Washing China Trade Policy
Around the world women wash clothes and most wash by hand since they lack access to electricity or enough electricity to power a washing machine.
Access to modern washing machines, like access to cars, matters for teenagers and adults in developed countries as well as poor countries. Protectionist policies that tax foreign goods can shield some jobs and companies, but taxes on imports raise prices that especially hurt low-income families and limit consumer choice. Protectionism shelters domestic firms, which may protect jobs in the short run also leads to less competitive domestic firms over time by reducing incentives for innovation in domestic companies.
Tariffs on foreign cars and washing machines reduce the competitiveness, profits, and, over time, employment of U.S. firms. So Whirlpool’s dumping charges against Korean/Chinese washing machines will hurt Whirlpool employees and stockholders in the years to come as well as hurting U.S. consumers now. (See “U.S. to Charge Duties on Some Samsung, LG Washing Machines Built in China,” (WSJ, July 20, 2016) and “Whirlpool Wants Tariffs for Chinese Washers,” December 30, 2015, and more on Asian washing machine protectionism below.)
The U.S. Commerce Department is:
upholding a complaint by competitor Whirlpool Corp. alleging that the companies [LG and Samsung] sold their washers in the U.S. for less than they cost to produce.
The concern is “predatory pricing,” where large firms care said to sell goods below cost for a time to drive competitors out of business, then later raise prices to recover early losses. So have LG and Samsung, both South Korean companies with Chinese factories, been manufacturing washing machines and selling in the US below their cost of production?
In “The Mounting Costs of Antidumping Laws: Time for Action?” (Truth on the Marketblog, May 23, 2016), Alden Abbott argues for reforming US Antidumping laws:
Although the original justification for American AD law was to prevent anticompetitive predation by foreign producers, I explained that the law as currently designed and applied instead diminishes competition in American industries affected by AD tariffs and reduces economic welfare.
Abbott cites and quotes from an October 2015 World Bank study, “Antidumping and Market Competition: Implications for Emerging Economies,” he says “confirms that the global proliferation of AD laws in recent decades raises serious competitive concerns.”