Re-edit (12/10/17): The trip to Montenegro expanded my understanding of eastern Europe. The take I had one year ago was in the sphere of Economics as I was still a stubborn Economics student then. One year later, I am happy that the incarnation of my skills and mindsets opened up. I could have written a more vivid recount of the time I spent in Montenegro, with my kind host family, “alt papa” (old papa). Life is so much more colourful, more beautiful, and more lively than mere economical framing. Maybe one day I will write a more emotional and real account on Montenegro. Still, the post from one year ago, please enjoy the intellectual conversation between “Alt Papa” and I on the theme of Trade War.
Back from Montenegro for a while. The five days in this former Yugoslavia country proved to be an important part of my thinking. What I took back from Montenegro is family love and some thoughts over the “fairness” of the society.
Family love came from the brief interaction with my Airbnb host family. The family was consisted of an older grandfather and grandmother. The grandfather treated me like his own daughter. We chatted and debated in German as he is an expert in German language. Despite of my broken German, I was able to improve in German, enjoyed reading Deutsche Zeitung, and debated with him.
Over those days, Wall Street Journal was filled with the news that some significant trade tensions had risen in between foreign countries and China. Western countries claimed that the Chinese government subsidised the extremely inefficient Chinese national-enterprises and cut the price of Chinese steels to below costs. As a result, Chinese steels were able to occupy a leading position (by price) in the global steel market and forced many western steel companies to close down temporarily. The obvious violation of international law fostered an outcry of sanctions on China in international business communities.
I raised the issue to the Grandfather and expressed my thought over fairness. Cutting price to below cost was apparently far from fair to me. I stood on the point like British Tata – a historical and established company losing its market value because of the unfair dumping from foreign companies. The unfortunate closure of Tata, from my limited understanding, only showed how rampant these unlawful price wars were.
Grandfather listened attentively to my broken German. Like an old general capable of anticipating his disciple’s actions, he smiled and asked me, “Young lady, what is fairness?”
I said fairness means an equal treatment in business and an equal entitlement to the practice of business in the market. Dumping violated such right.
A glimpse of wits sparkled in his eyes. He then asked, “If Western companies dump products, is it dumping? Is it fair?”
The later research tells me that international trade is a more complex issue than it appears. Lowering price to below cost has an ambiguous indication because natural reduction of both price and costs is possible. When a foreign steel company outperforms domestic companies, it is most likely due to the natural selection of business. However, if the domestic opponents twist the term, a crude but fair competition can be presented as dumping.
The article I read raised an example of inefficient US steel companies in 1998 filing dumping protest to the trade court and sued Japanese companies. The court yet ruled against the US companies.
The mere research I have done in this topic prevents me from producing high quality argument. Thoughts will be wrap up here and we may see more thinking on the fairness issues to surface throughout my course of study.
Source: To Dump or Not to Dump?