trade Nov.29th.ppt

1、Pushing exports (2) Nov.29th, 2012,case study: dumping and antidumping,How to win in a lawsuit of dumping accusation? 3 conditions to tax anti-dumping duty: -establishment of dumping; -there is material injury to the import-competing industry; -causal relationship between dumping and the damage to i

2、mport-competing industry. So, even if there is dumping, try to prove no major damage or no relation to the damage. Case that Chinese enterprises responded to the anti-dumping case successfully, the “hat case” The case of “citric acid and citrate sodium”,Background: the case occurred in May 1988. US

3、hat association accused Chinese firms to export hats at the price less than the fair value; because the eight Chinese export trade companies are state-owned or Chinese government-controlled enterprises, but not a market economy. so U.S. asked to levy an anti-dumping duty on Chinese exporting hats. T

4、erminology: Export trade companies: export the products provided by manufacturers, earn the profit difference and transaction costs.,THE HAT CASE,the hat case,Defendant: Chinese Ministry of Commerce Grounds of opposition: fair market price: Although the eight Chinese export trade companies are state

5、-owned, their suppliers can price the products by their own, without any government control. Therefore, the standard can not be ruled by non-market economy dumping margin : The 26 suppliers are: 6 foreign-owned enterprises, 16 joint ventures, only four state-owned enterprises. The producers can pric

6、e the products by their own, there is no price control from the Government. Result: U.S. Department of Commerce ultimately reject the validation of the antidumping duty on non-market economy.,Background: Since 1996, Chinese exports of citric acid and citrate sodium to the U.S. has increased quickly,

7、 with the market share of 5.7% from 1996 to 1999 16.2%. As the price of Chinese products ($ 0.41 per pound) is far lower than American-made citric acid (1.5 U.S. dollars per pound), the U.S. companies, Midland, Kerry and Trier citrate companies prosecute Chinas dumping to the U.S. Ministry of Commer

8、ce and International Trade Commission on December 15, 1999. They asked the Government to levy up to 355% of the anti-dumping duties. U.S. Department of Commerce levied the duty ranging from 211.58 to 307.79%.,The case of citric acid and citrate sodium,The case of citric acid and citrate sodium 2,Gro

9、unds of opposition: Whether dumping cause substantial damage to import-competing industries in the U.S.? or Whether the decline of U.S. citric acid market is because of dumping China? Response: the quality and end use of the U.S. and China productions of citric acid and sodium citrate are very diffe

10、rent. High-quality U.S. product is mainly used for food and medicines, while China produces only low-quality citric acid, mainly used for industrial detergent products. Therefore, the decline in U.S. market share has no causal relationship with Chinas exporting products. U.S. International Trade Com

11、mission finally ruled on the case as no harm, did not levy anti-dumping duties.,Subsidies can be: direct by cash payment, indirectly by lowering the cost of exports. Direct subsidies: Subsidies on price and subsidies on income. Government subsidies the exporters according to the quantity or value of

12、 exporting. Indirect subsidies: Include low-interest loan subsidies, export tax rebates, provide the services of exporting for free or at a low fee. (e.g. export-import bank) The impact of export subsidies may be different if the exporters have different market shares on the international market.,Ex

13、port subsidies,small exporting country: no impact on world price,Consumer surplus: -(e+f),producer surplus: (e+f+g),Government revenue: -(f+g+h),Net loss: -(f+h),Large exporting country: affects world price,Consumer surplus: -(e+f),producer surplus: (e+f+g),Government revenue: -(f+g+h+i+j+k+l+m),Net

14、 loss: -(i+j+k+l+m+f+h),Switching an importable to an exportable product,Consumer surplus: -ABEJ,producer surplus: ACEF,Government revenue: -BCGH,Net loss: BJG+CHF,o,F J,Overlapping area: OFGHJ,Case: European agriculture subsidy,In the WTO, export subsidies are strictly limited, except for agricultu

15、ral products. by the end of 20th century, a total of 25 WTO members use around 428 kinds of agricultural export subsidies. The EU is the worlds largest user of export subsidies. The products that are much dependent on subsidies are: dairy products and meat and egg products, including cheese, skim mi

16、lk powder, eggs, beef, poultry, etc. E.U. and U.S. are the worlds two largest agricultural exporters, therefore, their agricultural export subsidies on the international market has an important impact on prices.,Agriculture is amazing,Production subsidies: Different from export subsidies: subsidies

17、for all products, regardless of whether the product is sold in the domestic market or to foreign countries. These subsidies include tax breaks, low-interest loans and other direct way, and some preferential policies for regional support or research fund. Less net loss to the exporting countries but

18、more expenditure to the government.,Industrial policy to encourage exports,Consumer surplus: no change,Producer surplus: +(a+b+c),Government revenue: -(a+b+c+d),Net loss: d,Production subsidy,Consumer surplus: -(a+b),Producer surplus: +(a+b+c),Government revenue: -(b+c+d),Net loss: b+d,Supportive pr

19、ice,Consumer surplus: (a+b),Producer surplus: -(a+b+c+d),Government revenue: c,Net loss: b+d,Export restriction: Export tariff,Currency devaluation: Exports have greater price elasticity, increased export sales is caused by the depreciation; Other countries do not take any retaliatory measures. Othe

20、rwise, the effect of currency devaluation in other countries will be offset by the same measures. (USD/JPY, USD/RMB) Special economic zone: In special area, government reduces tariffs, customs control and the relaxes of exchange controls, providing services and other benefits methods, develops re-ex

21、port trade to attract foreign business, or encourages and attracts foreign investment. Free trade area Export processing zone Tariff-free zone,Industrial policy to encourage exports,Export tax rebate,International airport: to get tax-refund with invoice before you leave that country. Duty-free shops

22、, with a ticket to go abroad, you can buy goods in duty-free shops. Tax rebate policy is for export enterprises. If their products are sold abroad, they can ask the government to refund the taxes (value-added tax, consumption tax and tariff). The rational for the export tax rebate is to avoid double

23、 taxation. If a tax rebate is a policy to encourage export? First, we must tell the refunded tax is on production or on consumption: if on consumption, no any stimulators to exporters, because they are not levied by consumption tax. Second, we look at the amount of export tax rebate. If the tax reba

24、te is larger than the tax on production, the difference can be regarded as a subsidy to the exporters.,GATT and WTO allows countries to take countervailing measures tax on the export-subsidized products. To levy countervailing duty, the importing country government must provide sufficient evidence t

25、o prove that: (1) determine the existence of subsidies; (2) the domestic import-competing industry has been substantial damage; (3) exists between subsidies and injury a causal relationship. The duty does not exceed the subsidies on the exporting products. If the import country levy the duty as much as the foreign subsidy, the price and imported quantity has no change, there is no loss to the whole world, but the foreign subsidy is now transferred to the government of import country as the countervailin