Question

Define the word "dumping"as used by trade policy makers in the USA and how this definition can be used to justify protectionism, and why this definition is harmful to international trade

Answer 1

Dumping is defined as a situation 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.

The main purpose is to obtain a competitive advantage in the importing market. & Is recognised as an unfair trade practice.

Hence Dumping is when a country's businesses lower the sales price of their exports to gain unfair market share. They drop the product's price below what it would sell for at home. & sometimes even push the price below the actual cost to produce. & Finally the price is raised once they've destroyed the competition.

Dumping as protectionist policy:

The country involved in dumping is willing to take a loss on the product to increase its market share in that industry. because it creates jobs for its residents. dumping is used as an attack on the other country's industry. Resulting in that country's producers out of business and dumping nation becomes the industry leader.

harmful to international trade:

The main disadvantage is retaliation by the trade partner. Countries may impose trade restrictions and tariffs to counteract dumping. That could lead to a trade war.

Dumping is legal under WTO rules unless the foreign country can reliably show the negative effects the exporting firm has caused its domestic producers.

Hence To counter dumping, most nations use tariffs and quotas to protect their domestic industries from predatory pricing through dumping practices