#7 - TRADE DEFENCE INSTRUMENTS ARE MEANT TO PROTECT THE EU ECONOMY. OFTEN, THEY ACHIEVE THE OPPOSITE.
Trade defence measures such as antidumping are not well suited to modern international production chains. This is because of the strong role trade and trade defence policy accord to manufacturing, whilst disregarding other, often European based steps of international production chains. However, those easily add more than half of the final value of a good. Therefore, despite being manufactured abroad, such products could be regarded as European, yet are at risk of being subject to antidumping. If this happens, the EU effectively imposes antidumping measures against itself and can harm high skilled employment within the European economy.
Made in the world - how antidumping measures would harm the EU clothing industry
Production of clothing and footwear often involves manufacturing in developing countries such as Asia, Middle America or Africa. Other parts of the production chain are equally as important: research, development, design, logistics, marketing and retail. “These mostly creative parts of the production process usually add more value than manufacturing and they are mostly carried out in Europe.”, finds a study by the Swedish National Board of Trade. In textiles and footwear, these steps add 50% to 80% of the final value, Copenhagen Economics points out in the study “Unchaining the supply chain”, commissioned by EBCA.
This part of the value chain contributes significantly to the EU economy and employment. The resulting products are not much less “European” than traditional products which are fully manufactured within the EU. However, as pointed out above, may be subject to antidumping, negatively affecting the EU’s own industry. The Swedish National Board of Trade concludes: “anti-dumping decisions must take economic growth more into consideration … perhaps … by introducing a new community interest test, with focus on preventing that globalised European companies are damaged by anti-dumping.”
The newspaper, The Economist, in a 1998 article, went as far as arguing that “Anti-dumping is a particularly pernicious form of protection because it lurks beneath a veneer of respectability.” Whilst theoretically rules based, the practice was often different: “Dumping calculations are a sham”, often finding foreigners at fault, punished with huge duties which are rarely removed. Instead, the author argues, alleged predatory pricing should be dealt with by national antitrust authorities or better yet, within the framework of multilateral antitrust rules. By applying antidumping measures, governments effectively encourage businesses to increase prices, and to collude at the consumers expense.
The thought is underpinned by the findings of study, again by the Swedish Board of Trade: It found that three years after an antidumping investigation was initiated, consumers paid significantly higher prices on purchases from traditional EU producers (12% increase), on imports from countries not subject to antidumping duties (13% increase) and imports from countries subject to antidumping duties (74% increase), on average.
This is the seventh of ten messages on international trade, which we will publish over the coming weeks. If you like this please give us a star below. If you wish to respond, please send us a message via our contact form.