Dumping (pricing policy)

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This article is about the economics term. For industrial relations and social justice issue, see
Social dumping. For the tax avoidance term, see SUTA dumping.

In economics, "dumping" can refer to any kind of predatory pricing. However, the word is now
generally used only in the context of international trade law, where dumping is defined as the act
of a manufacturer in one country exporting a product to another country at a price which is either
below the price it charges in its home market or is below its costs of production. The term has a
negative connotation, but advocates of free markets see "dumping" as beneficial for consumers
and believe that protectionism to prevent it would have net negative consequences. Advocates
for workers and laborers however, believe that safeguarding businesses against predatory
practices, such as dumping, help alleviate some of the harsher consequences of free trade
between economies at different stages of development (see protectionism). The Bolkestein
directive, for example, was accused in Europe of being a form of "social dumping," as it favored
competition between workers, as exemplified by the Polish Plumber stereotype. While there are
very few examples of a national scale dumping that succeeded in producing a national-level
monopoly, there are several examples of dumping that produced a monopoly in regional markets
for certain industries. Ron Chenow points to the example of regional oil monopolies in Titan  :
The Life of John D. Rockefeller, Sr. where Rockefeller receives a message from Colonel
Thompson outlining an approved strategy where oil in one market, Cincinnati, would be sold at
or below cost to drive competition's profits down and force them to exit the market. In another
area where other independent businesses were already driven out, namely in Chicago, prices
would be increased by a quarter. [1]

A standard technical definition of dumping is the act of charging a lower price for a good in a
foreign market than one charges for the same good in a domestic market. This is often referred to
as selling at less than "fair value". Under the World Trade Organization (WTO) Agreement,
dumping is condemned (but is not prohibited) if it causes or threatens to cause material injury to
a domestic industry in the importing country. [2]