DUMPING

DHRITI
IIIB ECONOMICS PSDA
WHAT IS DUMPING?
● Dumping is a process of price discrimination, where the price of the product
when sold to other country is less than the price of the same product sold in
the market of the exporting country.
● Dumping occurs when :

NORMAL VALUE IN EXPORT MARKET > EXPORT PRICE

● WTO decides whether dumping is unfair competition.

WHY DOES DUMPING TAKE PLACE?
● Producers in one country are trying to stay competitive with producers
in another country.
● Producers in one country are trying to eliminate the producers in
another country and gain a larger share of the world market.
● Producers are trying to get rid of excess stuff that they cant sell in their
own country.
● Producers can make more profit by dividing sales into domestic and
foreign markets, then charging each market whatever price the buyers
are willing to pay.
Types of dumping
PERSISTENT DUMPING PREDATORY DUMPING
● Monopolist sells his ● Monopolist sells his product
product at higher below/lower the cost in
prices in the foreign market, after which
domestic market. prices are raised to take
● But lower in foreign advantage of the newly
market. acquired monopoly abroad.
● For ex,Japan, sold ● Main aim to drive out
electronics at high competitors from the
prices in its own market.
country. This is ● For ex, Predatory dumping
because it has no occured when Toyota Inc.
foreign competition. of Japan sold autos to U.S.
But it lowered prices consumers at lower prices
in the U.S market in than to Japanese
order to maintain consumers in order to put
market share. other companies out of
business in US.
SPORADIC DUMPING
● It is the ‘occasional’
sale of commodity at
below cost or at a
lower price in foreign
market.
● Main aim is to get rid
of inventory stocks.
● For ex, china was the
major producer of cd’s,
dvd’s and mp3 players
in the initial years of
21st century,but with
the arrival of storage
based media players
the stock of of those
cds got piled up and
they had to clear the
clutter of excess stock.
Positive Effects ( on importing country)
● Cheap rates of goods and services available in the country
● Helps to change people’s taste which is beneficial for the standard of
living.
● Creates a competition in the market.

Negative effects

● Domestic country is not able to bear the competition.

● Reduced profits and decline in productivity.
● Reduced return on investments.
Positive effects (on exporting country)
● Exporting country earns foreign currency.
● Helps to improve trade balance.

Negative effects
● Increases the demand of raw material in the exporting
country.
● Reduces the trade in domestic market.
Anti dumping
● It is measure to rectify the situation arising out of the dumping of
goods and its trade distortive effect.
● Re establish fair trade.
● The use of anti dumping measure as an instrument of fair
competition is permitted by the wto.
● It provides relief to the domestic industry against the injury caused
by dumping.
Anti dumping measures
● Tariff duty: importing country imposes high rate of import tariff on such types
of goods.
● Import quota : importing country in addition to tariff duty, restricts the volume
of imports.
● Import restriction: importing country bans the import of particular good or all
the goods from the dumping country.
● Voluntary export restraint: exporting countries realise the negative effects of
dumping, therefore,voluntarily come for bilateral agreements to avoid
dumping.