the threat of actions lead exporting firms to alter production, allocation, and production-location decisions ~~in ways dtha reduce welfare.6 X Many economists that have studied the problem of antidumping have concluded that the welfare costs associated with the use of this instrument could be reduced if account was taken of its economywide impact. The policy implication that is often drawn is that a 'public interest' test be introduced, and that the costs of protection be publicized. In practice it appears that such suggestions have little effect because of the widely held perception that dumping is 'unfair'. The costs of protection are consequently heavily discountced by policymakers, even if they are formally required to establish that action is in the national interest. Suggestions that international effbrts center on the adoption of public interest clauses or more specific 'economy-wide impact' tests run into the problem that such actions are _in theory_ in each country's interest. Reciprocal negotiations cannot strengthen thie incentives to go down this path. What is required is to deal with the rhetoric of 'unfairness' first. One possibility in this comection, discussed further below, is to engage competition policy a-uthorities in determining whether the exporter's home market is contestable, and-whether dumping threatens competition in the importing country's market.

# _Procedual Aspects of Anuidumping Investigations_

Detailed rules have been developed in the GATT regarding antidumping. A brief summary is perhaps useful for those that are not familiar with the multilateial "rules of the game," as amended by the recently concluded Uruguay round negotiations. Dumping is defined as offering a product for sale in export markets at a price below "normal value". "Normal value" is defined as the price charged by a firm in its home market, in the "ordinary course of trade". Trade is considered not to be ordinary if prices are less than average tota costs (i.e., the sum of fixed and variable costs of production plus selling, geneal and administrative costs).<sup>7</sup> In the absence of sufficient sales on its domestic market, the highest comparable price chargtJ in third markets or the exporting fum's estimated costs of production plus a 'reasonable' anount for profits, administrative, selling and any other expenses is to be used to determine normal value.' In cases where there is no export price or where it appears to the authorities concemed that the export price is unreliable because of a relationship or agreement between the parties involved in a transaction, the export price may be constructed on the basis of the price at which the

# _fI_ See, e.g., Finger (1993), Hoekman and Leidy (1993), and Messerlin (1989 and 1990).

_71_ Such sales may be disregarded in determining normal value if the authorities determine that they are made over a period of at least 6 months, in substantial quantities and are at prices which do not provide for the recovery of all costs within a reasonable period of time.

81 Costs are to be calculated on the basis of records kept by the exporter or producer under investigation, as long as these follow generally accepted accounting principles of the expordng country and reasonably reflect the costs associated with the production and sale of the product under consideration.

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