Dumping (in trade)

Definition
The practice of selling goods abroad below the price charged for the same goods in the domestic market or at a price below the cost of production, usually with the aim of driving competitors out of the market.

Dumping is considered to be an unfair trade practice and, as such, is prohibited under many national trade laws.

Dumping

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Types of dumping:

• Sporadic Dumping: Occasional sale of a commodity at below cost in order to unload an unforeseen and temporary surplus of the commodity without having to reduce domestic prices.


• Predatory Dumping: Temporary sale of a commodity at below cost or a lower price abroad in order to derive foreign producers out of business, after which prices are raised to take advantage of the monopoly power abroad.


• Persistent Dumping: Continuous tendency of a domestic monopolist to maximize total profits by selling the commodity at a higher price in the domestic market than internationally (to meet the competition of foreign rivals). For international price discrimination to take place, conditions must be met:
• Domestic and foreign markets must be separated.
• Demand elasticity of the product must be different in two markets. The good can be sold with a lower price where the demand elasticity is high; and with a higher price where demand elasticity is low.

from Wikipedia:
In economics, "dumping" can refer to any kind of predatory pricing. However, the word is now generally used only in the context of international trade law, where dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production. The term has a negative connotation, but advocates of free markets see "dumping" as beneficial for consumers and believe that protectionism to prevent it would have net negative consequences. Advocates for workers and laborers however, believe that safeguarding businesses against predatory practices, such as dumping, help alleviate some of the harsher consequences of free trade between economies at different stages of development

Remedies and penalties
In United States, domestic firms can file an antidumping petition under the regulations determined by the Department of Commerce, which determines "less than fair value" and the International Trade Commission, which determined "injury". These proceedings operate on a timetable governed by U.S. law. The Department of Commerce has regularly found that products have been sold at less than fair value in U.S. markets. If the domestic industry is able to establish that it is being injured by the dumping, then antidumping duties are imposed on goods imported from the dumpers' country at a percentage rate calculated to counteract the dumping margin.

Related articles:
- These shoes were made for dumping (BBC NEWS 24 Feb 2006)
- China slams EU anti-dumping charges on shoes (China Daily 24 Feb 2006)
- The Fallacies of Shrimp Protectionism