The U.S. antidumping law, according to its supporters, ensures "fair trade" by offsetting market distortions caused by foreign governments. Specifically, it allegedly targets "unfair" pricing practices--price discrimination and below-cost sales--that reflect protectionism, cartelization, subsidies, and other structural defects in foreign markets.

To evaluate those claims, the author of this study reviewed all U.S. Department of Commerce final determinations through the end of 1998 in original antidumping investigations initiated since January 1, 1995--a total of 141 company-specific dumping findings in 49 different cases. In addition, for particular companies it was possible to examine highly detailed price and cost data from the confidential case record.

The evidence reviewed in this study shows that there is a disconnect between the rhetoric of antidumping supporters and the reality of antidumping practice. The law as currently written and enforced crimination or below-cost sales. Of the five different calculation methodologies used by the Commerce Department to measure dumping, only one has any relevance to detecting market-distorting price discrimination; only 2 of the 107 affirmative dumping findings reviewed in this study relied exclusively on this methodology. None of the calculation methodologies measures whether sales are below cost; the one that comes closest merely determines whether profits are below an often arbitrary and inflated benchmark.

Furthermore, the law lacks any mechanism for determining whether the pricing practices it condemns as unfair have any connection to market-distorting policies abroad. Although price discrimination and below-cost sales can result from government interventionism, they can also be due to perfectly normal marketplace behavior. Consequently, the antidumping law frequently punishes foreign firms for unexceptionable business practices routinely engaged in by American companies.