Antidumping A problem in worldwide Trade

Introduction

Many modes of pricing traded goods may draw challenges under the rules on dumping, es pecially since the General Agreement on Tariffs and Trade agenda was expanded to cover import prices below constructed value, that is, full cost plus a standard profit margin. Two kinds of dumping in particular might also offend more or less well-accepted competition policy norms: predatory dumping, in which prices are cut to drive rivals out of business, after which the early losses are recouped by exploiting the resulting monopoly power to sustain elevated prices; and strategic dumping, under which oligopolists attempt to secure scale economy advantages by increasing foreign sales through dump ing while protecting their home market to keep foreign rivals from symmetrically expanding. Willig lays out a set of practical indicia through which the papers dealing with national experiences or spe cific industry histories might distinguish these two cases from other forms of dumping.

It might have been useful to have another paper tracing the treat ment of price discrimination under U.S. and perhaps other domestic competition rules. In the United States, the Robinson-Patman Act was passed with protectionist intent at least as ardent as that associated with the trade laws, but with small business rather than domestic business as the ward. Criticism from scholars, unsympathetic decisions by the appellate courts, and the ascendance of benefit-cost analysis within the antitrust agencies led to a striking decline in enforcement activity by the Federal Trade Commission. The number of cease-and desist orders fell from a peak of 252 in 1963 to an average of four per

year in 1974-75.1 Although resistance to changes in trade laws and their enforcement is probably more deeply entrenched, the moral is that policies can be overturned, thanks among other things to careful scholarship illuminating the consequences, costs, and benefits. Three papers survey dumping cases undertaken in Canada, the European Community, and the United States to determine how many might have entailed either predatory or strategic dumping. Several hurdles had to be cleared to leave a case arguably in one of those two categories: ?Did the allegedly dumping exporters have a large or rapidly growing share of sales in the target market? ?Was the number of exporting firms small (so that market power could be exercised after dumping had its domestic competition-reduc ing effect)? ?Were the exporting firms concentrated in only a few nations (making postdumping collusion more feasible)? ?Were there relatively few domestic sellers in the target market (which arguably reflects high barriers to entry or reentry)?

An earlier version of one paper tried to measure barriers to entry or reentry more directly using a sunk cost index, but the measurement effort was unsuccessful. This is disappointing, because seller concen tration in the target market is at best a weak proxy for barriers to entry, and there are plausible theories showing that pr?dation can be rational even against atomistically structured firms when exit is rela tively rapid and the predating firm has a sizeable absolute cost advan tage ...