The Unintended Economic Effects of US Antidumping Actions
Author:
Wei-Tung LiuMentor:
Ronald Rogowski, Professor of Political Science, University of California Los AngelesAn industry is engaging in the act of dumping when it sells goods in a foreign market at a price lower than in its domestic market. Since the potential damages dealt to mirroring industries in the importing country are significant, most countries around the world have established antidumping legislations as a means of counteracting foreign dumping through an ad valorem tax, the United States being no exception. This paper hypothesizes that since US antidumping legislation is aimed at counteracting unfair foreign competition, the economic impact of such policies should be overwhelmingly positive. However, a brief review of relevant literature reveals that the economic effects of antidumping investigations are usually mixed if not adverse. For example, although the recent antidumping duties established on Chinese solar panels may have provided much needed relief to the 24,000 workers employed by American solar manufacturers, the approximately 70,000 workers in installation, marketing and distribution of solar panels may potentially lose their jobs as the cheaper solar panels from China are no longer available to incentivize solar installation. In addition, the economic impacts of antidumping legislation frequently affect other industries, especially downstream manufacturing that depend on cheap raw materials to compete effectively. This is observed in the case of Chinese and Russian magnesium, where antidumping duties effectively doubled the input of domestic die casters who are desperately trying to revive Detroit by providing domestic automakers with lighter and more fuel-efficient car frames. In light of these realizations, this paper attempts to analyze the unforeseen consequences of antidumping legislation and show why they often cause more harm than good.