They have to full fill their

costs. So if the production unit shuts down in a country it affects certain

components of the economy like the unemployment increases, the gross domestic

product decreases, the gross national product decreases, the value of the local

currency depreciates. The domestic industry cartels also support dumping as the

local producers come together to charge high prices in local market to earn

revenue required and then they can easily sell the products in foreign market at a


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price below costs. Then they can easily dump in foreign countries at a very low

price to earn market share. This will be help full for the expansion of their

business. The destruction of industry will cause to decrease the business

expansion and domestic production. So people will hesitate to take loan and start

business so the rate of interest will also decrease.

The imports of the country increases where the goods are being dumped. The

balance of payment of that country goes into deficit as foreign payments increase

and the receipts decreases. The inflow of money decreases and the outflow of

money increases. This creates pressure on the local currency and the value of

currency decreases as compared to foreign currencies. The demand of foreign

currency will increase as the imports are increased and the excess supply of local

currency in foreign exchange market will cause to decrease the exchange rate of

local currency.

The study tells us that dumping being harm full for economy should be protected.

There are different methods for protecting the economy from dumping. We can

use tariffs, quotas and antidumping laws as well. Anti dumping laws are widely

accepted forms of protection. According to this study they are a suitable form of

dumping. The protectionists are the people who are in favor of restricting

dumping and they can be government, monopolists or the industrialists in aneconomy. This study informs us that the protectionists are the people who are

really fear dumping because according to them they will the most harmed people.

The study tells us that the dumping can be useful for customers but it is always

harmful for economy. The people may get cheaper goods which can be a gift for

them but the economy has to pay the cost. The study also tells us that some times

dumping increases the competition in local industry where the goods are being

dumped but other wise situation can also has equal chances of occurrence. The

competition is increased as the local producers also try to decrease the cost of

production and quality of their product but some times such situation does not

occur.


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Conclusion:

The study tells us that dumping obviously affects the economy. The effects of

dumping on economy are negative. Different countries around the world dump to each

others markets. Dumping can originate from natural resources, cheaper factors of

production or subsidies given by the government. The domestic industry has to face the

destructive effects of dumping and so are the other components of economy like gross

domestic product, gross national product, unemployment and exchange rates. These harm

full effects of dumping can bring economy on the verge of destruction. The protection

from dumping is very important. The anti-dumping laws are being implied by the

countries to protect their economy. The dumping can provide customers with the cheaper

products but it can be very costly for the economy. The standard of living can not be

enhanced by having cheaper available goods but it can be improved by increasing the per

capita income. So the economy should be protected from dumping for progress and

development.

Recommendations:

There are some recommendations that are based on the study. These recommendations

are as follows

1) The dumping affects the economy adversely so governments and other regulatoryauthorities should try to protect the economy when the dumping cases are filed.

2) The industry should be protected by the use of antidumping laws which are verygood form of protection.

3) Tariffs, quotas and taxes should also be implemented to protect the industry formdumping.

4) WTO should make sure that lesser dumping practices should take place.5) It should define more antidumping law that should restrict the dumping with out

harming the purpose of free trade.

6) Countries should not give the unnecessary subsidies or favors that give rise to thedumping practices.


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7) The government should intervene to break the cartels that are the cause ofdumping in industry so the perfect competition may take place.

8) To compete the other countries products that are low-priced and better quality,government should force the industry to increase the efficiency and production

level.

9) The governments should explore and utilize the natural resources available in thecountry and produce more efficiently and cheaply.

10)The human resources of the country should be utilized in an efficient way bygiving them the appropriate training and skills so their productivity can be

increased.

11)The industry should be efficient enough so that the exports may increase andimports may increase. This will not only increase the per capita income but also

save from the trade deficit.

12)The foreign low priced goods can be gift for customer but they does not reflectbetter standard of living so local production can not only enhance the standard of

living but also increase the jobs, gross domestic product, gross national product

and the currency value.

13)Competition among the local producers can be enhanced by giving more andmore local people a chance for entering the business and providing them

resources to compete, not with a competition in between local and foreign

products.


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Survey Questionnaire

Purpose of Study:

This study is being conducted in order to determent the effects of Dumping on

economy.

Direction:

Please mark the appropriate box against each question.

Q # 01: Do you think Dumping effect economy?

Q # 02: Do you think increasing free trade gives rise to dumping practices?

Q # 03: Do you think Dumping limit the International trade?

Q # 04: Do you think Dumping is possible with-out natural resources?

Q # 05: Do you think subsidies give by government supports Dumping?

Q # 06: Do you think Dumping harm the domestic industry?

Q # 07: Do you think domestic industry cartels support Dumping?

1 Strongly Disagree 2 Disagree 3 Indifferent 4 Agree 5 Strongly Agree








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Q # 08: Do you think Dumping increase imports?

Q # 09: Do you think Dumping should be protected?

Q # 10: Do you think Anti-Dumping laws are a good form ofprotectionism?

Q # 11: Do you think protectionists are threatened by Dumping?

Q # 12: Do you think Dumping is good for customer as well as economy?

Q # 13: Does Dumping affect the economy negatively?

Q # 14: Does Dumping affect the economy positively?

Q # 15: Do you think Dumping is beneficial for economy as it enhance competitionamong domestic and foreign producers?

COMSATS Institute of Information Technology(CIIT) Lahore.

URL:www.ciit.edu.pk








http://www.ciit.edu.pk/http://www.ciit.edu.pk/http://www.ciit.edu.pk/http://www.ciit.edu.pk/


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-: Bibliography :-

Institutions

COMSATS Institute of Information Technology Lahore (CIIT)

Punjab University Lahore (PU)

University of Management Sciences Lahore (UMT)

PakAims Lahore

Superior University Campus Lahore

Web Sites:

www.ciit.edu.pk(Digital Library)

www.jstor.org

www.google.com

www.yahoo.com

www.ask.com

www.en.wikipedia.org

Books:Research Methods For Business By Uma Sekaran

International Financial Management By Jeff Medora

International Business By Charles W.L. Hill
http://www.ciit.edu.pk/http://www.ciit.edu.pk/http://www.jstor.org/http://www.jstor.org/http://www.google.com/http://www.google.com/http://www.yahoo.com/http://www.yahoo.com/http://www.ask.com/http://www.ask.com/http://www.en.wikipedia.org/http://www.en.wikipedia.org/http://www.en.wikipedia.org/http://www.ask.com/http://www.yahoo.com/http://www.google.com/http://www.jstor.org/http://www.ciit.edu.pk/

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