Author: Brink Lindsey-director of the Cato Institute’s Center for Trade Policy Studies
The U.S. antidumping law protects American industries from supposedly unfair import competition. Specifically, it imposes extra duties on goods from a particular country or group of countries if two conditions are met: first, the Department of Commerce must find that the goods are being sold in the United States at “dumped” prices; second, the International Trade Commission must determine that the imports in question are causing or threatening “material injury” to domestic producers of the “like product.”
 
Antidumping advocates hail the law as a bulwark against unfair trade practices abroad. They argue that dumping—which they define as either international price discrimination or export sales at prices below the cost of production— results from interventionist government policies and structural differences between national economies. Those market distortions allegedly give foreign firms an unfair competitive advantage in the U.S. market by allowing them to charge lower prices than would be possible under normal market conditions. Antidumping duties are needed to offset that unfair advantage and thereby ensure the proverbial level playing field.
 
The claims of the antidumping law’s supporters raise basic questions about the proper objectives of U.S. trade policy. Assuming that the antidumping law does indeed target market- distorting practices, does it really make sense to respond to those practices by protecting particular American companies from the competitive consequences of those practices? Granted, cheap imports are capable of injuring specific import-competing firms; those same cheap imports, however, just as clearly benefit the American companies that buy and use them, not to mention the millions of consumers who buy from those companies. So why is it appropriate to sacrifice the interests of some Americans to the interests of others? Are the interests of import-competing firms really a valid proxy for the broader national economic interest?
 
Those questions go to the heart of the ongoing debate over free trade versus “fair trade.” Any complete assessment of antidumping policy must ultimately grapple with them. Before reaching those fundamental issues, though, it is necessary to examine whether the antidumping law does in fact uphold some plausible notion of fair trade. This is the narrow and specific focus of this paper: does the antidumping law really target market distortions caused by foreign governments? In other words, does the antidumping law really do what its supporters claim it does?
 
An examination of those questions reveals a disconnect between the rhetoric of antidumping supporters and the reality of antidumping practice. The antidumping law as currently written and enforced does not reliably identify either price discrimination or below-cost sales. Furthermore, the law lacks any mechanism for determining whether the pricing practices it condemns as unfair have any connection to market-distorting policies abroad. Although price discrimination and below-cost sales can result from government interventionism, they can also be due to perfectly normal marketplace behavior. Consequently, the antidumping law all too frequently punishes normal marketplace behavior that has nothing to do with “unfair trade” under any plausible definition of that term.