Unit 11 Flashcards
Pushing exports
Dumping
selling exports at a price that is “too low”,
a price below “normal value” or “fair market value (often called in the US)”
Dumping - either
the export price is lower then the price charged for comparable domestic sales in the home market of the exporter
Dumping - or
the export price is lower then the full unit cost (including a profit margin)
Why does dumping occur=
predatory dumping
A firm temporary charges a low price in the export market with the purpose of driving its foreign competitors out of business
Why does dumping occur=
cyclical dumping
During recession the demand fall and also the price.
The company tends to lower its prices, to limit decline in quantity sold.
If any of these sales are exports, the firm is dumping
key: happens during a recession
Why does dumping occur=
seasonal dumping
is intended to sale off excess inventories of a product
Why does dumping occur=
Persistent dumping
the firm maximises profit by charging a lower price to foreign buyers
- less monopoly power ( more competition) in foreign markets than it has in home markets
- buyers in the home country cannot avoid the high home prices by buying the good abroad and importing it cheap
Why does dumping occur
4 reasons
Predatory dumping
Cyclical dumping
Seasonal dumping
Persistent dumping
Normal Value - long standing definition
- price changed to comparable domestic buyers in the home market (or to comparable buyers in other markets).
dumping is international price discrimination favouring buyers of export
Normal Value -
two legal definitions
- long standing definition
2. Second definiton
Normal Value - 2nd definition
- arose in 1970. it is cost-based - the average cost of production the product, including overhead costs and profit.
dumping is selling exports at. price that is less then the full average cost of the product
Why does dumping occur =
predatory dumping - outcome
once the rivals are gone, the firm will use its monopoly power to raise prices and earn high profits
Why does dumping occur=
seasonal dumping - example
towards the end of a fashion season, clothing manufactures may decide to sell off any remaining stock of swimsuits at a price that are below full average cost
Why does dumping occur=
Persistent dumping - outcome
at any common price, the firm faces a less elastic (steeper) demand curve in its home market than in the more competitive foreign markets
gov policy towards dumping?
- importing countrys view
Welcome dumping and thank the exporting countries - bc they are getting things at a lower price.
- mainly seasonal and persistent dumping = good.
- Bad: cycle dumping most complicated
- Bad: Predatory dumpring
