CHINA DUMPING AS A CASE OF PRICE DISCRIMINATION & CHINA DUMPING IN INDIA

PRESENTED BY:

ASHITA SAKARIA - 1 NIKITA - 13 PRIYANKA KALE - 23 MASSOM - 49 VARUN ALIMCHANDANI - 58

DEFINITION OF DUMPING

Definition: Dumping is an informal name for the practice of selling a product in a foreign country for less than either (a) the price in the domestic country, or (b) the cost of making the product. It is illegal in some countries to dump certain products into them, because they want to protect their own industries from such competition.

EASY ILLUSTRATION OF DUMPING

Definition: Dumping is an informal name for the practice of selling a product in a foreign country for less than either (a) the price in the domestic country, or (b) the cost of making the product. It is illegal in some countries to dump certain products into them, because they want to protect their own industries from such competition.

DUMPING MARGIN

IT HOW U CALCULATE THE MARGIN DURING THE DUMPING Dumping is an informal name for the practice of selling a product in a foreign country for less than either (a) the price in the domestic country, or (b) the cost of making the product. It is illegal in some countries to dump certain products into them, because they want to protect their own industries from such competition.

WHAT IS ANTI-DUMPING?????

The WTO agreement allows governments to act against dumping where there is genuine (material) injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporters home market price), and show that the dumping is causing injury or threatening to do so.

WHAT IS ANTI-DUMPING

Anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the normal value or to remove the injury to domestic industry in the importing country.

ADAM SMITH APPOSING THE DUMPING ACTIVITY

Quoting Adam Smith, by restraining, either by duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. Thus Adam Smith was of the opinion, that, the importing countries should discourage those imports which will harm the domestic industries, by imposing duties on such items. arises for imposing anti-dumping duties.

ADAM SMITH APPOSING THE DUMPING ACTIVITY

Here he was referring to import duties but in the present economic scenario, import duties alone cannot discourage dumping. Thus the need arises for imposing antidumping duties.

ANTI-DUMPING MEASURES

1) Anti-dumping duty: This is imposed at the time of imports, in addition to other customs duties. The purpose of antidumping duty is to raise the price of the commodity when introduced in the market of the importing country. 2) Price undertaking: If the exporter himself undertakes to raise the price of the product then the importing country can consider it and accept it instead of imposing antidumping duty.

HOW TO CALCULATE THE EXTENT OF DUMPING????

GATT (Article 6) provides three methods to calculate a products normal value. The main one is based on .price of the product in exporters domestic market When this method cannot be used the other two alternatives arePrice charged by exporters in other country &calculation based on combination of

CASE STUDY 1

This case study supports the hypothesis that the dumping country need not be very developed so as to indulge in dumping. China is the worlds largest producer of apples. China has flooded the US market with apple juice concentrate along with textiles and garments. In the beginning of May 2000, an anti-dumping duty to the extent of 51.74% was imposed on Chinese apple concentrate. In United States, the price of Chinese apple concentrate is still low even after the imposition of antidumping duties due to their extremely low cost of production. China does not occupy a

CASE STUDY 2

In a recent post, I mentioned the U.S. government imposing additional duties on Chinese products because of dumping; that is, selling us cheap products. In what has got to be the ultimate case of dumping, pharmacies at Publix Supermarkets in Florida are still giving away certain prescription drugs. Evidently, this has been going on for some time. Quick, call the Commerce Department. Publix is obviously trying to put locallyowned pharmacies out of business. Then Publix will start charging to fill these prescriptions. Soon the price will be so high

THREAT OF DUMPING

In developing countries, especially those neighbouring the non-market economies, dumping can pose a serious threat. Dumping from China in India is an example of this. More than one-third cases decided by the Designated Authority in India involve China. These exporters are indulging in very aggressive pricing which is evident from the huge dumping margin. Moreover, in a majority of the cases, the exporters and producers of

STEPS INVOLED IN PRICING OF PRODUCT

One of the four major elements of the marketing mix is price. Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion. While there is no single recipe to determine pricing, the following is a general sequence of steps that might be followed for developing the pricing of a new product: Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning.

STEPS INVOLED IN PRICING OF PRODUCT

Calculate cost - include fixed and variable costs associated with the product. Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc. Set pricing objectives - for example, profit maximization, revenue maximization, or price stabilization (status quo). Determine pricing - using information collected in the above steps, select a pricing method, develop the pricing structure, and define discounts. Estimate the demand curve - understand how quantity demanded varies with price.

ESTIMATION OF DEMAND CURVE

Because there is a relationship between price and quantity demanded, it is important to understand the impact of pricing on sales by estimating the demand curve for the product. For existing products, experiments can be performed at prices above and below the current price in order to determine the price elasticity of demand. Inelastic demand indicates that price increases might be feasible.

MAIN OBJECTIVE OF PRICING

The firm's pricing objectives must be identified in order to determine the optimal pricing. Common objectives include the following: Current profit maximization - seeks to maximize current profit, taking into account revenue and costs. Current profit maximization may not be the best objective if it results in lower long-term profits. Current revenue maximization - seeks to maximize current revenue with no regard to profit margins. The underlying objective often is to maximize long-term profits by increasing market share and lowering costs. Maximize quantity - seeks to maximize the number of units sold or the number of customers served in order to decrease long-term costs as predicted by the experience curve.

MAIN OBJECTIVE OF PRICING

Maximize profit margin - attempts to maximize the unit profit margin, recognizing that quantities will be low. Quality leadership - use price to signal high quality in an attempt to position the product as the quality leader. Partial cost recovery - an organization that has other revenue sources may seek only partial cost recovery. Survival - in situations such as market decline and overcapacity, the goal may be to select a price that will cover costs and permit the firm to remain in the market. In this case, survival may take a priority over profits, so this objective is considered temporary.

MAIN OBJECTIVE OF PRICING

Psychological pricing - base the price on factors such as signals of product quality, popular price points, and what the consumer perceives to be fair.
In addition to setting the price level, managers have the opportunity to design innovative pricing models that better meet the needs of both the firm and its customers. For example, software traditionally was purchased as a product in which customers made a one-time payment and then owned a perpetual license to the software. Many software suppliers have changed their pricing to a subscription model in which the customer subscribes for a set period of time, such as one year. Afterwards, the subscription must be renewed or the software no longer will function. This model offers stability to both the

DIFFERENT METHODS OF PRICING

To set the specific price level that achieves their pricing objectives, managers may make use of several pricing methods. These methods include:
Cost-plus pricing - set the price at the production cost plus a certain profit margin. Target return pricing - set the price to achieve a target return-on-investment. Value-based pricing - base the price on the effective value to the customer relative to alternative products.

WHAT IS PRICE DISCRIMINATION????

Practice of selling goods or services at different prices to different buyers, even though sales costs are the same for all the transactions. Buyers may be discriminated against on the basis of income, ethnicity, age, or geographic location. For price discrimination to succeed, other entrepreneurs must be unable to purchase goods at the lower price and resell them at a higher one.

ADAM SMITH APPOSING THE DUMPING ACTIVITY

Quoting Adam Smith, by restraining, either by duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. Thus Adam Smith was of the opinion, that, the importing countries should discourage those imports which will harm the domestic industries, by imposing duties on such items. arises for imposing anti-dumping duties.

DUMPING AS A CASE OF PRICE DISCRIMINATION

Increasing volumes of apple juice concentrate imports from China into the U.S. began in the mid 90s as a result of low Chinese prices. In 1999, the U.S. Apple Association launched a complaint with the US International Trade Commission (USITC) regarding the Chinese price strategy. During the course of investigation, the U.S. Apple Association requested that the Department of Agricultural Economics at Washington State University analyze the impact on the total value of juice apples utilized in Washington during the span of the USITC investigation. To determine the magnitude of the effect of the USITC investigation, not only on finished apple juice prices but also on the Washington raw product price, an inverse demand for finished product and an input demand function for raw product was developed and parametrically estimated. Results from a derived demand analysis for juice apples revealed that a decrease in Chinese apple juice price reduced the prices paid by the processing sector by approximately 0.07 percent. However, throughout the course of the investigation process, juice apple prices increased significantly, resulting in an increase in the value of the juice apples purchased by

DUMPING OF CHINA GOODS IN INDIA

The government of India has levied anti-dumping duties on certain types of stainless steel that are shipped in from countries like China and Japan. The anti-dumping duties were imposed after finding that certain types of imported steel are landing at below the normal value in the country's port. The Central Board of Customs and Excise imposed the duties by saying that the domestic industry has suffered badly due to the imports from other countries. As per a notification of Central Board of Customs and Excise, the duties will remain effective till October 21, 2009. The subject countries will pay the duties in Indian currency, notified the board. Apart from China and Japan, other countries include South Korea, European Union, South Africa, Taiwan, Thailand and the US. The type of steel on which duties have been imposed is called cold-rolled flat steel products. The subject countries will have to pay duties ranging from $12.74 to $2,011 per tonne. The anti-dumping duties will be charged depending on the type of steel, the country of manufacture, the origin of import and the producer. The firms that are mentioned in the notification include Arcelor Mittal from France and Belgium, Lianzhong and Shanxi Taigang from China, Acrinox from Spain and Malaysia, Columbus from South Africa, Posco from South Korea and Yeih United of Taiwan. India is the fifth largest producer of steel in the world with a capacity of producing 53 million tonnes of steel annually.

DUMPING OF CHINA GOODS IN INDIA

The type of steel on which duties have been imposed is called cold-rolled flat steel products. The subject countries will have to pay duties ranging from $12.74 to $2,011 per tonne. The anti-dumping duties will be charged depending on the type of steel, the country of manufacture, the origin of import and the producer. The firms that are mentioned in the notification include Arcelor Mittal from France and Belgium, Lianzhong and Shanxi Taigang from China, Acrinox from Spain and Malaysia, Columbus from South Africa, Posco from South Korea and Yeih United of Taiwan. India is the fifth largest producer of steel in the world with a capacity of producing 53 million tonnes of steel annually.

EFFECT OF CHINA DUMPING ON THE FDI OF JAPAN

THE dumping of Chinese goods is not only threatening India's domestic industry but is also likely to affect foreign direct investment (FDI) flows. The dragon has cast its shadow even on the domestic industries of developed nations such as Japan. While th e dumping is hitting the small-scale sector and the chemical industry in India, it is the textile industry that threatened in Japan. Both India and Japan are on their feet to counter the dumping, but their approaches are different. While India is using antidumping measures and tariffs to shield its domestic industry, Japan is using economic measure -- that is, by investing more in Ch ina to produce and sell to its own domestic market at half the price of similar products produced in Japan.

EFFECT OF CHINA DUMPING ON THE FDI OF JAPAN

For instance, Japanese apparel major, Itokin Co, exported 1718 million pieces of garments from China to Japan in 2000, treble the 1999 figure. In 2000, other leading Japanese apparel companies -- Fast Retailing and Cecile -- set up shop in Shanghai to p roduce low-priced apparels for export to Japan. Thus, Japanese apparel-makers have increasingly been relocating their manufacturing base to China to capitalise on the cheap labour and nullify the latter's competitive edge in the Japanese market. To counter the dumping, the US and Europe may also take Japan's route -- by investing more in China, that is. What does this imply for India? Going by the current trend, and coupled with its imminent entry into the WTO, China will once again become an at tractive destination for foreign investments

EFFECT OF CHINA DUMPING ON THE FDI OF INDIA

The dumping by China has further dampened India's potential to attract foreign investors. With the removal of quantitative restrictions (QRs) from April 1, 2001, it is feared that the dumping would increase. Moreover, the world FDI trends are that the ea rlier attraction of local markets is giving way to global integration. Global integration means development of borderless production to cater to the needs of both the domestic and export markets. In this changed situation, if India wants to compete with China, it will have to strengthen its manufacturing facilities. But thi s is not easy. Hence, the only alternative would be to open up its service sector more boldly, that is, well before China does so after gaining WTO entry.

EFFECT OF CHINA DUMPING ON THE FDI OF INDIA

India, for instance, has a vast potential to attract FDI into retail and wholesale trading. Following the removal of the QRs and the gradual reduction in tariffs, the distribution industry has emerged as a high-potential area for investment. Considering India's size and the diversified nature of its regional markets, the domestic private sector alone cannot pump in the investment required. Hence, foreign investors should be encouraged to supplement the enlarged distribution industry with resources and t echnology, rather than be paranoid about protecting the domestic players.