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IAI Actuarial Core Principles · Business Economics · Globalisation and multinational business

A domestic steel producer in India complains that a foreign exporter is selling steel in India at a price below its cost of production and below its home-market price. Which trade measure is the usual response to this practice under WTO rules?

The usual response is an anti-dumping duty. Selling below cost or below the home-market price is dumping, and WTO rules let an importing country levy a duty after finding injury to its domestic industry. Countervailing duties instead target government subsidies.

  1. AAn anti-dumping dutyCorrect
  2. BA voluntary export restraint by India
  3. CA general safeguard quota on all products
  4. DA countervailing duty against the exporting firm's pricing
  5. A reduction in the bound tariff rate

Explanation

Selling abroad below cost or below the home price is dumping. WTO rules allow an importing country to impose anti-dumping duties after investigation shows injury to domestic industry. Countervailing duties address foreign government subsidies, not firm pricing. Safeguards cover import surges regardless of unfair pricing.

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