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Concept
Dumping (pricing policy)
Summary
Dumping, in economics, is a kind of injuring pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price below the normal price with an injuring effect. The objective of dumping is to increase market share in a foreign market by driving out competition and thereby create a monopoly situation where the exporter will be able to unilaterally dictate price and quality of the product. Trade treaties might include mechanisms to alleviate problems related to dumping, such as countervailing duty penalties and anti-dumping statutes.
A standard technical definition of dumping is the act of charging a lower price for the like product in a foreign market than the normal value of the product, for example the price of the same product in a domestic market of the exporter or in a third country market. This is often referred to as selling at less than "normal value" on the same level of trade in the ordinary course of trade. Under the World Trade Organization's Antidumping Agreement, full name Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, dumping is not prohibited unless it causes or threatens to cause material injury to a domestic industry in the importing country. Dumping is also prohibited when it causes "material retardation" in the establishment of an industry in the domestic market.
The term has a negative connotation, as advocates of competitive markets see "dumping" as a form of unfair competition. Furthermore, advocates for workers and laborers believe that safeguarding businesses against such practices, such as dumping, help alleviate some of the harsher consequences of such practices between economies at different stages of development (see protectionism). The Bolkestein directive, for example, was accused in Europe of being a form of "social dumping", as it favored competition between workers, as exemplified by the Polish Plumber stereotype.
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Related publications (8)
Related concepts (9)
Export
An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an exporter; the foreign buyers is an importer. Services that figure in international trade include financial, accounting and other professional services, tourism, education as well as intellectual property rights. Exportation of goods often requires the involvement of customs authorities.
Predatory pricing
Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. For a period of time, the prices are set unrealistically low to ensure competitors are unable to effectively compete with the dominant firm without making substantial loss.
Non-tariff barriers to trade
Non-tariff barriers to trade (NTBs; also called non-tariff measures, NTMs) are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs. Such barriers are subject to controversy and debate, as they may comply with international rules on trade yet serve protectionist purposes. The Southern African Development Community (SADC) defines a non-tariff barrier as "any obstacle to international trade that is not an import or export duty.