Dumping is a pricing strategy which involves setting low prices for items meant for export while higher prices are imposed on the same products if they are sold in the domestic market. In some cases, the export price may even be lower than the actual cost of production. Free market supporters believe that this practice is beneficial as it allows buyers to enjoy low prices. Critics, on the other hand, assert that dumping practices only support the negative consequences of free trade. For instance, certain local industries in countries where products are “dumped” may suffer major losses. This is why free market critics advocate the establishment of protectionist policies against dumping and other predatory pricing practices.
While dumping is not illegal in the context of international trade, authorities all over the world seek to control the extent to which it is practiced. Governments of importing countries often seek to minimize the extent of dumping in their territories, in order to protect local industries and domestic growth. In cases where dumping may cause serious negative consequences to the importing country’s industries, it is highly discouraged by the World Trade Organization. At the same time, though, the WTO may accept and address complaints against anti-dumping activities from its member nations. Countries which adopt anti-dumping measures have to undertake a series of activities in order to calculate the extent of dumping taking place. These processes seek to prove that ongoing dumping activities pose serious economic threats. Should authorities determine the margin of dumping to be negligible, anti-dumping investigations are then called to a halt.
