Reverse Dumping and Egypt’s Industrial Challenge

In the age of globalization, commercial dumping is no longer a one-way phenomenon flowing from foreign producers toward domestic markets. A more complex pattern has emerged—reverse dumping—where the host country of foreign investment becomes the source of exports accused of being sold abroad at unfairly low prices.

In this scenario, the state itself is neither the supporter nor the architect of such pricing; rather, it is the foreign investor who exploits the host nation’s territory as a low-cost manufacturing base, while setting prices and profit margins from its headquarters overseas.

This phenomenon occurs most clearly in labor-intensive sectors such as textiles and ready-made garments, where foreign companies benefit from cheap labor, subsidized energy, tax exemptions, and preferential trade agreements. They then export their products to global markets at prices below their true or international value. When anti-dumping investigations are launched abroad, the host country—such as Egypt—is placed on the list of accused dumping nations, and duties are imposed on all its exports, regardless of whether they are produced by national or foreign-owned factories.

Thus, Egyptian manufacturers end up paying the price for pricing decisions they did not make, and the state bears the consequences of policies it never enacted. Reverse dumping, therefore, is not merely a pricing distortion—it is a challenge to national productive sovereignty in a world where trade decisions are made beyond national borders but executed within the very structure of the domestic economy.

Why Does Reverse Dumping Occur?

The phenomenon of reverse dumping arises from a regulatory and legislative gap in the relationship between the state and foreign investors. This gap does not stem from the complete absence of laws, but rather from the lack of integration between tax, trade, and investment regulations. Most investment laws in developing countries — including Egypt — focus primarily on providing national treatment to foreign investors, granting them the same incentives and privileges as local investors. However, they often do not impose equivalent transparency obligations regarding export pricing or the mechanisms through which pricing decisions are made within the local market.

It is true that Egypt already has a comprehensive transfer pricing system, regulated by the Egyptian Tax Authority (notably Decision No. 547 of 2018), which obliges multinational companies to submit local and master files, as well as country-by-country reports (CbCR) in line with the OECD guidelines. Yet, this system is designed primarily to protect the domestic tax base and prevent profit shifting abroad, not to regulate export prices or their commercial effects on international markets.

This creates a critical loophole: a foreign parent company can still direct its Egyptian subsidiary to export goods at below-market or artificially low prices — not for tax evasion purposes, but to achieve strategic objectives such as penetrating new markets, offloading excess production, or offsetting losses in another country. Since Egypt’s transfer pricing reviews focus solely on domestic tax compliance, there is no commercial or sovereign monitoring mechanism to prevent such practices or to assess their impact on the reputation and competitiveness of Egyptian exports.

As a result, products are labeled as “Made in Egypt”, yet their pricing is determined abroad, leaving Egypt to bear the consequences of a decision it never made. When these goods reach markets in the European Union, the United States, or Asia at artificially low prices, anti-dumping investigations are launched against Egypt as the country of origin — not against the foreign parent company that orchestrated the pricing strategy.

Thus, the foreign company’s branch in Egypt transforms from a productive actor within the national economy into a tool in a global pricing strategy that does not reflect the interests of the local market. Reverse dumping, therefore, becomes a direct consequence of the state’s loss of control over pricing mechanisms dictated from abroad, even though production takes place within its own territory and under its domestic legal framework.

International Experiences in Addressing Reverse Dumping

The experiences of several emerging and major economies show that confronting industrial or reverse dumping cannot be achieved solely through traditional anti-dumping laws, but rather through comprehensive systems for monitoring pricing and financial transfers between multinational corporations and their local subsidiaries. Such systems ensure fair competition within the domestic market and prevent foreign investment from becoming a vehicle for external dominance under the guise of industrial growth.

India:

Since 2001, India has implemented a comprehensive transfer pricing framework under its Income Tax Act (Sections 92–92F), which obliges multinational enterprises to conduct their transactions with Indian subsidiaries in accordance with the Arm’s Length Principle—that is, at prices equivalent to those applied between unrelated independent parties.

To ensure effective implementation, the Ministry of Finance established a specialized unit within the Central Board of Direct Taxes (CBDT) responsible for reviewing transfer prices for exports and service transactions between Indian branches and their foreign parent companies. Oversight is particularly strict for entities operating within Special Economic Zones (SEZs), where tax incentives could otherwise encourage the manipulation of prices below market value.

If it is determined that declared prices are below the fair market value or economically unjustified, the tax authorities intervene to impose compensatory adjustments to the taxable income or revise the official reference prices used for India’s international exports.

Through this dual mechanism, India has successfully protected its public revenues from base erosion while simultaneously safeguarding its international trade reputation against accusations of dumping. This integrated approach exemplifies how fiscal regulation can serve both economic sovereignty and global competitiveness in the face of increasingly complex multinational pricing practices.

Brazil:

Since the 1990s, Brazil has faced repeated criticism from the European Union and the United States over the low export prices declared by multinational corporations operating within its territory. These practices exposed the country to multiple anti-dumping investigations, threatening its trade reputation and the credibility of its export pricing system.

In response, the Brazilian government enacted Law No. 9430 of 1996, which laid the foundation for regulating transfer pricing in transactions between related parties. This framework was later reinforced by Instruction No. IN 1312 of 2012, issued by the Federal Revenue of Brazil (RFB). The regulation explicitly states that export prices from Brazil may not be lower than 90% of the corresponding international benchmark price, whether for raw materials, semi-manufactured goods, or industrial products.

Under this system, foreign companies operating in Brazil are required to sell exports at fair and realistic prices, preventing them from using the Brazilian market as a platform for dumping cheap goods or circumventing international trade restrictions through artificially reduced export values.

This legislative framework established Brazil as a model of shared responsibility between the state and investors, ensuring that multinational activities within its borders do not distort global trade or damage the country’s reputation. In doing so, Brazil successfully aligned its fiscal integrity with its trade credibility, ensuring that its domestic market serves as a source of value creation rather than a tool for external price manipulation.

South Korea:

South Korea adopted a proactive and transparent approach by introducing the Advance Pricing Arrangement (APA) system — a mechanism that allows foreign companies operating in Korea to submit a prior request to the National Tax Service (NTS) to determine the pricing methodology for future transactions with their parent companies or related entities.

Once approved, the agreed-upon pricing formula becomes binding on both parties and cannot be retroactively altered, significantly reducing the risk of disputes or accusations of dumping and tax evasion.

This framework enabled South Korea to avoid dozens of international trade disputes, providing legal certainty for investors while allowing the state to ensure fair pricing and protect domestic industries. The success of this system has made South Korea a global benchmark for cooperative pricing mechanisms, inspiring other Asian and European countries to adopt similar models in subsequent years.

China:

Although China is frequently accused of engaging in dumping practices in global markets, it has simultaneously developed strict regulations governing foreign investment within its own borders to protect its domestic market from reverse dumping.

The Chinese government requires all foreign companies operating in China to submit an annual comprehensive disclosure detailing their financial and commercial transactions with parent companies or related entities. This includes transfer prices, financing ratios, and asset valuation methods. The State Administration of Taxation (SAT) rigorously reviews these disclosures as part of the national Base Erosion and Profit Shifting (BEPS) Program, which aims to prevent artificial profit shifting and manipulation of internal prices.

If any externally directed or unjustified pricing is detected, the authorities impose tax and accounting adjustments or withdraw the tax incentives granted to the offending investors.

Through this framework, China has effectively prevented its territory from being used as a production platform for artificially cheap exports, while simultaneously reinforcing discipline within its domestic market. This approach ensures that foreign investment functions as a tool for national economic development rather than as an instrument of external control or market distortion.

These global experiences collectively demonstrate that addressing reverse dumping cannot rely solely on the imposition of customs duties or trade defense measures. Instead, it requires the construction of a comprehensive legal and institutional framework capable of monitoring pricing and financing flows within multinational corporations, and integrating tax, trade, and investment policy to safeguard domestic industry—without compromising the overall attractiveness of foreign investment.

Lessons for Egypt

Egypt today faces a mounting challenge similar to that experienced by countries such as India, Brazil, and South Korea — particularly in the textile sector, one of the industries most frequently subjected to international anti-dumping investigations on the grounds of selling at unfair or below-market prices in certain foreign markets.

These investigations, whether initiated by the European Union or the United States, often fail to distinguish between nationally owned factories and foreign-owned facilities operating inside Egypt, thereby inflicting direct harm on the overall reputation of Egyptian exports and weakening the country’s negotiating position in trade disputes.

This situation reveals that the challenge is not limited to export pricing alone but touches the core relationship between the state and foreign investors, exposing the absence of institutional mechanisms that ensure transparency in pricing, financing, and local content ratios.

When some foreign companies operating in Egypt export their products abroad at prices subsidized by the parent company or below fair production cost, the result is a case of reverse dumping originating from within Egypt itself. This exposes the country to protective trade measures from its partners and threatens the competitiveness of its domestic industries.

Thus, the solution should not lie in restricting foreign investment or imposing arbitrary constraints, but rather in restructuring the business environment to integrate transparency and shared accountability as foundational elements of Egypt’s investment system.

This requires a set of institutional and practical reforms, including:

• Amending Investment Law No. 72 of 2017 to add a provision requiring foreign-funded companies to submit regular, detailed reports on their export pricing policies and commercial relations with parent or affiliated entities, while establishing clear Arm’s Length standards to ensure fair pricing.
• Activating and expanding Anti-Dumping Law No. 161 of 1998 so that it covers cases where pricing practices originating within Egypt harm the reputation of Egyptian products abroad, not only cases involving imported goods.
• Establishing a joint national unit between the Ministry of Trade and Industry, the Tax Authority, and the General Authority for Investment (GAFI) to monitor transfer pricing between foreign companies and their local subsidiaries and analyze pricing differentials in critical sectors.
• Creating a national export-price database for sensitive sectors such as textiles, chemicals, steel, and home appliances, to serve as an official reference in trade negotiations and international investigations.
• Linking industrial and investment incentives to the share of local value added, ensuring that tax and customs exemptions apply only when domestic manufacturing exceeds 40 percent of total production costs, thereby encouraging genuine production rather than superficial assembly.

Implementing these reforms would allow Egypt to establish a proactive regulatory system that prevents export price manipulation from within its borders, while redefining foreign investment as a partner in development rather than a source of market distortion—thus protecting both the integrity of its exports and the resilience of its national industry.

The Sovereign and Economic Dimension

Reverse dumping is not merely a transient trade risk—it represents a direct threat to the state’s economic sovereignty. When national territory becomes a production platform for external powers that dictate pricing policies and control the flow of goods, the local industry turns into a tool serving foreign interests, no longer reflecting the priorities of the domestic economy or contributing to independent development goals.

The danger lies in the shift of economic decision-making from the inside to the outside. Prices, costs, profit margins, and even export destinations are increasingly determined by considerations tied to parent corporations or their supporting governments, rather than by Egypt’s own industrial strategies or market needs. What is produced within Egypt thus becomes the outcome of foreign economic agendas—used to achieve gains in other countries’ balance of payments or to offset their trade deficits—while Egypt bears the costs in the form of international investigations, customs penalties, and declining export competitiveness.

This reveals the intricate intersection of taxation, investment, trade, and competition policy, all converging around one fundamental question of sovereignty: Who truly controls pricing?

Losing control over domestic pricing mechanisms means losing control over value chains and production flows, a loss far more profound than that of natural resources or energy, for it strikes at the very heart of national economic autonomy.

Productive sovereignty is not achieved merely by owning factories or attracting capital, but by ensuring that the state retains authority over pricing and supervises value creation from production to export. Without this control, even factories that are legally “Egyptian” risk becoming mere extensions of a global production system driven by external objectives rather than national interests.

As Egypt continues its effort to rebuild a strong industrial base, it must embed the principle of economic sovereignty within its investment and trade legislation. Protection should therefore not be measured solely by tariffs or import restrictions, but by the state’s ability to regulate capital movement, monitor pricing structures, and guide production toward national priorities.

Accordingly, updating anti-dumping legislation, expanding the mandates of competition and tax authorities, and establishing national monitoring and pricing mechanisms are not merely technical reforms—they are acts of sovereignty, essential to ensuring that Egypt remains an independent and active producer in the global economy, rather than a transient production hub serving external interests.

Conclusion

Reverse dumping stands as one of the most serious manifestations of imbalanced globalization—the hidden face of a system that transforms nations from victims into the accused in international markets, while the underlying outcome remains unchanged: industrial contraction, erosion of national value added, and diminishing trust in exports. When national territory is used as a base for re-exporting products priced under external directives, the promise of investment becomes a burden, and industrial growth gives way to productive dependency that undermines economic independence.

Confronting this phenomenon cannot be achieved through traditional protectionist policies or import restrictions alone, but through strategic governance of foreign investment and export operations. The state that monitors capital flows, tracks export pricing policies, enforces transparency on foreign investors, and links government incentives to genuine domestic value added, is the state that truly possesses its economic sovereignty in the age of open globalization.

Today, dumping no longer comes only from abroad—it can begin within, when institutional oversight weakens, when pricing and production are left unregulated, or when certain investments evolve into isolated economic enclaves serving external agendas unrelated to national development. Thus, the challenge transcends trade policy—it strikes at the core of productive sovereignty, the state’s ability to determine what is produced, how it is produced, and for whom it is produced.

Egypt’s coming struggle, therefore, is not merely against importers or foreign competitors, but against the gap between domestic production and external decision-making, and against the distortion of national value chains amid a rapidly changing global economy. Preserving productive sovereignty is not a political luxury or theoretical slogan—it is a strategic necessity to safeguard the future of Egyptian industry, uphold the state’s economic independence, and affirm Egypt’s position as a productive force capable of engaging with the world without being consumed by it.

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