What is dumping and international price discrimination?
Dumping and international price discrimination. Introduction. Dumping is, in general, a situation of international price discrimination where the price of a product which is sold to the importing country is less than the price of the same product when sold in the market of the exporting country.
What is dumping in trade?
Based on World Trade Organization ( WTO ), dumping is a form of international price discrimination in which the price of a product sold in the importing country is lower than the price of the same product offered in the exporting country’s market. In the simplest of circumstances, we can detect dumping by comparing prices in two markets.
What is the effect of dumping on price competition?
With the occurrence of unfair price competition due to dumping, local producers must cut prices as low as possible to compete with imported dumping products. However, if domestic producers are not able to compete with dumping goods, in the end, only dumping products dominate the market and kill other competitors in the industry. 3.
What are the causes of dumping in the housing market?
Causes behind dumping is that it enables the exporter to compete in foreign market and to captive the market by selling at a low price; even sometimes below cost and to make the deficiency in sales revenue by charging a high price to the home buyers taking advantage of his Monopoly position in the market.
What is an example of dumping?
Dumping usually involves exporting large quantities or offloading a product on a foreign market. For example, if UK businesses started selling apples to the US for less than what they're worth in the US, then US apple producers would have a hard time selling their products to the domestic market.
What does product dumping mean?
If a company exports a product at a price that is lower than the price it normally charges in its own home market, or sells at a price that does not meet its full cost of production, it is said to be "dumping" the product.
What does dumping mean in law?
Dumping is a violation of fair trade practices, involving selling of goods in the U.S. market at prices lower than the prices at which comparable goods are sold in the domestic market of the exporter. These sales must cause or threaten material injury to a competing U.S. industry.
What is dumping and types of dumping?
What is Dumping? Dumping in the financial world occurs when a company or a country exports its products at a price lower than its domestic price. Exporters dump to compete with the producers and sellers in the importing country.
What is called dumping?
Dumping is an international trade term used when a country or company exports a product at a price on the import market that is lower than the price on the domestic market of the exporter.
What does dumping mean in trade?
What is dumping? Dumping is, in general, a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country.
What are the effects of dumping?
Dumping can lead to lower prices for consumers, can force stagnant companies to become more competitive and innovative, and can allow exporting companies to increase revenues by selling more product.
What are the advantages of dumping?
Increases market share for the dumping country's industry: The main advantage of dumping is selling at an unfairly competitive lower price. A country subsidizes the exporting businesses to enable them to sell below cost. The nation's leaders want to increase market share in that industry.
What are the objectives of dumping?
The monopolist practices dumping in order to develop new trade relations abroad. For this, he sells his commodity at a low price in the foreign market, thereby establishing new market relations with those countries. As a result, the monopolist increases his production, lowers his costs and earns more profit.
How does dumping affect trade?
Over the long run, dumping can deter investment in the market where it is occurring and, conversely, may well foster increased investment in the protected market.
What are the conditions for dumping?
Conditions for Success of Dumping These are: The company must have some degree of monopoly on the product, at least in the home market. Or well established and recognized brand. For a buyer in the foreign market, it should be impossible to re-sell the goods to another country, where the product costs more.
Which price discrimination is persistent dumping?
A firm that is selling a product at a lower price on foreign markets for the purpose of driving foreign producers out of business is engaging in persistent dumping.
How does dumping affect trade?
Over the long run, dumping can deter investment in the market where it is occurring and, conversely, may well foster increased investment in the protected market.
What is the meaning of waste dumping?
Term. The disposal of solid wastes without environmental controls.
What is the aim of dumping by businesses?
Taking action to protect against import dumping is an argument in favour of protectionism. Import dumping happens when businesses sell significant quantities of products abroad at below production cost or significantly below selling prices in the home market.
How do you deal with dumping?
Closer to Closure: 10 Tips for Moving On After Getting DumpedAllow Yourself to Feel. ... Understand the Grieving Process.Practice Forgiveness. ... Channel the Energy Elsewhere. ... Maintain Your Self-Worth. ... Throw Out the Mementos. ... Create Your Own Closure. ... Embrace the Impermanence of Life.More items...•
What happens when dumping products dominate the market?
With the occurrence of unfair price competition due to dumping, local producers must cut prices as low as possible to compete with imported dumping products. However, if domestic producers are not able to compete with dumping goods, in the end, only dumping products dominate the market and kill other competitors in the industry.
How does dumping affect domestic production?
Therefore, dumping indirectly pressures domestic producers to fix prices around the price of dumping products. If domestic producers sell identical products at prices that match the needs of production capital , they will lose in price competition. So to compete, like it or not, they have to cut the price of these products.
Why do exporters have a great potential for bankruptcy?
However, over time, exporters have a great potential for bankruptcy due to price dumping that is too extreme. This happens because the exporters sell their goods too cheap; even so, they cannot cover the production costs incurred.
What is dumping in the world?
Dumping is a form of international price discrimination in which the price of a product sold in the importing country is lower than the price of the same product offered in the exporting country’s market. This practice has a purpose that can help exporters, but in reality, dumping can harm importing countries if carried out in the long term and excessively.
Why is dumping important?
In this case, dumping is useful to help countries in crisis. Countries experiencing a crisis can import commodities from countries experiencing excess production at a lower price to sell more excess items and prevent losses.
How to detect dumping?
In the simplest of circumstances, we can detect dumping by comparing prices in two markets.
What is the role of dumping in a crisis?
Suppose a country experiences a commodity crisis and cannot produce that commodity. The only way is to import it. Then at the same time, some countries experience over-production or excess in making a commodity. When the domestic needs have been met, the excess commodity must be exported rather than stored and damaged.
What are the causes of dumping?
Causes behind dumping is that it enables the exporter to compete in foreign market and to captive the market by selling at a low price; even sometimes below cost and to make the deficiency in sales revenue by charging a high price to the home buyers taking advantage of his Monopoly position in the market.
What happens when a producer resorts to dumping?
Moreover, by resorting to dumping, when the producer is able to widen the size of foreign markets for his product, his investment risks are minimised and when he has to launch large-scale production, he can reap the economies of large-scale resulting in cost minimisation. Eventually, in the long-run, it may become possible for him to sell his goods at a cheaper price in the domestic market as well.
What is another type of price discrimination in the arena of foreign trade?
Dumping is another type of price discrimination in the arena of foreign trade.
Can you resell goods from a cheaper market?
3. It should not be possible for buyers to re-sell goods from a cheaper market to a dearer one. In foreign trade, of course, the distance transport cost element and customs duties prevent this tendency.
Abstract
Dumping actions and anti-dumping policies were regularly on the political agenda for several years in the pre-World War I period in Europe and the United States.
I. INTRODUCTION
The tariff debate between free trade advocates and protectionists at the end of the nineteenth century and at the beginning of the twentieth directed scholars’ attention particularly to anti-dumping policies and, consequently, to the need to systematize the theory of dumping.
IV. JANNACCONE ON THE EFFECTS OF DUMPING IN BOTH DOMESTIC AND FOREIGN MARKETS
Jannaccone ended his first article (Jannaccone Reference Jannaccone 1914a) with the following words:
V. JANNACCONE AS A PRECURSOR OF VINER
The origins of the theory of dumping lie in Jannaccone’s contribution. He defined and classified dumping (1914a). He proved that the most natural scientific framework for dumping is imperfect competition, and he definitively formalized dumping as an instance of price discrimination.
VI. FINAL REMARKS
Viner ( Reference Viner 1923) is considered to be the first classic treatment of dumping in the economic literature. His treatment overshadowed the contributions of other scholars who took part in the theoretical systematization of dumping at the beginning of the twentieth century.
Footnotes
1907 ). These works were later widely cited in the literature on dumping, also thanks to the papers published in journals such as Economic Journal and Journal of Political Economy by authors such as Dietzel and Lotz, and some papers on German monopolistic combinations published in the Quarterly Journal of Economics.
What is dumping in trade?
Dumping is, in general, a situation of international price discrimination where the price of a product which is sold to the importing country is less than the price of the same product when sold in the market of the exporting country. It is generally perceived that dumping would result in unfair trade.
What are the objectives of dumping?
The general objectives of dumping is the maximization of profits of a company, the driving out of competitors from the market or the sale of surplus stock lending to a price rise in a monopolistic market.
What is the purpose of anti-dumping?
The purpose of an anti-dumping investigation is to ascertain whether dumping has taken place and has caused injury to the domestic industry of the country importing the allegedly dumped products. In other words, the process focuses on
How long is anti-dumping duty?
The maximum duration of anti-dumping duties is 5 years, unless a review (called a “sunset” or “expiry review”) covering both dumping and injury, is initiated before the expiry of the 5 years and it is determined that the expiry of the duty would be likely so lead to continuation or recurrence of dumping and injury.
What causes price differences in the domestic and international markets?
Subsidies provided to the goods in the domestic market can also be a reason for the price difference in the domestic and international markets. The difference in variable costs of goods and competitive edge of a particular industry in reducing production costs can cause variations in the prices of products. Exchange rate fluctuations can also be ...
How long does it take to get an antidumping order?
As a rule, anti-dumping investigations are to be concluded within a period of one year after initiation, unless special circumstances are found to prevail. However, in no case can a period of 18 months be exceeded.
Which article of the GATT contains the basic provisions relating to anti-dumping action?
Article VI which is the “enabling provision” contains the basic provisions relating to anti-dumping action. And. The Agreement on Implementation of Article VI of GATT, 1994 (the anti-dumping agreement or the AD Agreement) The AD agreement contains detailed provisions relating to methodologies and procedural issues.
What Is Dumping?
Dumping is a term used in the context of international trade. It's when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market. Because dumping typically involves substantial export volumes of a product, it often endangers the financial viability of the product's manufacturer or producer in the importing nation.
Why is dumping prohibited?
Dumping is also prohibited when it causes "material retardation" in the establishment of an industry in the domestic market. 1 . The majority of trade agreements include restrictions on trade dumping.
Why is dumping important?
Because dumping typically involves substantial export volumes of a product, it often endangers the financial viability of the product's manufacturer or producer in the importing nation.
What are the advantages and disadvantages of dumping?
Advantages and Disadvantages of Dumping. The primary advantage of trade dumping is the ability to permeate a market with product prices that are often considered unfair. The exporting country may offer the producer a subsidy to counterbalance the losses incurred when the products sell below their manufacturing cost.
What is the meaning of "dumping"?
It's when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market.
What would happen if trade partners restricted this form of market activity?
Additionally, trade partners who wish to restrict this form of market activity may increase restrictions on the good , which could result in increased export costs to the affected country or limits on the quantity a country will import .
Is there anti-dumping on silica fabric?
In January 2017 , the International Trade Association (ITA) decided that the anti-dumping duty levied on silica fabric products from China the previous year would remain in effect based on the investigation by the Department of Commerce and the International Trade Commission that showed that the silica products from China were selling at less than fair value in the United States. The ITA ruling was based on the fact that there was a strong likelihood that dumping would repeat if the tariff was removed. 2
What is price discrimination?
Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to. In pure price discrimination, the seller charges each customer the maximum price they will pay. In more common forms of price discrimination, ...
What are the three types of price discrimination?
There are three types of price discrimination: first-degree or perfect price discrimination, second-degree, and third-degree. These degrees of price discrimination are also known as personalized pricing (1st-degree pricing), product versioning or menu pricing (2nd-degree pricing), and group pricing (3rd-degree pricing).
When can companies successfully apply price discrimination?
Economists have identified three conditions that must be met for price discrimination to occur. First, the company needs to have sufficient market power. Second, it has to identify differences in demand based on different conditions or customer segments. Third, the firm must have the ability to protect its product from being resold by one consumer group to another .
Can the markets overlap?
The markets cannot overlap so that consumers who purchase at a lower price in the elastic sub-market could resell at a higher price in the inelastic sub-market. The company must also have monopoly power to make price discrimination more effective.
Can different customer segments have different price points?
In many cases, no. Different customer segments have different characteristics and different price points that they are willing to pay. If everything were priced at say the "average cost," people with lower price points could never afford it. Likewise, those with higher price points could hoard it. This is what is known as market segmentation. Economists have also identified market mechanisms whereby fixing static prices can lead to market inefficiencies from both the supply and demand sides.
Is price discrimination illegal?
The word discrimination in price discrimination does not typically refer to something illegal or derogatory in most cases. Instead, it refers to firms being able to change the prices of their products or services dynamically as market conditions change; or charging different users different prices for similar services or charging the same price for services with different costs. Neither practice violates any U.S. laws—it would become unlawful only if it creates or leads to specific economic harm.
How to identify dumping?
Thus, in the simplest of cases, one identifies dumping simply by comparing prices in two markets.
How long do anti-dumping duties last?
The “sunset” requirement establishes that dumping duties shall normally terminate no later than five years after first being applied, unless a review investigation prior to that date establishes that expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury. This five year “sunset” provision also applies to price undertakings. The Agreement requires authorities to review the need for the continued imposition of a duty upon request of an interested party.
What is fair comparison in export?
The basic requirements for a fair comparison are that the prices being compared are those of sales made at the same level of trade, normally the ex-factory level, and of sales made at as nearly as possible the same time.#N# As part of the Agreement's requirements regarding transparency and participation, the investigating authorities are required to inform parties of the information needed to ensure a fair comparison, for instance, information regarding adjustments, allowances, and currency conversion, and may not impose an “unreasonable burden of proof” on parties.
What is the Ad Hoc Group on Implementation?
The Committee has created a separate body, the Ad Hoc Group on Implementation, which is open to all Members of the WTO, and which is expected to focus on technical issues of implementation: that is, the “how to” questions that frequently arise in the administration of anti-dumping laws. Dispute settlement.
Can anti-dumping duties be limited to imports?
If the Constitutional law of a Member precludes the collection of duties on imports to the region, the investigating authorities may levy duties on all imports of the product, without limitation, if anti-dumping duties cannot be limited to the imports from specific producers supplying the region.
Is there a comparable price for a product in the exporting country?
However, the Agreement recognizes that this may result in an inappropriate or impossible comparison, for instance if the product is not produced in the exporting country, there is no comparable price for the product in the exporting country, or the product is merely transshipped through the exporting country.
Introduction
- Dumping is, in general, a situation of international price discrimination where the price of a product which is sold to the importing country is less than the price of the same product when sold in the market of the exporting country. It is generally perceived that dumping would result in unfair trade. The purpose of an anti-dumping investigation i...
Nature and Scope
- This project intends to give a broad overview of initiation of anti-dumping investigations. The concept of dumping shall be discussed, followed by a discussion on the existing multilateral legal framework. The pre-initiation phase and final determination phase shall also be discussed briefly.
Dumping
- Dumping per se is not against GATT obligations. This practice is condemned only when it causes injury to the domestic industry. Dumping can be explained in three contexts: 1. In a layman’s view, ‘dumping’ is selling a product at low prices in the international market 2. In legal terms, under Article VI of the GATT and ADA, dumping is defined as the sale of a product at a price less than …
Rationale For Dumping
- The general objectives of dumping is the maximization of profits of a company, the driving out of competitors from the market or the sale of surplus stock lending to a price rise in a monopolistic market. Subsidies provided to the goods in the domestic market can also be a reason for the price difference in the domestic and international markets. The difference in variable costs of goods a…
Multilateral Legal Framework
- Since 1 January 1995, the rules of the multilateral trading system relating to anti-dumping are found in the following WTO provisions: 1. Article VI of the General Agreement on Tariffs and Trade 1994 Article VI which is the “enabling provision” contains the basic provisions relating to anti-dumping action And 1. The Agreement on Implementation of Article VI of GATT, 1994 (the anti-d…
The pre-initiation Phase of The Investigation
- The AD Agreement provides that the anti-dumping proceedings can be initiated on satisfaction of the following: 1. a written application by, or behalf of the domestic industry affected by the alleged dumped imports or 2. in “special circumstances” by the investigating authorities of the country concerned acting on their own motion For instance, the authorities might decide to initiate an inv…
B) Lodging of A Complaint
- In the normal course of events, a domestic producer, or a number of producers, will approach the concerned Ministry or institution with a complaint that dumped imports are causing injury to the industry. After consultations, and if it appears, on the face of it, that there is substance to the claim, the domestic producers will normally prepare an application for the initiation of an anti-du…
C) Minimum Information Required For An Application
- An application has to provide certain minimum information. Article 5.2 states that applications containing simple assertions, unsubstantiated by relevant evidence cannot be considered sufficient. As noted above, this minimum information must indicate the existence of dumping, injury and a causal link between the alleged dumping and injury. Article 5.2 lays out the specific …
The Identity of The Applicant
- By its very nature, this information is readily available to the applicant. In the case where the applicant is bringing the application on behalf of the domestic industry, it will usually have some indication of the production accounted for by the other domestic producers, either through direct knowledge or through industry publications etc.
Information Concerning Dumping
- The information required under this category is generally not freely available to the applicant. The applicant usually has to make a special effort to satisfy the requirements of Article 5.2, especially regarding the information relating to the price of the like product when sold for consumption in the domestic industry of the exporting country (normal value information). This has led authorities to …