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Summarise and Analyse the case study below clearly giving the…
Summarise and Analyse the case study below clearly giving the introduction and Conclusion then answer the questions below:-
US anti-dumping against Chinese apple juice concentrate producers
The US Commerce Department (in short, ‘Commerce’) frequently initiates anti-dumping investigations of Chinese imports. In most cases, Chinese producers are found to be guilty of dumping in the USA and suffer high punitive tariffs. However, the tide turned when Chinese apple juice concentrate (AJC) producers took Commerce to court.
Commerce’s probe into AJC production in China started in response to a petition filed by US apple juice producers. They requested a 92% anti-dumping rate and then dropped to 52% after they heard that Chinese AJC producers started to fight by responding. If the Chinese did not respond to the investigation, they would obviously lose.
China was the world’s largest producer of AJC, exporting about 90% of its AJC production. The proposed anti-dumping rate of 52%, if imposed, would have devastated Chinese AJC producers and apple growers. Among about 30 Chinese AJC producers involved in the US anti-dumping investigation, 15 companies agreed to respond and then 1 1 companies collectively hired experienced US lawyers, with one firm dropping out later. The case took four and a half years (1 9992004) and cost about US$3.6 million in legal fees for the Chinese respondents.
A key point of contention was how much it would cost to produce AJC in a market economy. Since China was not considered a ‘market economy’, Commerce chose India and other surrogate factors of production for valuation purposes. Commerce concluded that Chinese AJC exports were sold at less than ‘fair market value’ and the US International Trade Commission determined that the Chinese dumping materially esteemed international trade economist outlining some concerns regarding free trade. Nine Chinese respondents appealed the case to the US Court of International Trade, challenging the selection of India as a surrogate country and Indian prices for apple juice and calculation of expenses. Unusually, the Court did not support Commerce’s decision, and the Chinese AJC producers won. When choosing India as a surrogate country, Commerce relied on the data in a private market study prepared for US petitioners by a paid consultant because there were no official countrywide data about AJC production in India. According to the Court, this information was insufficiently reliable. Thus Commerce failed to adequately explain how the data in the market study could serve as substantial evidence of the Indian AJC industry as a whole and thus led to its conclusion that India was a significant producer of comparable merchandise (AJC) to be a proper surrogate country.
Accordingly, Commerce observed the Court’s decisions and used Turkey as the surrogate country. It then amended the weighted average dumping margins to 1.5% (3.83% for four Chinese respondent firms and 0% for six firms), while the same rate (52%) was maintained for other Chinese AJC exporters that did not respond. To the ten Chinese respondents, reducing the punitive tariff first from 92% to 52%, then to 15%, and finally to 1.5% on average was as a major victory in the US anti-dumping game whose rules were typically stacked against them. Since these ten AJC producers represented 80% of Chinese AJC exports, this effectively opened the US market. AJC exports from China to the USA grew from 227 tons in 2005 to 388 tons in 2010. More recently, rising demand in China and lower costs in other producer countries has stopped the rise in Chinese exports.
This case taught Chinese businesses an important lesson: as long as they operate within the framework of WTO, they don’t need to be afraid of unreasonable anti-dumping charges. Challenging a decision by a US government department in court may be expensive but can be successful.
CASE DISCUSSION QUESTIONS
Considering absolute and comparative advantages, how would you explain the growth in AJC exports from China to the USA?
From an institutional perspective, what explains the imposition and the reduction of tariffs for AJC?
Is this form of international trade beneficial to home and host societies?
