Protectionism is on the rise again – thanks partly to a hole in world trade rules

In the 1930s widespread recession bacame world depression only after countries retreated behind tariff walls and trade collapsed. Today the world economy wobbles and teeters, but most governments vow that they have learnt their lesson. Perhaps they have. Even so, it is reassuring that international trade rules make a return to protection harder and more expensive than it was in the 1930s.

Do not bank on it. For there is a big hole in those multilateral rules. Countries can slap duties on cheap imports that they judge are being “dumped” in their markets. And – surprise, surprise – there has recently been a surge in anti-dumping cases around the world, as companies such as America’s steel makers feel the pinch of slower growth and rising imports from crisis-hit economies.

Anti-dumping is a particularly pernicious form of protection, because it lurks beneath a veneer of respectability. Its apologists assert not merely that foreigners are stealing jobs at home – the usual protectionist line – but that they are doing so unfairly by selling their wares on the cheap, perhaps in the hope of driving domestic competitors out of business. Anti-dumpers claim to target only such cheats; and, moreover, to use objective calculations of what they ought to charge, making proper allowance for profit. Duties are imposed only to bring prices back into line with what they should be; if victims squeal, they can raise their prices instead.

Yet the practice is very different from the theory. Dumping calculations are a sham. Foreigners are almost always found at fault. Huge duties are imposed and rarely removed, even when conditions change. Worse still are the hidden costs of anti-dumpimg. A government that threatens any foreign firm offering the keenest prices is merely encouraging it and others to raise prices and cut sales. In effect, companies are being urged to collude at consumers’ expense.

But surely anti-dumping measures may be justified if foreigners are guilty of predatory pricing? Not usually. Genuine predatory pricing is extremely rare, because it relies on the unlikely ability of a single producer to dominate a world market. In any case, consumers gain from lower prices; so do companies that can buy their supplies more cheply abroad – General Motors, for example, in the case of steel. And even in the very few cases where foreigners might drive domestic producers out of business and raise prices once they corner the market, anti-dumping is a wrong response.

In the dumps

A better answer would be to invite national antitrust authorities, who look into predatory pricing by domestic firms, to deal with foreigners too. That is how this matter is dealt with between Australia and New Zealand. A further improvement would be to write antitrust rules into world trade law. Competition policy may be on the agenda for next year’s trade summit, which could launch a new round of trade talks. Its remit could easily be widened to cover anti-dumping as well as other competition issues.

As of now, however, such a change looks unlikely. America seems wedded to anti-dumping, as does the European Commission. Both are encouraging hard-pressed domestic producers to seek protection, sometimes by filing repeat cases, often starting one up immediately after another has been turned down. Now other countries are retaliating with anti-dumping suits of their own against American and European firms. As the cases multiply, a mockery is made of multilateral efforts to tend off protection. In short, the echoes of the 1930s may yet reverberate. It is time for the world to dump anti-dumping.

The Economist

Notes

1. worse still are the hidden costs of anti-dumping - инверсия использована для усиления эффекта звучания фразы

2. to corner the market – добиться контроля над ценами (путем скупки товаров или ценных бумаг в огромных масштабах)

3. remit– here: agenda

4. wedded to smth – преданный, приверженный

Vocabulary

to dump – осуществлять демпинг: продавать товары по заниженным ценам; dumping – демпинг:1) продажа товаров по бросовым ценам, в том числе ниже себестоимости 2) продажа товаров за границей по ценам ниже, чем внутри страны; anti-dumping – антидемпинговые меры; anti-dumping duty – антидемпинговая пошлина: таможенный тариф, вводимый для борьбы с ввозом товаров по бросовой цене

to remove duties, tariffs, etc. – отменить пошлины, тарифы и т.п.

predatory pricing – “ грабительское “ ценообразование: незаконная практика вытеснения крупными компаниями с рынка небольших и более эффективных компаний путем временного существенного снижения цен на услуги или товары ниже издержек за счет прибыли по другим операциям (через некоторое время цены вновь поднимаются)

antitrust authorities – антитрестовские (антимонопольные) власти; antitrust rules – антитрестовские правила (законы): предназанчены для поощрения конкуренции и борьбы с монополистической деятельностью, ограничением нормальной рыночной конкуренции; to respect the rules – уважать правила (закон)

to retaliate – принять ответные меры, нанести ответный удар; retaliation– возмездие, ответный удар; retaliatory measures – ответные меры

Exercises

1. Explain in English the following:

it lurks beneath a veneer of respectability; dumping calculations are a sham; steel workers feel the pinch of slowing growth.

2. Recognize the special difficulties in the following; translate into Russian:

1) Duties are imposed only to bring prices back into line with what they should be.

2) In the very few cases anti-dumping is the wrong response.

3) They might drive domestic producers out of business and raise prices once they

сorner the market.

4) Such a change looks unlikely.

5) It relies on the unlikely ability of a single producer to dominate a world market.