Dumping in International Trade

What is dumping?

Dumping is the practice of exporting a product at a lower price in a foreign market than in the exporter’s domestic market. It is a form of price discrimination intended to gain a competitive advantage abroad. Because it can harm producers in the importing country, dumping is viewed as an unfair trade practice, though it is not automatically illegal under international rules.

Key points

• Dumping = export price < domestic price for the same product.
• It can help exporters gain market share but may injure domestic producers in the importing country.
• The World Trade Organization (WTO) permits dumping unless the importing country can demonstrate material injury to its industry.
• Common responses include antidumping duties, countervailing measures, tariffs, and quotas.

How dumping works

Manufacturers or exporters sell at below their home-market price—or even below cost—to penetrate foreign markets, capture customers, or undercut competitors. Governments may subsidize exporters to offset losses from below-cost sales. Sustained dumping can drive competitors out of a market and enable the exporter to raise prices later.

Pros and cons

Pros
* Rapid market entry and expanded export volumes for exporters.
* Lower consumer prices in the importing market (short term).

Cons
* Local firms in the importing country can be harmed, potentially leading to closures and job losses.
Subsidies to support dumping can be expensive for the exporter’s government.
Dumping can provoke trade disputes, retaliatory measures, and longer-term market distortions.

Policy responses and global perspective

• WTO framework: Dumping itself is not banned; importing countries must show dumping, injury to domestic industry, and a causal link to impose remedies.
• Antidumping duties and countervailing duties are the primary tools to offset dumping or subsidies.
• Quotas and other import restrictions may also be used to protect domestic industries.
• Dumping that causes “material retardation” of a developing domestic industry can be prohibited.
• Enforcing antidumping claims can be complex, costly, and fact-intensive; proving injury and calculating dumping margins requires detailed investigations.

Case example

U.S. authorities investigated imports of amorphous silica fabric from China and found the products were being sold in the U.S. at less than fair value. Based on findings that dumping had occurred and was likely to continue, authorities maintained an antidumping duty to prevent future injury to domestic producers.

Common questions

What is the dumping margin?
The dumping margin is the difference between the exporter’s home-market price (or normal value) and the export price. It helps determine the size of antidumping duties.

Why do companies dump?
To gain footholds in new markets, increase sales, and potentially displace competitors. If sustained long enough, dumping can enable market dominance.

What’s harmful about dumping?
It can flood an importing market with underpriced goods, harm or eliminate domestic producers, and strain international trade relations.

Bottom line

Dumping is a strategic pricing practice that can yield short-term gains for exporters and lower prices for consumers, but it often harms domestic industries and can prompt legal and political responses. WTO rules allow remedies when dumping causes material injury, and most countries rely on antidumping and countervailing measures to protect their industries.