August 13, 1998
NOTE TO EDITORS
Free versus Fair Trade: The Dumping Issue, the latest edition of the New York Fed's Current Issues in Economics and Finance, is available for your review.
Authors Thomas Klitgaard and Karen Schiele examine the debate over antidumping tariffs --tariffs imposed on imports judged by a government to be unfairly priced ("dumped")--and conclude that their use is ill conceived in many ways. More countries have resorted to antidumping tariffs in recent years as international trade agreements have phased out other kinds of trade barriers. The article raises questions about the merits of this form of trade protection and discusses other remedies that are available to those hurt by unfair import competition.
According to Klitgaard and Schiele, defenders of antidumping tariffs claim that the tariffs prevent foreign producers from engaging in predatory pricing--a radical underpricing of export goods that is designed to drive domestic competitors out of business. Critics argue that these tariffs, like all trade barriers, hurt the economy by directly raising the prices that consumers and manufacturers must pay for goods.
The authors focus their analysis on the rationale for antidumping regulations and the review process used by governments to evaluate allegations of dumping. They find: