The main advantage of dumping is selling at an unfairly competitive lower

price. A country subsidizes the exporting businesses to enable them to sell below

cost. The nation's leaders want to increase market share in that industry. It may
want to create jobs for its residents. It often uses dumping as an attack on its
trading partner's industry. It hopes to put that country's producers out of business
and become the industry leader. There is also a temporary advantage to
consumers in the country being dumped upon. As long as the subsidy continues,
they pay lower prices for that commodity.

The problem with dumping is that it's expensive to maintain. It can take years of
exporting cheap goods to put the competitors out of business. Meanwhile, the
cost of subsidies can add to the export country's sovereign debt. The second
disadvantage is retaliation by the trading partner. Countries may impose trade
restrictions and tariffs to counteract dumping. That could lead to a trade war. The
third is censure by international trade organizations. These include the World
Trade Organization and the European Union.

A country prevents dumping through trade agreements. If both partners stick to

the agreement, they can compete fairly and avoid dumping. Violations of
dumping rules can be difficult to prove and expensive to enforce. For example,
the North American Free Trade Agreement (now the United States-Mexico-
Canada Agreement) provides a mechanism to review violations of the trade
agreement. Trade agreements don't prevent dumping with countries outside of
the treaties. That's when countries take more extreme measures. Anti-dumping
duties or tariffs remove the main advantage of dumping. A country can add an
extra duty, or tax, on imports of goods that it considers to be involved in
dumping. If that country is a member of the WTO or EU, it must prove that
dumping existed before slapping on the duties. These organizations want to make
sure that countries don't use anti-dumping tariffs as a way to sneak in trade
protectionism. Most countries are members of the WTO. Member countries
adhere to the principles laid out during negotiations of the General Agreement on
Tariffs and Trade. That was a multilateral trade agreement that preceded the
WTO. Countries agree that they won't dump and that they won't enforce tariffs
on any one industry or country. To install an anti-dumping duty, WTO members
must prove that dumping has occurred.

The WTO is specific in its definition of dumping. First, a country must prove that
dumping harmed its local industry.
It must also show that the price of the dumped import is much lower than the
exporter's domestic price. The disputing country must also be able to
demonstrate what the normal price should be. When all these have been put in
place, then the disputing country can institute anti-dumping tariffs. The EU
enforces anti-dumping measures through its economic arm, the European
Commission.3 If a member country complains about dumping by a non-member
country to the EU, then the EC conducts a 15-month investigation. Like the WTO,
the EC must find that material harm has occurred to the industry.  The EC must
find two other conditions before it imposes duties. First, it must find that
dumping is the cause of material harm. Second, it must find that the sanctions
don't violate the best interests of the EU as a whole. If found guilty, the exporter
can offer to remedy the situation by agreeing to sell at a minimum price. If the EC
doesn't accept the offer, it can impose anti-dumping duties. These can be in the
form of an ad valorem tax, a product-specific duty, or a minimum price. 

References:
U.S. Congress. (2020) "United States-Mexico-Canada Agreement Implementation Act,"
Accessed March 7, 2020. Retrieved from https://www.congress.gov/bill/116th-congress/house-
bill/5430/text

World Trade Organization.(2020) “Anti-dumping, Subsidies, Safeguards: Contingencies, Etc,”.

Retrieved from https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm

European Commission.(2020) “Anti-dumping,” Retrieved from

https://ec.europa.eu/trade/policy/accessing-markets/trade-defence/actions-against-imports-
into-the-eu/anti-dumping/