more structure on the evidentiary requirements for a government to implement a new antidumping measure, although those requirements still allow for substantial government discretion and are at best questionable from the perspective of economic welfare.

Under the Antidumping Agreement, a national government must undertake an investigation and consider substantial economic evidence before it can impose a definitive antidumping measure that restricts imports. The investigating authority is instructed to consider a number of factors when making its decision, but most critical among them are whether two important legal criteria have been met: that a domestic industry suffers “material injury” and that this injury is the result of “dumped” imports.

The domestic industry provides evidence of dumping to the national government’s antidumping authority by showing that prices of competing products sold by foreign exporters in the domestic market were lower than the “normal value” of the product (WTO, 1995; Article 2.1). The national government authority has substantial discretion in calculating the normal value benchmark with which to compare the export price. The benchmark can be determined by any of three methods: i) the price for sales of the same good in the exporter’s home market, ii) the price for export sales of the same good in a third market, or iii) a constructed measure of the exporter’s average cost.<sup>8</sup> The second major piece of evidence that must be provided to the government in a national antidumping investigation is that the petitioning domestic industry is “materially injured” by these dumped imports (WTO, 1995; Article 3). When considering evidence that the domestic industry is injured, the Antidumping Agreement suggests that national authorities can consult a number of types of industry data, including “actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilization of capacity; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments” (WTO, 1995; Article 3.4).<sup>9</sup>

> 8 There is an extensive research literature questioning these definitions from the perspective of economic welfare. If antidumping is an instrument in the arsenal of competition policy, there are many non-predatory circumstances in which a profit-maximizing foreign firm would otherwise be expected to price in violation of one of the criteria. A common example of the first is international price discrimination associated with different demand elasticities across countries. A common example of the third is pricing below average cost during short-run periods of low demand, provided the foreign firm can cover at least its variable cost. For other examples see Hoekman and Kostecki (2001, pp. 315-330). Other economic research suggests that there are various ways in which industries may be able to use antidumping within and across countries as a means of facilitating _anti_ -competitive behavior such as collusion. For examples, see Prusa (1992) or Bown (2005b).

> 9 Economists also argue that these measures of “injury” alleged to be caused by unfair trade are by themselves meaningless, as they are observationally equivalent to injury caused by other sources. One example is an inefficient, import-competing industry that is contracting in the face of newfound “fair” foreign competition following an agreement to liberalize trade. Alternative explanations are that it is an industry facing changing consumer preferences for its products, negative domestic cost shocks, etc. An important limitation of the text of the Antidumping Agreement is that it does not mandate how domestic authorities are to rigorously attribute injury across multiple contributing causes. For an examination of the law and economics of this issue and the jurisprudence of antidumping disputes challenged at the WTO, see Durling (2003) and Durling and McCullough (2005).

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