Question

What are the implications of international pricing in terms of price dumping African economy at large?

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Answer 1

The adverse impacts of China-Africa trade relations, especially its financial power balance in favor of the former, have drawn a lot of scholarly and media commentaries. One of the accusations leveled against China is that it uses its financial dominance to dump its products in African nations, and that it has anti-competitive impacts on domestic markets. While proof of real dumping has been seen in some cases, in other cases a number of commentators have incorrectly called dumping the sale of inexpensive Chinese products in Africa. It is important to clearly differentiate between the two practices in order to know how to solve the challenges that they bring to the development of African economies.

Dumping is one of the most prevalent types of price discrimination in international commercial law. Dumping happens when an exporting nation sells a product on its national market at a reduced cost than it sells the same product. Another example of dumping is when an exporting nation sells its products below the price of manufacturing. While selling below price may occur with or without discrimination, economists have adopted this latter definition as dumping.

Once the exporting nation gains a market monopoly, prices begin to rise. This last type of dumping is the most feared because its impacts are likely to cripple domestic markets through the producing country's abuse of dominance.

In South Africa, an application submitted by Graftech South Africa to the International Trade Administration Commission of South Africa (ITAC) accused China of dumping its graphite electrodes used in furnaces The supposed dumping was based on a comparison between China's export cost and ordinary value, which in this situation was the largest relative price of similar products when exported In the preliminary inquiry, the ITAC discovered that in the Southern African Customs Union (SACU) area, China undercut its rates by 338.57%.

The committee ruled that a prima facie case of dumping was stated. Furthermore, the applicant's proof stated that there was a decrease in sales due to price undercutting which led to a decrease in profit as well as adverse impacts on cash flow, return on investment and the capacity to raise capital. Moreover, the SACU companies lost their market share and some staff ultimately had to lose their employment. On this basis, the committee discovered that there was prima facie evidence of material injury triggered by the supposed dumping to the applicant.

In addition, in the case launched on behalf of SACU by Sappi Southern Africa, the applicant quoted market share loss, decrease in sales and revenues as well as important losses caused by enhanced coated paper imports from China. After inquiries, the ITAC determined that the SACU area was dumping steel kitchen sinks from China. Material injury was found to be caused by a sales and profit decrease.

While this is by no means an exhaustive list of dumping instances against China, it demonstrates that dumping has comparable impacts across distinct sectors, and these impacts are very harmful to local businesses.