1. WTO Rules on Subsidies The WTO has a set of rules on subsidies.
Subsidies directly linked to exporting are prohibited
ex: firm gets a tax break on quantity of exports
Exception: use by developing countries
Subsides not directly linked to exporting, but still have an impact on exports are "actionable“
ex: gov. subsidizes electricity to local firms, who then export some of their production
If a subsidy is believed to be prohibited or actionable, a country can
file a complaint with the WTO and use the dispute settlement process
use a national procedure for assessment
If the importing country can prove
a prohibited or actionable subsidy and
harm to its industry
it can impose a "countervailing duty“
countervailing duty: a tariff used to offset the price or cost advantage created by the subsidy to foreign exports.

2. Dumping
Dumping: selling exports at a price too low - less than "normal value" or fair market value
2 definitions of “normal value”
normal value: the price charged to comparable domestic buyers in the home market (or to comparable buyers in other markets)
dumping is thus international price discrimination favoring buyers of exports
normal value: takes a cost-base approach. Dumping is selling exports at price that is less than the full average cost of the product.

3. Dumping: Why does it occur?
Predatory dumping
firms temporarily charge a low price in the foreign market to drive competitors out of business
Once competition is gone, monopoly power will be used to raise price
Cyclical dumping:
occurs during periods of recession
LR equilibrium: perfectly competitive firms earn oπ at P=ATC.
What about a global recession?
demand for commodities 
equilibrium prices  …. in the short run.
In the SR, prices will fall below ATC  -π.
Firms produce and sell in the SR as long as they cover variable costs
If these sales are exports - we have dumping

4. Dumping: Why does it occur?
Seasonal dumping:
intended to sell off excessive inventories of a product.
Firms undergo some FC of production.
IF there is a big harvest of a perishable product
Then: prices on the market 
→ selling exports a low prices below average cost is dumping.
Persistent dumping
Firms with market power uses price discrimination between markets to  π
A firm will maximize π by charging a lower price to foreign buyers:
if firm has less monopoly power (more competition) in the foreign market than in home market and
if buyers in home market cannot avoid the high home price by buying the good abroad and importing it cheaply
If these conditions hold: firm can make home country buyers pay more and thus earn a higher total profit.

5. Antidumping: How should the “dumpee” react?
Answer depends…
Firms competing against dumped exports: complain loudly to government.
Consumers of dumped exports: welcome the low prices
especially true under persistent dumping (and seasonal dumping) because consumers gain from trade at the low imported (dumped) price
not necessarily true under predatory dumping
Consumers gain in the short run from dumping, but not in the long run with eventual monopoly pricing
What about cyclical dumping?
Complicated because it is the sign of a well functioning competitive global market

6. Antidumping Policies Basic idea:
If an importing country believes they are faced with dumped exports into their market and
If importing country believes it may be harmful to their domestic industry.
Importing country may levying a antidumping duty (a tax) to retaliate against dumping.
The antidumping duty is an extra tariff equal to the discrepancy (the dumping margin) between the actual export price and the ‘normal value.’
Before doing so, importing country should weigh costs and benefits…

7. Antidumping Policies: costs vs benefits
Investigators of alleged dumping look at:
whether the export price is too low and
whether there is injury to domestic industry.
If both are found the importing country can impose antidumping duties
However: investigators don’t look at:
overall effect of alleged dumping on the national well-being of the importing country (benefit to domestic consumers)
The reason for (type of) the dumping
Result:
Some think the process is biased in favor of finding dumping and imposing antidumping duties.
The threat of a dumping suit can induce foreign exporters to raise their prices.
Point: Antidumping policy has become a way for import-competing producers to gain new protection against imports.

9. Antidumping Policies: Proposals for reform
Antidumping actions could be limited to situations in which predatory dumping is plausible
This will limit the scope of antidumping policy and focus on the type of dumping that is considered "bad" for both consumers and producers.
The injury standard could be expanded to require that the weight be given to consumers and users of the product
this shifts the focus of discussion on net welfare
The antidumping policy could be replaced by the more active use of safeguard policy
safeguard policy: the use of temporary import protection when a sudden increase in imports causes injury to domestic producers