Trade and Dumping
We learnt that dumping is actually good for the consumers and bad for the import competing industry of the country where the good gets dumped.
Dumping: Charging different prices in different countries for the same product. The country with the lower price, normally calls this dumping and increases the price by imposing a tax. The definition used here, may differ from online ones or from other places.
Predatory dumping how ever is bad. That is when you dump goods with the intent to reduce the price and drive out all competition in that market so you become the monopoly. This has never happened in the international trade so far ( i would like to try it ;)). Reason why this doesn't work, this becomes a never ending cycles of foreign producers driving each other out of the market since "monopoly profits" are better than competitive profits. Consumers lose, because once when someone wins, they will charge a high price and reduce quantity, short term benefit of low prices is paid in eternity of high prices and reduced quantities :).
Generally the cases for dumping are along the lines that you sell your watch in USA for $30, and you sell the same brand in your home market (Japan, makes life easier) for $40. USA would label this as dumping, and add a $10 tax, so the price goes to $40. Most cases in international trade happen because of price discrimination and not because of Predatory dumping(predatory dumping may account for 4% of cases, while 96% are generally price discrimination).
There is a sticky issue of dumping agricultural products. In the above example, taken from life, products sold at a higher price in Asian countries are due to the fact of inelastic demands, import restrictions and next generation technologies. The cell phone technologies that are being introduced in Europe and North American markets have already been in use in the Asian markets for the past 2-5 years for the consumers.
Back to agricultural products (USA, EU, Canada are guilty on most count, agricultural subsidies), this can be good provided the dumping increases the supply of food, the food gets distributed and the risk of famine is averted (never happens, distribution systems are such). What results is that people who grew their food with no subsidy face a price that doesn't even make up for their cost. The product being dumped is not of the same quality, and often countries in Africa have natural grown products for most, but developed countries have a tendency to mess around with that ;).
In the agricultural product it is not a case of "dumping", but a case of flooding the market with excess supply. Naturally since most of these countries have little trade with USA, and these flood are detrimental to growth, they look towards the WTO (studying that in 2-3 class time). There have been occasions when USA has been hit back due to flooding the market, and it does hurt the economy, but what can I say, people don't learn much from their mistakes.
A note on dumping in developed countries. In competitive markets, there has to be a consensus that dumping is being done, hence organising is hard. Industries which are monopolies, duopolies, oligopolies...etc, are the ones that are against dumping. Ironic, they should be least worried about having their profits taken away and become more economically efficient (that may mean ripping off the consumers surplus, as long as they do it efficiently, hardly no one does, they choose the easy way).
This means that you only file a complaint, and the board goes and harasses these foreign companies. End result, these companies often quit, and the end result is achieved through the wrong means.
Dumping: Charging different prices in different countries for the same product. The country with the lower price, normally calls this dumping and increases the price by imposing a tax. The definition used here, may differ from online ones or from other places.
Predatory dumping how ever is bad. That is when you dump goods with the intent to reduce the price and drive out all competition in that market so you become the monopoly. This has never happened in the international trade so far ( i would like to try it ;)). Reason why this doesn't work, this becomes a never ending cycles of foreign producers driving each other out of the market since "monopoly profits" are better than competitive profits. Consumers lose, because once when someone wins, they will charge a high price and reduce quantity, short term benefit of low prices is paid in eternity of high prices and reduced quantities :).
Generally the cases for dumping are along the lines that you sell your watch in USA for $30, and you sell the same brand in your home market (Japan, makes life easier) for $40. USA would label this as dumping, and add a $10 tax, so the price goes to $40. Most cases in international trade happen because of price discrimination and not because of Predatory dumping(predatory dumping may account for 4% of cases, while 96% are generally price discrimination).
There is a sticky issue of dumping agricultural products. In the above example, taken from life, products sold at a higher price in Asian countries are due to the fact of inelastic demands, import restrictions and next generation technologies. The cell phone technologies that are being introduced in Europe and North American markets have already been in use in the Asian markets for the past 2-5 years for the consumers.
Back to agricultural products (USA, EU, Canada are guilty on most count, agricultural subsidies), this can be good provided the dumping increases the supply of food, the food gets distributed and the risk of famine is averted (never happens, distribution systems are such). What results is that people who grew their food with no subsidy face a price that doesn't even make up for their cost. The product being dumped is not of the same quality, and often countries in Africa have natural grown products for most, but developed countries have a tendency to mess around with that ;).
In the agricultural product it is not a case of "dumping", but a case of flooding the market with excess supply. Naturally since most of these countries have little trade with USA, and these flood are detrimental to growth, they look towards the WTO (studying that in 2-3 class time). There have been occasions when USA has been hit back due to flooding the market, and it does hurt the economy, but what can I say, people don't learn much from their mistakes.
A note on dumping in developed countries. In competitive markets, there has to be a consensus that dumping is being done, hence organising is hard. Industries which are monopolies, duopolies, oligopolies...etc, are the ones that are against dumping. Ironic, they should be least worried about having their profits taken away and become more economically efficient (that may mean ripping off the consumers surplus, as long as they do it efficiently, hardly no one does, they choose the easy way).
This means that you only file a complaint, and the board goes and harasses these foreign companies. End result, these companies often quit, and the end result is achieved through the wrong means.