This article is about a specific legislative remedy sometimes employed to counteract a trade imbalance. For a larger discussion of trade between the U.S. and China and who is impacted, see U.S. – China Trade Dispute
There is a lot of finger-wagging and threatening of China based on its trade surplus with United States. An understanding of U.S. Antidumping laws provide a valuable insight into the realities of trade wars and how they impact foreign and domestic industries. This article discusses the origin of U.S. anti-dumping laws and which subset of these laws can be applied by private companies. It also discusses some U.S. companies that may benefit from the application of these law vis-a-vis competitors from China.
The U.S. is protecting its trade interests more actively as its deficit with China has now grown to over $220 billion. With a Democrat lead Senate and House, an increased vigilance in its trade interests is likely. Under U.S. law, one weapon in the United States’ trade war arsenal is an anti-dumping action.
Anti-dumping laws provide protection to domestic firms from import competitors engaged in predatory pricing. The Antidumping Act of 1916 is designed to stop the practice of pricing imports at a price substantially less than the actual market value or wholesale price of such articles . . . in the principal markets of the country of their production . . . .” with the intent of destroying, injuring, or preventing the establishment of an industry in the United States. In essence, the law is supposed to stop importers from intentionally selling a product at a loss in order to drive competitors out of business, thereby establishing increased market power that allows one to raise prices above competitive market levels and increase profits. The Act provides for both criminal punishment, as well as a lawsuit for civil treble damages payable to any person harmed by a violation of the Act to sue for treble damages.
Subsequent anti-dumping legislation in 1921 eliminated the intent requirement, thus even inadvertent selling below cost was prohibited. Under the 1921 Act, an importer could be penalized solely for selling below cost and causing a resulting injury. However the 1921 Act eliminated the ability for injured private citizens and companies to sue for damages. Instead, The United States Government is awarded any damages from a successful action under the 1921 Act and the importer need only pay compensatory damages.
Antidumping actions under the 1916 Act can yield higher damages and those damages can be paid to private companies, however it is more difficult to bring a case under the 1916 Act due to the need to prove that any selling below cost was done with the intent to harm domestic competitors in the U.S. However, the prospect of being awarded treble damages has incentivized aggrieved private parties to pursue actions under the 1916 Act in the hope of being financially rewarded for their efforts and creating a larger potential penalty (and thus larger deterrent) for would be predatory importers.
MeadWestvaco, International Paper, and Arcelor Mittal, IPSCO are well positioned to benefit from these laws. Industries where dumping allegations are most likely to be made are those involving commodity-like manufactured products, such as paper products, steel, and chemicals. As this makes it harder for Chinese companies in these industries to export into the US, domestic US manufacturers or manufacturers not facing anti dumping action could benefit with firmer prices and demand as well as any damages collected.