Dumping
Dumping, in economics, is an act of selling a product at a price significantly lower than the standard market price. It is commonplace in international economics, since it frequently occurs when an influential country or group of manufacturers seek to increase their market share in smaller or developing countries. According to the World Trade Organization (WTO), dumping is said to exist in a market where “a product is introduced at a price that is lower in the import market than the price in the exporter’s home market.”
Dumping, simply defined, is an illegal practice of selling a product in a foreign market at an unfairly low price in order to gain monopoly in that market. The WTO says that if a producer exports a product at a price lower than the price that they are charging in their own domestic market, then that is considered dumping. Therefore, dumping is also a type of price discrimination, and it generally happens when a producer wants to gain market access and maximise their profits by selling their product at a lower rate outside their domestic market.
Unfortunately, dumping has some negative consequences for the economy of the country where it is practiced. These include a decrease in economic development, a decrease in the profitability of local industries, and a decrease in employment levels. In addition, local businesses and consumers may be subject to higher prices for goods and services due to competition from less expensive and underpriced imported goods. In some instances, this could even have a knock-on effect that could damage the reputation of the importing country.
In conclusion, while dumping may have some positive effects in the short-term, such as increased market access or increased profits, there are also a number of negative consequences, such as decreased economic development, decreased local employment and higher prices for consumers. Therefore, governments of countries which are at risk of receiving dumped goods should take action to prevent such practices from impacting their local economy, or to minimise the potential damage caused by such activities.
