Abstract
Differences between markets result in dumping. Two models are opposed in order to explain dumping from a cooperative oligopoly into a market of competitive oligopoly, the Bertrand versus Cournot model: price maintenance on one hand and volume of production increase on the other. Definitions of dumping in economic literature appear insufficient. Dumping appears an extremely rational phenomenon, resulting from market circumstances, in which producers have an often-disregarded active and influential role. It appears that dumping can add to profitability. It is also demonstrated that dumping is, in principle, predatory. The business case of Tosoh shows how a Japanese producer takes a high domestic price and a low export price as given fact. Feasibility calculations for a joint venture project have been based on assumption of completely different prices: a proposal for a joint venture with apparent objective of eliminating the Western competitor by offer of Original Equipment Manufacturers (OEM) supply of dumped magneto optical discs and by using the Westerner’s technology.
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Notes
- 1.
The majority of theory is based either on reciprocal access to markets with differing demand characteristics. Brander and Krugman (1983) present a theory of “reciprocal dumping”, included in almost all their textbooks. Assumption of such access is, of course, justified as starting point for a model, but not if this assumption is imposed as a truth and as a guideline for trade policy. In the latter case, it becomes prejudice with a political connotation. Another assumption is that one country has some restrictions on competition and re-import, but there is not special stimulus for dumping.
- 2.
Various studies have been made, which use Japanese statistics on distribution, such as Maruyama (1993) and Rawwas et al. (2008), pp. 104–115. However, the details on the distribution system as presented in the previous Chapter are generally not accepted or neglected by economists, since these are data contradicting available aggregate and official data.
- 3.
In 2009, the white good (refrigerators and washing machines etc.) business of Sanyo was sold to the Chinese company Haier, which thought it obtained access to the Japanese market, but this access had the disadvantage of supply in Japan of only a few products. The distribution of Sanyo had already been incorporated into the Matsushita Panasonic keiretsu.
- 4.
Marginal cost (MC) is the additional cost resulting from an additional unit product produced and sold. Marginal revenue (MR) is the additional turnover resulting from an additional unit product sold. If proceeds from one extra unit product sold is equal to the additional cost of that one unit product sold, no additional profit can be made, or additional profit is zero, and that means that the profit is at its maximum. When the demand (quantity demanded as relation to a price) is, for instance, Q = 12–0.2.P or P = 60–5.Q, the turnover or revenue is Q.P = 60.Q–5.Q 2. In the case of a monopolist, an increase in revenue due to a small increase in Q (or marginal revenue) is MR = d(Q.P)/dQ = 60–10.Q. The quantity where marginal cost equals marginal revenue is lower than where marginal cost equals price. The resulting price is also lower than where MC = P.
- 5.
Prestowitz (1988), presented it as if the Japanese were plotting the extermination of foreign competitors. Collusion may have taken place for the sake of peace keeping, but abroad all Japanese are fierce competitors among themselves and with others.
- 6.
The total demand function applied is P = 60 − 2.5 × Q, the total cost used is TC = 60 + Q 2. That means that marginal cost is MC = 2.Q and average cost is AC = 60/Q + Q.
- 7.
Arthur Karl, director of the Dutch Japan Trade Association DUJAT and former director of the Dutch company importing Mitsubishi cars, explained during a lunch in early 1993 that import plans of Mitsubishi cars into the Netherlands contained a quantitative target, whereas the price, to meet this target, was set in accordance with the quantitative target. This could be called Cournot behaviour.
- 8.
Magaziner and Patinking (2004, p. 64).
- 9.
Shimotani (1995, p. 69).
- 10.
Bhagwati et al. (1983, p. 235).
- 11.
Elasticity of demand is the percentage of demanded quantity in response to a percentage price decrease. If a company offers a product at a price decreased by 1 % and the quantity demanded (sold) increases by more than 1 % demand is elastic. If it decreases by less than 1 % demand is inelastic. The more elastic demand, the less steep the demand curve. Differences in demand elasticity result in different price levels, provided that supply conditions are the same.
- 12.
World Trade Organisation Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti–Dumping Agreement, ADA) Article 3 concerning the Determination of Injury defines the injury.
- 13.
Article 5.8 of the ADA lays down these thresholds of dumping and injury.
- 14.
Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community No 384/96 on protection against dumped imports from countries not members of the European Community mentions this as definition, Article 1 Principles, paragraph 2.
- 15.
Belderbos (1994), imputed superiority to Japanese competitiveness because, without much clarification, of the superior management methods of Japanese executives. Although it is essential to the relevance of his writings, he has never supplied any evidence on competitive superiority of Japanese firms, which, the author shows, is a myth.
- 16.
The case can also be presented for an oligopoly, but it does not essentially change the argument. The oligopolist with a trade keiretsu is a monopolist within this keiretsu, which is its market.
- 17.
Any price below the prevailing price in F is sufficient, provided that it is not below average cost of the Predator. Even a loss in market F is acceptable, provided that the increase in profit in E is not exceeded by the loss in F. Consequently, the Predator, formally, is a price–taker.
- 18.
The European Council of Ministers refers in “Recordable Compact Disks from Taiwan”, Council Regulation (EC) 1050/2002 of 13 June 2002, recital 31, to “a very predatory form of dumping”. These sales below cost of production are apparently considered “predatory”. Sales below cost are, however, not necessarily a sign of predation. In the proceeding sampling of exporters had to be applied, which by definition, implies many competitors in the domestic market and therefore, improbability of predation.
- 19.
Blonigen and Prusa (2003) give an extensive list with literature on the subject.
- 20.
The reader should not panic. A homogenous production function means that there are constant returns to scale. If factors of production capital and labour (K and L) are both doubled, the product doubles.
- 21.
Article 21 Community interest, of Council Regulation (EC) No 461/2004 of 8 March 2004 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community and Regulation (EC) No 2026/97 on protection against subsidised imports from countries not members of the European Community Official Journal of the European Community 13.3.2004, L 77/12, and the basic regulation Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (Council Regulation (EC) No 1225/2009 of 30 November 2009, codified AD OJ L 343/51 of 22.12.2009).
- 22.
Because they supplied Korean department stores with products that were superior to a Korean product, three shaver producers Braun, Panasonic and Philips were accused of dumping. Since the Woolim (or Ulim) product was relatively cheap but qualitatively inferior, the price undercutting was based on highly artificial comparisons, which put the imports always on unequal footing, resulting in undercutting. The shaver case of Korea towards the EEC (Braun and Philips) and Japan (Hitachi and Matsushita) took place in 1996 and ended in price undertakings, under which the exporters respected a price, which were higher and even more profitable than before. It did not save the Kaiser brand of Woolim.
- 23.
This is information obtained from PDO in Germany in 1995 during the preparation of a dumping complaint, which for undisclosed reasons was never lodged.
- 24.
Market price data from Fujiwara-Rothchild Ltd., market analysis reports.
- 25.
According to Jackson (1989, pp. 218–223), dumping was a consequence of different systems of employment. Dumping by Japan was due to the fact that labour was considered fixed cost and this should be tolerated. He did not explain why Western labour should be dismissed for the sake of maintenance of employment in Japan.
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van Marion, M. (2014). Market Structure and Dumping. In: International Trade Policy and European Industry. Contributions to Economics. Springer, Heidelberg. https://doi.org/10.1007/978-3-319-00392-4_8
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