Brazil’s reforms show how to use fair-trade dumping laws without dumping competition

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The anti-dumping duty— a charge on goods produced by foreign companies whose prices are below home- market levels—is commonly used by countries fighting for global market share. For Brazil, it's been a go-to measure for protecting domestic producers from dumped exports. Brazil imposed almost 12 percent of anti-dumping measures in force globally in 2017, surpassed only by the United States and India.

While the duties helped some companies, others were worse off. Brazil’s Ministry of Economy, with the help of the World Bank, sought to improve its trade defense decision-making with a new anti-dumping framework which better accounts for competition effects and trade interests.  

National and international legal systems recognize anti-dumping as a valid response to arguably unfair pricing. Still, applying such duties increases prices of imported goods. This can reduce competition pressure on national producers, which can reinforce or create their market power,  this can also increase the production costs of companies dependent on the imports in question and raise prices for final consumers. Governments must be aware of how trade defense instruments can affect winners and losers, particularly when these measures are directed at input markets, and they must strike the right balance between considerations of fair trade, competition outcomes, and productivity across the economy. 

For Brazil, antidumping had become the source of self-inflicted injuries. Many of these antidumping duties were imposed on intermediate goods, such as iron and steel, plastics, rubber, and chemicals, the building blocks of more sophisticated, higher value-added products. There is also recent evidence that use of antidumping measures was associated with an increase in markups and a decrease of productivity of firms  that operate in protected sectors.

Through a technical-assistance project grounded in analytical work, stakeholders’ consultations, and international experience, the World Bank advised Brazil on how to streamline the use of public interest principle in anti-dumping analysis. This new approach would allow officials to assess whether imposing an anti-dumping measure could cause more injury than benefits in the value chain, and to allow the suspension of antidumping measures (or reduction of antidumping duties) due to anticompetitive impacts in domestic markets. 

Brazil’s reforms, implemented throughout 2019, included changes in the institutional design, legal procedures and economic methods used to perform public interest analysis in antidumping investigations. A new department under the Ministry of Economy, the Undersecretariat  of Trade Defense and Public Interest (SDCOM), became responsible for conducting both the anti-dumping investigations and the public interest analysis. Merging these mandates under one entity channeled resources for the public interest assessment and embedded the public interest analysis into the established antidumping investigation framework. Second, the government revamped procedures guiding the public interest analysis, implementing due process rules and aligning parties, timelines, and information requirements with the regular antidumping investigation. This reform generated more legal certainty and reduced the room for discriminatory treatment between parties and claims. Finally, the government issued methodological guidelines to inform stakeholders about how public interest would be applied in concrete cases, clarifying the reasoning behind the policy and procedures.

With less than a year of implementation, these reforms have already delivered concrete results. Between April 2019, when implementation started, and December 2019, 17 public interest reports were issued by SDCOM and 4 of them have either recommended the reduction of antidumping duties or the suspension of antidumping measures based on public interest reasons. Sectors affected by these decisions are mostly producers of intermediate goods – -such as cast-iron pipes and non-oriented (NGO) electrical steel grades. By reducing importing costs, these interventions are expected to boost competition pressure for domestic producers of these goods while benefitting the performance of firms that use those products as inputs, therefore boosting the overall country’s competitiveness.

Other countries can learn from Brazil’s experience and better balance the trade-offs often found between promoting fair international trade and local market competition. 

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