What is Dumping? In economics, dumping refers to manufacturing firms that export goods at a price lower than their domestic price or cost of production. It's a kind of predatory pricing.
It also refers to agricultural subsidies paid to farmers in the US and the European Union, who then sell food around the world at artificially low prices.
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there are three Main types of dumping:persistent, predatory It is sporadic.
This is international price discrimination going on indefinitely. Exporting companies benefit from this when demand in a foreign market is more elastic than demand in the company's home market.
Used by manufacturers as a means of eliminating competition in a foreign market. High domestic prices are used to supplement reduced export earnings from cheaper products.
By exporting goods at cheap prices, exporters are able to drive out any competition in the area. Once competition is eliminated, the firm can then raise the price of the product and generate more revenue.
The importing country usually complains, because its market may end up being controlled by a foreign monopoly.
This occurs when there is a temporary surplus of a specific product. Firms will dump surplus goods in foreign markets without having to lower prices in the domestic market. The internal market refers to the market within the borders of a country.
The Antidumping Agreement of the World Trade Organization (WTO) ensures that its members do not arbitrarily take these actions.
The agreement states that measures can only be enforced if sales of a dumped product cause material injury to a domestic industry producing a similar good.
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