Dumping

What Is Dumping?

In international trade law, dumping is the practice of exporting a product at a price below its normal value, such as below the price charged in the exporter's own home market or below its cost of production. Because the exported good is sold abroad more cheaply than at home, dumping is treated as a form of unfair price discrimination across borders. A firm might dump goods to offload surplus output, to gain market share in a foreign country, or, in the most aggressive version, to drive competitors out before raising prices later. World Trade Organization rules allow importing countries to respond when dumping is found to injure a domestic industry.

Why It Matters

Dumping sits at the center of many trade disputes because it is hard to distinguish from ordinary competition. Low import prices benefit consumers, so a foreign firm simply being efficient and cheap is not dumping; the concept specifically requires selling below normal value. When authorities determine that dumped imports are materially harming a domestic industry, they may impose an anti-dumping duty, an extra import tax meant to offset the price gap. Anti-dumping cases are among the most common trade remedies filed at the WTO, and steel, chemicals, and electronics are frequent subjects. Critics warn that anti-dumping rules can be misused as disguised protectionism, since proving a fair 'normal value' involves judgment calls that can be tilted to favor domestic complainants.

Test Your Knowledge

Questions on this topic from the EconRecall fact bank:

• In international trade law, what is "dumping"?
  Exporting a product at a price below its normal value, such as below its home-market price
• What is an anti-dumping duty?
  An additional import tax imposed to offset dumping found to injure a domestic industry