Dumping means selling of goods in a foreign market on low rate. Dumping happens when firm’s sells products in foreign market on low rate because they produced more product according to their demands. After the fulfillment of demands of local market they export extra product to the other countries on very low rate because if they sell these product in own local market the rate of these prices will drop, due to that they exports these product in other countries (Mastel, 2016).
Dumping means charging monopoly on domestic market and charging the price equal to the cast of the production less than the foreign market for the same product.
There are three types of Dumping
Sporadic dumping is that type of dumping when the production is more and demand is less you fulfill the demands of local market and then export the surplus production to maintain your price monopoly. In sporadic dumping it is un-intentionally production is high and demand is low
When products are sells in local market at high prices and the remaining products sell in low prices in foreign market it is called persistence dumping. Persistence dumping is possible only if the demand of this commodity is less elastic in the local market and high demand in foreign country or market (Mastel, 2016). In foreign market they sell product on low prices and sell high quantity and earn huge profit because the demand is high elastic in the foreign market. The foreigner customer is more attract towards foreign commodity because this price of that commodity is low.
Industrialist intensely produced more product without considering demand and supply
In this you sell product on very cheap or in loss because you remove your competitor from the market when you make monopoly in the market, you raise the price of the product
Objectives of the Dumping
Find place in the foreign market
Due to high competition in the foreign market a monopolist sell his product on very low rates because get position in the foreign market. He set low prices only due to high market competition.
To sell surplus commodity
Another main objective of the monopolist is to sell surplus products, which is over from the local domestic demand. Mostly monopolist dump those products who are surplus from their local market.
Expansion of their industry
Another objectives that achieve by the monopolist through dumping in other countries to extend their industry, when he expand his industry in the result he produces products on cheaper rate and more products dump in foreign market on lower cast.
New trade relation
Sometime monopolist dump in foreign country to developing a new trade relations in foreign countries. For this purpose he sells products on very low rate to developing new trade relation in foreign country.
Effects of dumping:
Dumping effects both the host state and the sender states.
Effects of dumping on host state:
The effects of dumping on host state where monopolist dump his commodity it is based on the nature of the commodity and the time period of dumping whether the time period is short or long time period.
If the monopolist dump his product for a short span of time in foreign country when they affect domestic industry of the host state is for the short span of time (Liu et al. 2016). Due to the low prices of the dump commodity this product sell easily and within the specific time.
Dumping is harmful for the country that host it if this dumping is for a long period.
If the dumping product is common consumer good due to the cheap rate it will change the demand of good, and when after the sometime the dumping will stop in the result the demand will reverse and change in the taste of the people will be harmful for the economy (Popescu et al. 2016).
If the dumped products low price capital goods they will lead to setting a new industry but if the dumping is stop in the result that industry will be shut down. Ultimately host country in loss.
In case a monopolist dump his commodity in a foreign country on very cheap rate to remove his competitor from the market in the beginning the host state get benefits from it, but in long term when the competition is end he sells his products on high rate.
If the host country imposed high tariff duty on the dumping products it will equalize the prices of the dumping commodities and domestic commodities it will benefits for the host country. If there is low tariff duty it will benefits for the monopolist he sell his commodity on low prices.
Effects of dumping on exporting country:
When the local consumer cost the products of monopolist at higher cast when in result of surplus they cannot got benefits from them. When the surplus production is dump in foreign countries they cannot reduce the prices of products in the local market. Due to export of surplus local consumer cannot got the advantages of this over production.
The exporting country get extra advantages when they produce surplus they export and got extra benefits after fulfill his local demands.
The exporting country or country that dump their products in foreign country earns huge foreign currency in result of selling dump products.
Dumping is very serious issue in the international economic market. Dumping very badly effect the host economy, due to the dumping the national economy of the host country is fully destroy (Blonigen & Prusa, 2016). There are some actions taken by the host economy to protect their domestic such as quota, embargo and barriers etc.
Effects of Dumping on United States of America:
Dumping is very badly effect United States. Over production in china and other states due to high market value of United States these states dumped in United States, the value of these dumped products is low as compare to the domestic produced products (Watson, 2014). Due to huge difference between the prices of local production and between the products that dumped in the country the local production will effect negatively because the consumer more attract towards those product that are cheap , due to this emerging concept the will badly effect the local industrialist.
The emerging trend of consumer towards the foreign product it is very bad for United States economy because due to that huge capital flow from United States towards other foreigner country (Watson, 2014). Due to high ration of dumping in United States the local industrialist face many difficulties to compete with the business men who dump in United States and a local American business men who produces products in American and also sell in America. It is difficult for American local business men to compete with them.
Due to high labor rate the production cast is high and due to labor cast in other countries such as China where is the cost of labor is low (Watson, 2014). Due to that the prices of Chinese products is low as compare to American products.
According to these emerging move of consumer towards foreigner products new American administration take some steps that help United States local industry to stand on their feet’s.
To protect your domestic economy from the dumping sates may take some step that is quota, tariff and duty etc.
America need to adopt following policies to protect your local business.
High tariff and duty:
To stop dumping many countries imposes high tariff and duty on importing commodities. This policy will help to protect your local business (Blonigen & Prusa, 2016). Due to high tariff and duty the price of dumping and local commodity is equal than it is difficult for the dumping goods to attract consumer.
Another that will take by American to protect their local economy that is import quota. When the impose quota it is difficult for foreigner business to dump high ratio in America.
Impose embargo on import also will help United States to protect its economy from foreigner business man. There are many states that impose embargo on import to protect your local business.
These above mention suggestion will help America to protect its local market from the dumping if steps were not taken dumping very negatively affect the United States.
Dumping is very serious issue in international market economy. Many monopolist dump their products in foreign country to stabilize the prices of products or to influence the foreign economic market. The main purpose of dumping is to build your monopoly in local or foreigner economy. Dump products are cheap and that easily attract the consumer due to that the local economy was suffer due to dumping. American economy also face many problems due to the dumping. America mainly face dumping issue from China. Chinese commodity are cheaper as compare to United States and easily attract the consumer due to which the local American business man face troubles. It is need that America take steps to protect their local business man from foreigner business man that dump products in America and sell out these on low market rate. If the steps were not taken by the authorities it is very dangerous for United States of America in the future.
Blonigen, B. A., & Prusa, T. J. (2016). Dumping and antidumping duties. In Handbook of Commercial Policy (Vol. 1, pp. 107-159). North-Holland.
Liu, C. S., Hsiao, C. T., Chang, D. S., & Hsiao, C. H. (2016). How the European Union’s and the United States’ anti-dumping duties affect Taiwan’s PV industry: A policy simulation. Renewable and Sustainable Energy Reviews, 53, 296-305.
Mastel, G. (2016). Antidumping laws and the US economy. Routledge.
Popescu, G. H., Nica, E., Ștefănescu-Mihăilă, R. O., & Lăzăroiu, G. (2016). The United States (US) Steel import crisis and the global production overcapacity till 2016. Metalurgija, 55(3), 538-540.
Watson, K. (2014). Will Nonmarket Economy Methodology Go Quietly into the Night?: US Antidumping Policy Toward China after 2016.