CandleFocus Glossary Editor
Dumping is an economic practice that involves the exporting of goods at prices that are lower than what is charged in the domestic market, with the intention of hurting the competition. The dumping may have reduced prices for consumers, but it adversely affects domestic producers and the domestic economy of the importing country.
It occurs when a country or company sells goods abroad below their price in the domestic market or the actual production cost. By doing so, the exporter can increase the sales and dump the inventory of certain goods in foreign markets, even if this leads to losses for the exporter. Low prices attract consumers and can lead to the displacement of domestic industries, which harms the local producers and workers in the importing country.
Under WTO rules, for a country to impose tariffs and quotas against dumping, it must show that the exporter’s actions are causing 'material harm' to its domestic economy. If the importing country can show this 'material harm', then a special tariff, known as a 'countervailing duty', can be imposed in order to protect domestic industries from the imports.
The WTO also advocates for more ‘fair’ trade, by encouraging countries to remove tariffs and subsidies that make prices of exported goods artificially low. This undermines competition in the importing country, as industries in the exporting country can then charge lower prices without facing authorities scrutiny.
Despite the WTO rules on dumping, many importing countries are still taking measures to protect their domestic industry from dumped goods. This includes anti-dumping duties, or special levies on goods that are suspected of being dumped. Imposing these duties is a way for the importing country to counter the effects of ‘unfair’ foreign competition, but it also puts increased strain on the international trading system.
To maintain a stable international trade environment, countries should continue to strive for fair trade, with each nation working towards a mutually beneficial agreement. At the same time, proper legal measures should be taken in cases where evidence clearly indicates that goods are being dumped. This way, economies can benefit from the open market while still protecting their domestic industries.
It occurs when a country or company sells goods abroad below their price in the domestic market or the actual production cost. By doing so, the exporter can increase the sales and dump the inventory of certain goods in foreign markets, even if this leads to losses for the exporter. Low prices attract consumers and can lead to the displacement of domestic industries, which harms the local producers and workers in the importing country.
Under WTO rules, for a country to impose tariffs and quotas against dumping, it must show that the exporter’s actions are causing 'material harm' to its domestic economy. If the importing country can show this 'material harm', then a special tariff, known as a 'countervailing duty', can be imposed in order to protect domestic industries from the imports.
The WTO also advocates for more ‘fair’ trade, by encouraging countries to remove tariffs and subsidies that make prices of exported goods artificially low. This undermines competition in the importing country, as industries in the exporting country can then charge lower prices without facing authorities scrutiny.
Despite the WTO rules on dumping, many importing countries are still taking measures to protect their domestic industry from dumped goods. This includes anti-dumping duties, or special levies on goods that are suspected of being dumped. Imposing these duties is a way for the importing country to counter the effects of ‘unfair’ foreign competition, but it also puts increased strain on the international trading system.
To maintain a stable international trade environment, countries should continue to strive for fair trade, with each nation working towards a mutually beneficial agreement. At the same time, proper legal measures should be taken in cases where evidence clearly indicates that goods are being dumped. This way, economies can benefit from the open market while still protecting their domestic industries.