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Economics Article Analysis : Price controls amid anti-dumping probe

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Introduction

International Baccalaureate Economics Higher Level Inter Community School of Zurich Marc Fleming Extract Title: Price controls amid anti-dumping probe Source of Extract Bangkok Post www. Bangkokpost.com Extract date: Monday February 18 2002 Word Count: 447 Syllabus Links: 2 & 3 This article discusses how the Thai government implemented a price ceiling on various hot rolled still products because domestic firms were exploiting the situation of the imposed surcharges on imported steel. Price ceilings are a form of market intervention employed by governments to control price levels. They are also known maximum prices. A maximum price is a set physical limit of price, this meaning that the price of a given product may not exceed the set limit. ...read more.

Middle

The Thai government decide to take action by taxing all imported steel. The diagram below illustrates how this works and what effects are. The tax increases the price of steel imports from p1 --> p2 what this does is increase the amount domestically supplied steel from qD1 --> qD2. It can also be seen that quantity of imports has fallen from (qD1 -- qT1) to (qD2 - qT2). However, after the imposition of the tax local firms were exploiting the situation of the imposed tax. They had raised their prices close to that of the taxed imports. This makes the market price for steel higher than the equilibrium price of course hurting the consumers. ...read more.

Conclusion

This type of market intervention is not good in term of efficiency. The Thai government should of in the first place not of used a tax to end the dumping of steel, they should have placed an embargo on all imported steel which has a price lower than that of production. This way the home market would have been protected and there would have been no need for a price ceiling. I not quiet aware of the plausibility of news source the Bangkok Post for it could be bias in that it is saying that foreign companies were dumping steel in their home market, since there have been no anti-dumping investigations made yet. The Thai government may be using the supposed dumping as an excuse to shield domestic steel produces from global competition. ...read more.

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