Countries are allowed to offset injurious dumping by imposing anti-dumping duties. In principle, the duty should be no higher than needed to remedy the injury to the domestic industry, but in practice the duty usually is equal to the margin of dumping. Rules governing the determination of dumping and injury are by nature arbitrary, and the existing rules have not kept pace with the increasing complexity of international production and trade. Recent Round of talks of the World Trade Organization (WTO) have sought to update the anti-dumping rules, both to address problems that have arisen in specific cases and to resolve disputes arising from national differences in the interpretation of WTO rules.
A government endeavouring to convince the public or sectoral interests that a certain trade reform will proceed smoothly may offer guarantees against disruption. These may include strengthened anti-dumping provisions.
The improved market access and increased market penetration resulting from the Uruguay Round, as well as other economic factors, have given rise to more intense demands from domestic producers in many countries for "trade remedies" in the form of contingency measures, including safeguards, anti-dumping duties and countervailing duties. There has been active use of anti-dumping laws by many countries, as well as of other trade measures in such areas as rules of origin. The most affected sectors include metals, plastics, textiles and clothing, footwear and headwear.
Contingent protection measures such as anti-dumping actions have become the preferred channel of import-competing industries in the EU and US in particular to petition for protection against foreign suppliers. Not only has the number of cases grown substantially, but the number of countries instituting anti-dumping measures also has grown. There are several reasons for this, some associated with legitimate concerns for unfair business practices and some arising out of changing patterns of comparative advantage which induce protectionist responses. All members of the World Trade Organization (WTO) are required to follow the procedures set out in the Uruguay Round (UR) anti-dumping agreement. However, these obligations do not guarantee that anti-dumping cases, particularly involving some new uses, have been conducted with the uniform rigour. The administrative agencies of many new users have neither the personnel nor the expertise required to conduct detailed investigations. In such circumstances investigations tend not to be as transparent as intended by the UR agreement.
Use of contingent protective measures, that is, anti-dumping action, countervailing duties and safeguards by western market economies against products of eastern Europe, are adversely affecting trading and investment propensities of the economies in transition. As explained above, the use of such measures has come at a time when standard protection measures (tariffs and quotas) have been reduced as a direct result of the conclusion of Association Agreements signed between the EEC/EU and the individual countries of central and eastern Europe. This process of liberalization in East-West trade was impeded in 1992 when the EEC/EU, at the behest of western producer groups, imposed restrictions on a range of imports of sensitive products from the transition economies which were considered to have been "dumped" on the EEC/EU market.
While dumping undeniably represents a genuine threat to domestic producers, the procedures for combatting it under the terms of the Association Agreements have been criticized for their lack of transparency and for the scope they have given to administrative discretion to impose barriers on products from the "sensitive sectors" which are listed as exceptions to the overall liberal trading regimes in the agreements. These so-called contingent measures of protection, it has been argued, have tended to undermine the liberal intentions of these Agreements. Moreover, recent changes to the way the EEC/EU approves anti-dumping duties – i.e. subject to approval by a simple majority of member states, instead of by a qualified majority vote – threatens to make it even easier for the EEC/EU to use anti-dumping procedures in the future.
The impact of these restrictive measures on trade with the countries in transition is difficult to quantify. Currently, for example, these sensitive items which are vulnerable to restrictions constitute as much as 45% of the exports of the Czech Republic and Hungary. Bulgaria has reported that some of its exports were provided more access to western markets before the signing of its agreement with the EEC/EU than after. In the agriculture sector in 1993, several eastern European countries suffered from the temporary restrictions on their exports of meat and meat products, their losses being estimated at several hundred thousand US$ a month for Bulgaria, some $40-50 per month for Hungary and $70 per month for Poland. As concerns foreign investment, there is no doubt too that restrictions will have an adverse affect on flows of FDI in the East. This concerns those foreign investors contemplating investing there with the intention of exporting at least part of their output to the West. Many investors might forego investments if they thought that their products would become a target for protectionist actions. According to the UN/ECE data base on foreign investments in the countries of transition, it has been noted that while some countries have registered greater FDI flows in the course of 1993 than in preceding years, overall, the flows have been disappointing.
At the end of 1996, the EU had 143 anti-dumping measures in place, the USA 198, Canada 93 and Australia 47.
The WTO Agreement on Subsidies and Countervailing Measures (Uruguay Round) comprised a basic trade-off: stronger disciplines on export and domestic subsides and in return allowance for certain "desirable" subsidies that support R&D, pollution control investment, etc not targeted at specific industries. Although it created the potential for expanding subsidies in these categories, it contained safeguards to prevent this potential abuse.
The WTO Agreement on Safeguards (Uruguay Round) set out the conditions under which countries may impose temporary import protection. To invoke this "escape clause", countries must demonstrate that imports are causing or threatening serious injury to a domestic industry. Overall, the Agreement established clear rights and obligations regarding the imposition of safeguard actions, including extensive notification and consultation requirements. It also contained constraints and incentives that constrain the use of such measures. First, the current agreement required safeguard actions to be applied against imports from all sources. Although the agreement allows countries in certain circumstances to act only against selected countries whose imports have increased disproportionately. Second, the agreement sets out a definition of "serious injury" that clarifies the injury threshold that must be met before safeguard actions can be imposed. Third, safeguard measures may be applied for specific periods according to country type. Previously the only constraint on the duration of a safeguard measure had been the impressive requirement that it should be "temporary". Fourth, the agreement restricts the use of safeguard actions applied by developed countries against imports from developing countries. On balance, however, the agreement offered little incentive to resort to the new rights and obligations under the WTO, instead of other import control measures such as anti-dumping. Accordingly, safeguards continue to play a minor role in international trade relations.
In practice, the search for safeguards has become a complicated process which has little to do with economic efficiency.