Case Study 1- Vibha Vohra

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Dyal Singh Public School *

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Nov 24, 2024

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Fall 2021 - BUS8330 – Global Trade Law Case Study 1 The small island state of Boga which comprises about 2 million inhabitants has recently been recovering from a civil war. Boga suffered serious economic decline throughout the period of the civil war. The country’s companies and other businesses also closed down as the civil war disrupted manufacturing. Its infrastructure was also totally damaged. Following the war, the incumbent government of Boga is striving hard to rebuild the country back up and give hope to its citizens. The government is doing this with the assistance of external donors, including the government of Canada and Canadian non- governmental institutions. To stimulate the economy and create a fresh start, the government of Boga is providing various incentives to businesses in the country to enable them hire staff, train them and produce goods for both the domestic economy and the international marketplace. One of the companies receiving assistance from the government of Boga is Syntax Electricals which produces light bulbs and other electrical items. The assistance that the government of Boga provides to Syntax – over five million dollars for an initial 4- year period - is helping the company to rebuild their factory which was destroyed during the civil war as well as to cover production costs so that the citizens of the country can buy Syntax’s products at cheap rates. To ensure that Syntax has sufficient leverage to produce enough electrical products for Boga’s domestic economy, the government has provided additional tax incentives for the company and also placed restrictions on imports of electrical products, such that only licensed companies in Boga can import those products into the country. Because of the incentives it receives from the government of Boga, Syntax can sell its products at cheaper prices both domestically and internationally. Products of other electrical companies are unable to compete with Syntax because of the basement rates at which it sells its products. For example, while its costs Syntax $3.50 to produce a single led bulb, they sell it at the rate of $2.00 in Boga. Among the countries that Syntax exports its electrical products is Vietnam where Syntax’s products are competing with those locally manufactured in Vietnam. Syntax’s led bulbs are sold in Vietnam at the rate of $3.00 after making the usual allowance for shipping and handling charges. The Vietnamese manufacturers – whose led bulbs are sold at the average rate of $4.50 each – are worried that they may be unable to compete with Syntax whose electrical products come in cheaper than those manufactured in Vietnam. They are of the strong opinion that Syntax is dumping its led bulbs in Vietnam. Both Boga and Vietnam are members of the World Trade Organization. Answer the following questions – [1] Would you consider Boga government’s incentives to Syntax Electricals to be unfair trade practice? If yes, describe the unfair trade practice involved, and especially what makes it unfair. (5%) Yes, I consider Boga government’s incentives to Syntax Electricals to be unfair trade practice since WTO strictly prohibits selling of any goods below their normal value. For example, Syntax Electricals produce light bulbs at $3.5 and sells domestically at $2 whereas in Vietnam it sells at $3. Therefore, it clearly

shows that Syntax Electricals are dumping their products by exporting them to other countries at cheaper price. It is because of the tax incentive provided by the Boga government. Also, Boga government has provided additional tax incentive to Syntax company and also the government has imposed import restrictions on the ‘like’ goods that leads to subsidization, another unfair trade practice by Boga govt. Due to this, the Boga government is allowing Syntax to sell their products at less price than normal value to foreign countries. All of it goes against the Most Favoured Nation Clause that states that all the WTO members should treat foreign product no less than their domestic product. And in this case, Boga is conducting their business in unfair manner by charging less than the normal value of the product. Moreover, Boga government is also charging different prices from domestic people and those from other countries that shows price differentiation. Boga government is trying to outreach the international market as well by diminishing the production of domestic manufacturers in other countries. They are dumping their products in Vietnam and it goes against WTO laws as it is harming the business of ‘like’ items of domestic manufacturers. Fore example, the domestic manufacturers sell light bulbs at $4.50 whereas Syntax is selling in Vietnam at $3.00. Moreover, WTO states that when the product cross the border of imported country, it will follow the rules of the import country. However, the light bulbs imported are charged differently than the domestic light bulbs in Vietnam due to the dumping and tax incentive unfair trade practice undertaken by Boga Government. Being the member of World Trade Organisation, Boga has fairly conducted their business by the means of unfair trade practice to regain their economy. In order to protect their economy, they are indulging in business to destroy or harm the local business of their member or exporting countries. Thus, Boga government has used dumping and tax incentive unfair trade practice which is harming the business of like products of other countries. [2] Do you agree with the Vietnamese electrical products manufacturers that Syntax is dumping its led bulbs in the Vietnamese market. What actions can the government of Vietnam take under the WTO rules to protect its companies from Syntax’s alleged dumping actions? (5%) Yes, I agree with Vietnamese electrical products manufacturers that Syntax is dumping its products in Vietnam market because Syntax incurs a cost of $3.5 to make a single bulb and they are selling them at $3.00 in Vietnam which is less than their normal value. Moreover, this cost includes all the shipping and handling charges during the export as well. Also, the domestic market in Vietnam is suffering from such unfair trade practice because the light bulbs produced by local manufacturers are sold at $4.5 and the domestic market are worried to compete with Syntax. And WTO has ruled out that every member should treat foreign products equal to their domestic products and charge same price. But here, Syntax is price discriminating.

Vietnam government can protect their country by following the solutions provided by WTO when the country face dumped on situation from their member country. For example, Vietnam is dumped on by Boga with their light bulbs exporting. Vietnam government can take undertake Anti-Dumping measures to protect themselves from this unfair trade practice. They can initiate the Anti-Dumping agreement under WTO by stating the facts of the unfair trade practices performed by Boga government and how it is harming the domestic market. Moreover, all the criteria to apply for Anti-Dumping agreement is there in this case.  There is dumping in this situation because Boga government is doing price discrimination with member countries. Moreover, they are selling light bulbs at less price than the normal value in Vietnam.  Due to dumping, domestic industry of the like product (light bulbs) are suffering and are worried to compete with Syntax due to their cheap price than their local selling price.  Also, there is a link between the dumping of light bulbs with the suffering on domestic manufacturers of light bulbs. [3] Assuming that the country involved in this scenario is Canada rather than Vietnam, what is the procedure that a Canadian company can follow to redress allegations of dumping against foreign manufacturers of products imported into the Canadian marketplace? (5%) If this case has been with a Canadian company than the company can apply for Anti-Dumping measures with Special Import Measures Act (SIMA), Canada’s anti-dumping legislation that protects the Canadian manufacturers and businesses from any sort of unfair trade practices. In this case, Boga government has undertaken dumping and subsidization unfair means to get back their economy. Also, the goods or light bulbs sold by Syntax into Canada at less price than their normal value clearly shows the dumping of their goods which is also causing an injury to the domestic Canadian manufacturers of light bulb. Such Canadian companies can impose anti-dumping measures through Canadian government that will increase the price of imported light bulbs to their normal value. It will eliminate dumping and subsidization. Following is the process a Canadian manufacturer can undergo to impose anti-dumping measure-  Apply for Anti-Dumping agreement with SIMA. When it is applied, SIMA will begin the process by finding the dumping or subsidization through CBSA (Canada Border Services Agency).  After that, they will find the injury caused to the domestic Canadian manufacturers due to dumping or subsidizing. The process is similar for all WTO member countries to impose anti-dumping measures on another member country for any unfair trade practices.

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Case Study 1- Vibha Vohra

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