Economics, Politics, Social Commentary and occasionally Superstring Theory.

Wednesday, December 01, 2004

Consumers Demand to Pay More For Shrimp

...or so the Commerce Deparment would have you believe. The Washington Times (which I deplore linking to) has the story. Now's a good time to give a functional analysis of anti-dumping law.

Dumping occurs when a foreign company sells its exports at a cheaper price than in its home market. The price in the home market price is referred to as normal value (NV) and the export price is referred to as (surprise) export price (EP) or constructed export price (CEP). Constructed export price is only used if the foreign company and the importer are somehow related. Both prices are subject to a number of adjustments in order to try to reach an ex-factory price, or the price at which the good would fetch as soon as it left the factory (or fishery). The difference between the price in the home market (NV) and the export price (EP) is called the dumping margin (DM). If Commerce finds a dumping margin above a certain level, they impose duties on the imports which make up the difference.

So, here's what we have: Foreign companies are offering consumers lower prices than are available in our domestic market. Our government responds by slapping a duty on the products to artificially raise prices. How is this not a tax?

Well, the principal way that it differs from a tax is the most appalling. The proceeds from the additional duty assessed against the imports is then given to the party who petitioned Commerce in the first place! This is the Byrd Amendment. For instance, let's say Shrimpcatcher, based in Louisiana, petitions Commerce that Shrimpexporter, based in Vietnam, is dumping shrimp in the U.S. Then, Commerce finds a positive dumping margin (which it does in more than 90% of the cases). If the International Trade Administration (another branch of Commerce) finds that the dumping is causing material injury to the U.S. shrimping industry, then the duties are assessed. Shrimpimporter has to pay more to Shrimpexporter because of the duty, which means it has to charge more to the consumers. The extra cost, in the form of the higher duties, gets sent in the form of a check from the U.S. Treasury to Shrimpcatcher in Louisiana. Essentially, Shrimpcatcher is imposing a regressive tax on shrimp consumers with the support of the U.S. government. Under these circumstances, why not bring an anti-dumping petition to Commerce? If the potential payoff is in the millions and the cost is substantially less, why not roll the dice?


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