what is dumping in International Business

[Kalpana Heliya]

Meaning:

If a company exports a product at a price (export price) lower than the price it normally charges on its own home market (normal value), it is said to be 'dumping' the product.
Effects: The effect of dumping on consumers and producers.
While on the one hand, dumping is in the benefit of foreign exporters who practice it, as well as consumers, on the other hand, it harms domestic producers whose products have been dumped. Foreign exporters may rely on dumping when they create a new product and would like to promote it, so they export it with a price which is lower than its marginal cost. In some other circumstances, foreign exporters are obliged to sell their product with a price which is cheaper than its marginal cost due to changes in market conditions or exchange rates. Unquestionably, in both cases consumers benefit from the low priced foreign products (Trebilcock & Howse 2005).
Undoubtedly, dumping is detrimental for domestic producers. Predatory pricing (as previously defined) may result in bankrupting many domestic producers or even driving them out of the market by closing their industries and terminating their businesses and consequently, raise the problem of un-laboured workers of such industries, as well as intermittent dumping which harms domestic producers in that, after the occurrence of such type of dumping (for certain period of time), consumers will substitute their products by those foreign products with the cheaper price. Furthermore, after the lapse of this period, domestic producers will have to readjust their price with a higher one in order to recover the loss incurred. The adjustment and readjustment of price harms domestic producers’ welfare. It is worthy to note that consumers might as well be harmed by the said adjustment and readjustment as they may end up purchasing a long term product with a higher price. According to Jacob Viner, intermittent dumping harms both the domestic producer and the consumer. In his view, it harms the former in that it takes enough time to injure him, the latter in that he will not be provided with a stabilized supply of long-run products (op.cit.
Dumping can harm the domestic industry by reducing its sales volume and market shares, as well as its sales prices. This in turn can result in decline in profitability, job losses and, in the worst case, in the domestic industry going out of business.
Often, dumping is mistaken and simplified to mean cheap or low priced imports. However, it is a misunderstanding of the term. On the other hand, dumping, in its legal sense, means export of goods by a country to another country at a price lower than its normal value. Thus, dumping implies low priced imports only in the relative sense (relative to the normal value), and not in absolute sense.

Anti dumping:
Meaning:
Anti Dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade. The use of anti dumping measure as an instrument of fair competition is permitted by the WTO. In fact, anti dumping is an instrument for ensuring fair trade and is not a measure of protection for the domestic industry. It provides relief to the domestic industry against the injury caused by dumping.
Anti dumping measures do not provide protection per se to the domestic industry. It only serves the purpose of providing remedy to the domestic industry against the injury caused by the unfair trade practice of dumping.