On March 31, in the midst of the COVID-19 global pandemic, American mattress manufacturers and labor unions, claiming “dumping,” petitioned to impose prohibitive duties on mattress imports from seven countries.
They are banking on precedent. In 2019, the International Trade Commission ruled against mattress imports from China—applying an unprecedented 1,731 percent duty. China had been the No. 1 exporter of mattresses to the United States, but after the ITC’s determination, China’s share plunged from 82 to just 2 percent overnight.
Now the petitioners (Brooklyn Bedding, Corsicana Mattress Company, Elite Comfort Solutions, FXI, Kolcraft Enterprises, Leggett & Platt, and two labor unions) are targeting mattress imports from Vietnam, Thailand, Turkey, Serbia, Malaysia, Indonesia, and Cambodia—83 percent of the remaining U.S. mattress imports from around the globe, according to recent data.
These attacks on mattress imports should alarm every American consumer. As an expert in antitrust and regulatory policy, I’d like to shine some light on what you may not know about “dumping”—selling exported goods at lower prices than at home—and the real motives of the people claiming to stop it.
Protectionism in Corporate America Today
Protectionists are individuals and firms trying to gain, through legal or regulatory processes, competitive advantages over their rivals that they could not win in a fair, fully functioning marketplace.
Antidumping petitions are one powerful example of that strategy. Disguised as noble actors trying to protect American manufacturers and especially jobs, in the end the businesses claiming harm from imports are just attempting to benefit at the expense of others.
What I find important is the timing of the petition: in the midst of a global pandemic, when affordable goods like mattresses are needed more than ever. The petition, in fact, was so inappropriate that it drew the attention of the Department of Justice, although it later decided that intervention would be premature.
The Illogical Theory of Dumping
Now let’s take a look at the basics of dumping. The idea is that one exporting firm (or group of them) located in some other country purposefully cuts its prices in an importing country below its cost of production. The goal is to bankrupt producers in that market.
Of course, the foreign firms lose money for as long as the dumping goes on. So, for that strategy to make sense, the dumper must later raise prices both to cover current costs and earn enough revenue to offset the earlier losses.
However, once the dumpers raise prices, new competition arises either from domestic firms that survived or new firms that enter the industry to take advantage of the now higher prices and profits. Expansions in production by these firms limit the dumper’s ability to raise prices and recoup their lost profits.
The only way dumping can succeed without inviting competition is if barriers to entry are insurmountable, such as huge upfront investments to begin production or specialized knowledge not widely available.
In the matter at hand, the manufacturing equipment and technical knowhow required to make mattresses isn’t hard for newcomers to acquire—and the industry already is saturated. So, when the dumpers try to raise prices above cost, success will be unlikely.
Dumping doesn’t pass the test of economic logic. The odds of any one of the exporting countries launching a successful dumping campaign are very low. The odds of seven countries acting in concert are zero.
Let’s be clear. American mattress manufacturers have everything to gain by excluding every mattress exporter in the world from the U.S. market. They tasted success in their case against China, and now they are trying to solidify that victory by blocking mattresses from much of the rest of the globe.
While domestic producers would benefit, buyers of mattresses here at home would have everything to lose. Mattress prices will ascend to Cloud 9 if the ITC believes the petitioners’ fictional dumping story. It leaves me to ask: how do they sleep at night?
This article was published by The Beacon