Page 192 - International Marketing

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194 International Marketing BRILLIANT'S

What do you understand by Dumping? Also explain the ob-
jectives and arguments of Anti-dumping legislations.
Introduction
It is a fact that prices in home market and export markets may differ.
The price of the product in markets abroad may be lower or higher than or
equal to price in the market at home market. In case, the price of the
product in the market abroad is lower than the price in home market, then
the question of dumping appears. In international markets, dumping is a
widely used strategy. Dumping means selling of a product or commodity
below the cost of production or at a lower price in overseas markets
compared to domestic markets. Dumping is considered as ‘unfair’ trade
practice by the World Trade Organization (WTO). Anti-dumping duties
can be levied on imports of such products under the agreement on Anti-
dumping practices. A product is considered to be dumped if its export
price is less than either its cost of production or the selling price in the
exporting country. Besides, for taking anti-dumping action, there should
be genuine ‘material’ injury to the competiting domestic industry. The
government in the importing country should assess the extent of dumping
and estimate the injury cost to prove dumping.
Dumping is considered to be ‘unfair’ in international markets, but it
makes sound economic sense as a profit maximization strategy. For
dumping to occur, the following conditions need to be satisfied:
 The industry must be imperfectly competitive so that the firms act
as a price setter rather than price taker.
 Market must be so segmented as to make it difficult for the domestic
buyers to purchase goods intendend for overseas markets.
Definition
There is no acceptable exact, definition of the term 'dumping'. GATT
(General Agreement for Tariffs and Trade) has defined it as, "the difference
between the domestic price and the price at which the product is exported
from a country."
According to United States, "dumping is an unfair trade practice,
unfair price cutting having for its objectives the injury, destruction or
prevention of the establishment of American industry."
Objectives of Anti-Dumping Legislation

The objectives of the anti-dumping legislation are:
(i) To legitimately protect the local industry and trade from preda-
tory pricing practices by foreign companies, or,