What Is Dumping?Dumping is a term used in the context of international trade. It's 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. Because dumping typically involves substantial export volumes of a product, it often endangers the financial viability of the product's manufacturer or producer in the importing nation. Show
Key Takeaways
DumpingUnderstanding DumpingDumping is considered a form of price discrimination. It occurs when a manufacturer lowers the price of an item entering a foreign market to a level that is less than the price paid by domestic customers in the originating country. The practice is considered intentional with the goal of obtaining a competitive advantage in the importing market. Advantages and Disadvantages of DumpingThe primary advantage of trade dumping is the ability to permeate a market with product prices that are often considered unfair. The exporting country may offer the producer a subsidy to counterbalance the losses incurred when the products sell below their manufacturing cost. One of the biggest disadvantages of trade dumping is that subsidies can become too costly over time to be sustainable. Additionally, trade partners who wish to restrict this form of market activity may increase restrictions on the good, which could result in increased export costs to the affected country or limits on the quantity a country will import. International Attitude on DumpingWhile the World Trade Organization (WTO) reserves judgment on whether dumping is an unfair competitive practice, most nations are not in favor of dumping. Dumping is legal under WTO rules unless the foreign country can reliably show the negative effects the exporting firm has caused its domestic producers. To counter dumping and protect their domestic industries from predatory pricing, most nations use tariffs and quotas. Dumping is also prohibited when it causes "material retardation" in the establishment of an industry in the domestic market. The majority of trade agreements include restrictions on trade dumping. Violations of such agreements may be difficult to prove and can be cost-prohibitive to enforce fully. If two countries do not have a trade agreement in place, then there is no specific ban on trade dumping between them. Real World ExampleIn January 2017, the International Trade Association (ITA) decided that the anti-dumping duty levied on silica fabric products from China the previous year would remain in effect based on the investigation by the Department of Commerce and the International Trade Commission that showed that the silica products from China were selling at less than fair value in the United States. The ITA ruling was based on the fact that there was a strong likelihood that dumping would repeat if the tariff was removed. What is the cause of price escalation in international markets?True or false: Price escalation is the result of excess profits that exist in international markets. This statement is false. While excess profits exist in some international markets, the reason for price escalation is the cost of exporting products from one country to another. To be successful in a deflationary market, an exporter must _____.
Why do marketers ship unassembled goods to a free trade zone?- uncertain potential demand for goods offered in payment - insufficient time to carry out market analysis Identify typical reasons why marketers can lower their costs by shipping unassembled goods to a free trade zone (FTZ) in an importing country. (Select all that apply.) - Lower tariffs on unassembled goods
What does false price escalation mean?(T/F) There is a set of global rules that govern the standards of decency in advertisements across the world. False price escalation refers to the : disproportion price difference in two countries engaged in trade with each other An increase in forward hedging during international trade can be attributed to the absence of ______.
Which of the following occurs when a company sells goods in a foreign market below the price of the same goods in the domestic market?What is Dumping? Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer's sales price in the country of origin ("home market"), or at a price that is lower than the cost of production.
When price differences are greater than the cost of transportation between two markets the possibility of a?The possibility of a parallel market occurs whenever price differences are greater than the cost of transportation between two markets.
Is the practice of selling a product in foreign countries for a lower price?What Is Dumping? Dumping is a term used in the context of international trade. It's 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.
What are the advantages of working with export management companies?Export management companies can help exporters with:. Foreign market research.. Trade shows and other overseas product promotions.. Marketing strategies for targeting preferred buyers.. Foreign distribution.. Establishing logistics systems.. Managing and training a foreign sales force.. |
Uncontrolled causes of the escalated price of exported goods confine the sale of a product to _____.
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