By Justin Kirschner
The “mother
of all trade issues” will come to a head by the end of this year: is China
a market economy under the WTO and who gets to make that decision? The answers
to those questions have far-reaching economic and political ramifications.
Though the purpose
of the WTO is to facilitate a reduction of trade barriers between its
members, the WTO explicitly permits its members to levy anti-dumping duties. An
anti-dumping duty is a temporary duty on imported goods imposed on a foreign
firm when the foreign firm “dumps” products on the importing member’s market. A
product is dumped
when it is “introduced into the commerce of another country at less than its
normal value” so as to cause or threaten to cause material injury to the
domestic industry in the importing country. The consequent anti-dumping duty an
importer may impose can be as high as the dumping
margin, which is the difference between the actual price of the imported
good and the normal value of the good. Generally, a product’s normal
value is equal to the value of the product in the ordinary course of trade
in the home market of the exporting country.
