The Importance of Strictly Enforcing Antidumping Laws

Particularly in light of Russia's recent problems, the focus in the United States is usually upon such high-profile issues as arms control and political machinations in Moscow.

Within Russia, however, more attention is paid to economic issues. In particular, antidumping laws - a little known international trade issue - have become a top priority of Russian trade negotiators. As obscure as it may sound, the issue deserves the attention of US policymakers, as well, because antidumping laws have a profound effect on the handling of new trade cases involving Russian steel.

Antidumping laws impose duties on imported products that are sold at less than the price in their home market, or less than their cost of production. Determining the appropriate standard for judging dumping in trade with Non-Market Economies (NMEs) raises difficult concepts. As US trade officials determined in the mid 1970s, the short answer to these questions is that normal concepts of "price" and "cost" cannot be applied to Russia and similar economies. The approach settled upon was to select market economies at a similar level of development to use as surrogate markets to determine a reasonable estimate of the cost of production in NME economies.

Initially, the NME antidumping procedures were employed in only a few isolated cases, such as one involving Polish-made golf carts. But with the emergence of China and Russia as trading powers, NME procedures were made law and came into frequent use.

Partly as a result of their increased use, NME antidumping laws have often come under harsh criticism. Critics argue that the laws ignore the economic reforms implemented in Russia, China, and other former communist countries, as well as being simple protectionism.

These criticisms are, however, largely misplaced. Although there certainly has been economic reform in Russia and countries like it, it usually falls short of converting these countries into market economies. Prices for inputs, like labor and energy, are often still set by the government. Many relics of non-market economics, like state-owned enterprises and government economic planning, are in place. In short, the price mechanism is still not being allowed to function, costs cannot be determined, and US law directs government authorities to use NME antidumping procedures.

Though it is true that NME procedures have resulted in the imposition of high duties on some products, they have not imposed a serious trade burden on NMEs. Even the World Bank concluded that current US antidumping laws haven't posed a barrier to NME exports.

If allowed to price their exports to the US at whatever level they desired, Russia and other NMEs would undoubtedly attempt to export their surplus production - built up because of communist-era policies - at cut rate prices in order to gain hard currency. New imports would adversely affect US industries in sectors ranging from steel to spice production, and, perhaps worst of all, large state-dominated economies would be rewarded for communist-era policy.

To avoid that mistake, the US must continue to apply NME antidumping laws to Russia.

* Greg Mastel is a vice president and senior international economist at the Economic Strategy Institute in Washington, D.C. He is author of the forthcoming book 'Antidumping Laws and the U.S. Economy.'