RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTCP/W/136
15 July 1999
(99-2928)
Working Group on the Interaction between
Trade and Competition PolicyOriginal: Spanish
COMMUNICATION FROM MEXICO
The following communication, dated 10 June 1999, has been received from the Permanent
Mission of Mexico with the request that it be circulated to Members.
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Anti-Dumping Measures and Competition
I. INTRODUCTION
The purpose of anti-dumping measures is to protect domestic concerns against unfair practices
engaged in by foreign competitors.  Although this is a legitimate objective, it is also certain that the
existing anti-dumping rules use criteria and procedures that can lead to inefficiency, restrict
competition and affect the welfare of consumers in the importing Member.
Although cases of anti-dumping measures that do not result in damage to economic efficiency
can very well occur, the assessment and the procedures do not make use of criteria that automatically
produce that situation.  Dumping is a blunt instrument for determining price discrimination and
predatory pricing behaviour, since it penalizes international price differences without considering
economic efficiency aspects, the position of competitors in the affected markets and/or situations of
intense competition.
The anti-dumping assessment does not take into account the fact that price discrimination is
not necessarily inefficient.  It could, for example, represent an efficient reaction of exporters to
different conditions in geographically separated markets, without such behaviour necessarily implying
the displacement of efficient domestic producers in the importing market.  In conditions such as these,the balancing prices that maximize the economic surplus are necessarily different in each region, and,
consequently, any measure that distorts the decisions of the economic agents, without affecting the
barriers that caused them, will be to the detrimen t of efficiency, competition and the welfare of the
consumers.
Dumping has indeed predatory effects or objects when an exporter with market power has the
capacity and possibility to (i) fix prices below the balancing prices;  (ii) displace his competitors and
(iii) recover the losses thus incurred by the subsequent imposition of monopoly prices.
II. PROPOSAL
We shall now consider the criteria commonly used in competition policy that could help to
identify more precisely some of the situations in which anti-dumping activities can damage economic
efficiency.WT/WGTCP/W/136
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Dumping
Differences in prices between the domestic market and the export market do not necessarily
reflect predatory trading strategies.  Penalizing such differences can cause distortions in the optimum
patterns of production and trade.  On the other hand, the imposition of export prices below thelong-term balancing prices can result in the displacement of efficient economic agents, a reduction in
competition, injury to domestic industry and harm to global economic efficiency.  The elimination of
such situations and, consequently, the rational protection of local producers, without prejudice to
competition, must be the central object of anti-dumping policy.  Hence the need to have more
adequate definitions which take account of the experience of the competition authorities in
determining situations of discriminatory and predatory pricing.
The fact that a price is sustainable in the long term can be an indication of balance.  The
criterion used to determine the presence of dumping could thus be improved if certain situations were
excluded in which prices are sustainable in the long term.  Assessment of these situations could be
strengthened, for example, by considering the criteria used in various countries to determine situations
of predatory pricing;  for which it is necessary to prove the existence of prices lower than total orvariable average costs and the capacity of the predator to recover his losses subsequently through
monopoly prices.
Injury
The displacement of local competitors can reflect conditions of intense competition.
Determination of injury in the current anti-dumpi ng assessment sense does not necessarily refer to
losses of economic efficiency.  An attack in which the possible foreign predator temporarily increases
his market share turns into a direct transfer to  consumers without necessarily having an adverse
impact on the structure of the local markets.
Anti-dumping assessment considers that there is injury when a greater volume of imports at
prices lower than those in the country of origin has a negative effect on the domestic producers of the
importing Member in terms of sales, market share, output, employment, wages, etc.  This concept
could be revised so as to consider also whether the competitors displaced are efficient ones, whether
there are any adverse changes in the structure of the markets affected, whether the predator has the
capacity subsequently to abuse his monopoly power and what effect is produced on the welfare of theconsumers.
Market power
An exporter without substantial market power has neither the possibility of unilaterally
influencing the price nor the capacity to displace competitors.  Some approaches recommend
assessing the substantial market power of the allege d offender at the initial stage and continuing the
investigation only in cases where such a situation has been identified.  Assessment of dumping
practices could benefit from certain concepts such as the market share of a concern or industry;  the
existence of competitors and their power;  the barriers to market entry;  access to sources of inputs;etc.  The recuperative power of the industry affected is another element to be taken into account since
it is less likely that a predatory attack will be successful if the industry in question does not have
substantial deep-seated costs.
Although it is certain that the best defence for maintaining the current dumping legislation is
based on the idea that dumping is predatory, it would also be useful therefore to distinguish between
predatory dumping and non-predator y dumping.  In markets where there is a substantial number of
competitors, it is difficult for dumping of the predatory kind to exist.  In this connection, it would be
useful to consider the possibility of eliminating anti-dumping activities from industries in which there
is a substantial number of sellers.WT/WGTCP/W/136
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Determination of the like product
The concept of the like product used in the anti-dumping rules makes it possible to omit
competitors who produce substitutes and whose presence could substantially reduce the market power
of the person allegedly responsible for these practices.  Redefinition of the like product in the light ofthese factors would result in an assessment of dumping in terms of the technically more solid concept
of the relevant market.  This could contribute to the more efficient and rigorous application of
anti-dumping measures.  Consequently, it is recommended that the concept of the like product should
be reconsidered with due regard for the application of the concept of the relevant market.
Note
This document is submitted as a non-exhaustive contribution by Mexico to the Working
Group on the Interaction between Trade and Competition Policy.  Its purpose is to give some practical
examples of the way in which certain basic concepts of competition policies could be used to improve
the anti-dumping rules.  As such, this document is submitted without prejudice to the position of
Mexico in the preparatory work for the Third Ministerial Conference.
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