Oct 21 2008

Fair trade vs. free trade: the problem with “dumping”

FT.com / World – Anti-dumping investigations soar

Free trade is good, right? This sentiment is one that economists typically agree with wholeheartedly. The mutual gains from free trade among nations that specialize in the goods for which they have the comparative advantage results in increased global output and consumption among trading nations. That, at least, is the basic premise of free trade.

But is there such a thing as unfair free trade? The World Trade Organization, whose mission is the removal of barriers to trade among all the world’s nations, thinks there is such a thing as unfair trade. Under certain circumstances, the WTO allows member nations to place protective tariffs on particular imports, and recently, more and more nations have taken action to protect their domestic markets from unfair trade practices of their trading partners:

The number of new anti-dumping investigations soared by nearly 40 per cent in the first six months of this year, the World Trade Organisation said on Monday, reflecting increased trade tensions as the credit crunch began to take its toll on the global economy.

Between January and June 16 WTO members started 85 new investigations compared with 61 in the first six months of 2007. China was the target of nearly half the probes, a jump of 75 per cent over the same period last year.

Under WTO rules, countries can put duties on unfairly priced imports that are sold in export markets more cheaply than at home. But until this year dumping actions had seemed to be on a downward trend, with 164 investigations in the whole of last year compared with over 200 in 2006.

Anti-dumping actions, once mainly taken by rich countries against poor ones, have become a tool increasingly used by developing nations while industrialised countries have increasingly become targets…

The EU was the third-ranking target in the first half of the year, after China and Thailand. Canada, the US, New Zealand and Norway also had investigations opened against their exports.

The WTO said the main products affected were base metals (21 investigations), textiles (20) and chemicals (10).

The number of new measures taken as a result of anti-dumping probes also rose in the first six months of 2008, with 54 measures against 51 measures in the same period in 2007. India applied duties in 16 cases, with the EU some way behind in second place.

China was again the main target followed by Taiwan, the EU, South Korea, Russia and the US.

Discussion Questions:

  1. Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?
  2. Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?
  3. When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

140 responses so far

140 Responses to “Fair trade vs. free trade: the problem with “dumping””

  1. nchaneliereon 10 Oct 2011 at 5:10 am

    •Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    Cheap goods is what every consumer is looking for, however, in this case, we have to consider the long-term effects before getting to happy and settling with cheaper imports. What happens when a country has to many cheap imports within its domestic markets is local firms having a lot of trouble to keep up with the low prices. Often, these cheap imports are sold at lower prices than production prices, meaning that the local firm cannot compete with such low prices, therefore on the long-term having to shut down, creating higher unemployment and a loss of domestic firms affecting the domestic economy drastically. So countries prefer to have “normal” priced imports coming in, because this allows their own firms to have an adequate share within the market, there will be lower imports, so an increased aggregate demand keeping everyone happy.

    •Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    Dumping refers to a country exporting high quantities of a commodity to a developing country at a lower cost than the cost of production. This means that the exporting country does benefit from this trade, however the receiving country is disadvantaged by the low prices, affecting the domestic AD, due to high Imports.

    This distinction is important to understand how dumping can be considered as “unfair” trading.

    •When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    The principle of comparative advantage is not being undermined, because comparative advantage is when a country can produce a product at a lower opportunity cost than another. Dumping is about selling a product at a lower price than its cost of production, so it is no longer a question of comparative advantage, but one of seeing if both the countries are actually benefitting from the trade or not.

  2. nchaneliereon 10 Oct 2011 at 5:14 am

    Gunnhildur Ómarsdóttir

    I totally agree with you in the answer of your first question. It's one of those situations where the long-term consequnces cannot be neglected because a falling economy is very hard to stablize, so for countries to realise that cheap cheap imports are not good for their domestic economy is very important.

  3. yoferon 10 Oct 2011 at 2:47 pm

    Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    Cheap imports do might make consumer happier as consumers pay less, but the problem begins when the cheap imports are consumed more than domestically produced products. Consumers in a country would look to maximize their personal utility and buy the cheapest products but if imported products are much cheaper than domestically produced products than the domestic producers might find themselves without a job, for that reason a country will keep cheap imports out of the country

    Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    Dumping refers to the sale of a country’s goods below the cost of production in the country where the good is made. The distinction is important because selling below the importing country’s cost of production is fair trade while dumping severely hurts the importing economy and is ‘unfair’.

    When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    Yes when a nation protects its domestic market from dumping, the principle of comparative advantage being undermined. Because if a country is able to dump than it uses its comparative advantage but because the act is might hurt the importing economy than the principle is undermined.

  4. yoferon 10 Oct 2011 at 3:20 pm

    Dilan Gunes

    I do agree with the analysis you mad for the first question about the perspective of domestic producers and firms but regarding to question two I think that dumping has more to do with the ignoring of comparative advantage and the harm it causes the economy in which the commodities are being dumped

  5. Talia Greeneon 10 Oct 2011 at 3:24 pm

    1. Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy? Cheap goods do make a consumer happy in the short term. Cheap goods are goods that are sold below the production price, so domestic producers will be unable to compete. Consumers will buy the foreign cheap goods instead of the domestic goods, and domestic industries will decline.

    2. Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter? It refers to the sale of goods below the exporting country’s costs of production. This distinction is important, because it is what makes it an unfair trade practice as opposed to merely a result of free trade. The exporting country is able to sell the good below their own production costs because they have a surplus, which makes it near impossible for the importing country’s industries to compete.

    3. When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? It does not undermine comparative advantage. When a country practices dumping, they are not benefiting from producing the good at a higher efficiency, they are benefiting from their surplus. They are selling the good below the cost of production, so comparative advantage is not a factor.

  6. Talia Greeneon 10 Oct 2011 at 3:27 pm

    @yofer

    I disagree that preventing dumping undermines comparative advantage. Comparative advantage is based on a country being able to produce a good more efficiently, or having a lower production cost for that good. When a country practices dumping, they sell the good below their own production costs, so comparative advantage is not really a factor.

  7. Merve_Akpinaron 10 Oct 2011 at 8:43 pm

    Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    Even if the cheap goods are so desirable for consumers government wants to keep them away for some reasons. This occasion can be called as dumping. It happens when a country produces surplus of a good, and tries to get rid of that good in another country’s market with a really low price. But if government let that, the domestic markets end up suffering from this. Overall that is the reason for it.

    Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    Dumping refers to sale of country’s good below the importing country’s cost of production. Dumping is not the costs of production in the country where the good is made. This distinction matters, because if a country is producing below cost in imported country and the country is importing to the nation we can say that there is no dumping. It is kind of deal between countries and maybe the comparative advantage. But if there is no such a deal it is dumping.

    When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    When a nation protects its domestic market from dumping, the principle of comparative advantage is being undermined. Otherwise the domestic markets can run out. Moreover, if dumping continues in a country for years like a kind of habit, it may cause unemployment.

  8. Merve_Akpinaron 10 Oct 2011 at 8:48 pm

    @Talia Greene

    I liked your comment, but I disagree with some points; When a nation protects its domestic market from dumping, the principle of comparative advantage is being undermined. Because if a country does not keep cheap imports out of markets by willingly, we can say that it is the way they trade that is why that cannot be dumping it may be part of comparative advantage. So preventing this is in away preventing comparative advantage.

  9. HEppleron 11 Oct 2011 at 5:05 am

    Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    The country's desire to limit cheap imports depends on the type of cheap. In situations involving dumping, the domestic government would want to prevent the flooding of the market because the prices of all goods would be driven down because of the large quantity of cheap imports on the market. If the imports are cheaper than the domestically produced goods, the domestic producers are forced to take a loss on their production. In the long run, continued losses can result in less competition because the firms loosing money will leave the market creating a dependence on cheap imports for a good the domestic economy is capable of producing. In the long run, this will increase unemployment because there will be fewer domestic firms and therefore a decreased demand for labour. The short term consumers will be happy because they will be able to purchase goods with a smaller opportunity cost, but the long run creates unemployment, dependence, and instability in the market.

    Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    Dumping is releasing a large quantity of an export on a market for less than the domestic country's cost of production. The distinction is important because if it is less than the cost of production of the exporting country, the firm would not want those goods on their market because it would drive the price down. Also because if it is above the cost of production for the firm but below the cost of production for the importing country, it can be seen as a situation of comparative advantage where the exporting country has an advantage in capitol, resources, or efficiency.

    When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    The principle of comparative advantage is being undermined to an extent. The dumping country would have the comparative advantage because they produced a surplus using the same amount of resources the importing countries would have; however, dumping should be limited because the comparative advantage for the dumping country is not one that will be present in the long term but rather an accidental or lucky advantage because of a good year. The country who is being dumped on may typically have the comparative advantage, and their anti-dumping measures and ensuring the stability of their economy as well as the long-term stability of the global economy and the preservation of the concept of comparative advantage.

  10. HEppleron 11 Oct 2011 at 5:07 am

    @ Merve, I like your post, but I disagree that the presence of cheap imports on the market must be dumping. Sometimes the presence of cheap imports can be the result of a comparative advantage or an absolute advantage.

  11. Bryan_DiLauraon 11 Oct 2011 at 7:57 am

    -Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    A country may want to keep cheap imports out of its domestic markets. If the domestic economy must have a competing market, and they must have fairly similar products, then there is a pretty good reason to keep the cheap imports out. This market would directly compete with the domestic one, and especially in a dumping situation, this could put the domestic market totally out of business. On the other hand, if there isn't a competing market, cheap imported goods are a great thing for consumers. However if it exists, there could be much bigger things for the consumers to worry about than just a cheap price (like unemployment, etc).

    -Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    Dumping is when a country sells a good at lower than the production costs, to another country. Often times this is a surplus of production in the original country, and they are trying to get rid of the surplus. This is very significant, as the opposite is just free trade with a comparative advantage.

    -When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    Somewhat. While the overproduction that leads to the surplus was most often caused by a comparative advantage over the other country, they are being sold in the country in a destructive way within the importer's economy. This is more to protect the countries own business, who may or may not have a comparative advantage. Who knows, maybe it is just a big country with an absolute advantage, and just has a surplus of inefficiently produced goods.

  12. Bryan_DiLauraon 11 Oct 2011 at 8:01 am

    @HEppler

    You bring up a really good point about dumping that I had never though about before in question 2. I feel like dumping may often be caused by an absolute advantaged country, overproducing, then sending the surplus where they know it will sell.

  13. gökçe g&on 11 Oct 2011 at 8:02 am

    1)None of the countries would like to lost of cheap imports which are flooding the economy since this surplus of cheap imports refer to the less business for the domestic manufacturers of similar goods, and also the workers in those firms may lose their jobs, if this happens those workers can’t spend Money so help the economy.

    2) the dumping concept refers to selling a product under the price it was made in the country of origin. Therefore it is significant to make this distinction since selling a good below the importing country’s cost of production is free trade.

    3) technically being undermined refers to the principle of comparatibe advantage, this is for a good cause. Everyone would like to buy good products for a less prices, but in the long term effects of this habit lead to unemployment in the domestic economy. A country has to pick its position when coping with the dumping.

  14. gökçe g&on 11 Oct 2011 at 8:05 am

    @merve

    you explain the concepts very well but I dont agree with you about cheap goods need to be in the markets, because cheap products may be the result of comparative advantage or an absolute advantage.

  15. tsekineon 11 Oct 2011 at 2:39 pm

    1. In terms of free trade and comparative advantage, it would make a lot of sense for a country to import cheap products, as it will benefit consumers, due to its low price and producers of certain products (which have a comparative advantage). However when we look at the reasons for protectionism, it would also make sense that a country would want to keep cheap imports out of its domestic market. This is simply because of the fact that local producers of a particular product (where the product is also imported cheaply), would suffer due to job insecurities (mainly caused by the low demand, since the imported products are cheaper compared to the local one). This may eventually lead to a loss of jobs.

    2. Dumping refers to the sale of a country’s goods below the importing country’s costs of production (mainly caused by surpluses, or excess in the production of certain goods). I would imagine the distinction of the two statements matter, as they are completely different. One statement (dumping) refers to the sale* of a country’s goods below* the importing country’s costs of production. Whereas the other statement refers to the costs of production* in the country where the good is made, this statement would closely resemble the concept of free trade.

    3. Yes, I believe to some extent, the principles of comparative advantage is being undermined when a nation protects its domestic market from dumping, simply because a nation is able to import cheap goods for consumers, and at the same time allow different firms to specialize into the production of specific products. The protection of dumping would not allow the specialization of production of products. However it can be argued that consumers’ tastes and demand towards a specific good will also have a role in the restriction of importing certain goods. Hypothetically, if the majority of a nation does not ‘like’ or consume a certain product, there is really no need for importing the particular good.

  16. tsekineon 11 Oct 2011 at 2:45 pm

    To: Behiye Dasdemir

    About your second response: I was also thinking about the impact that dumping may cause on the aggregate demand of the economy. However, I was thinking of the opposite as you were. You stated that the importing country would suffer from the fall in AD, but I was thinking of an increase in aggregate demand (which would most likely lead to inflation due to the high level of consumption).

  17. Quinn Richardsonon 11 Oct 2011 at 5:19 pm

    1.There legitimate reasons for nations to not want cheap imports in their domestic markets. The first argument is that it destroys domestic production of the same goods. These foreign firms sell their goods at a lower than production cost price; a price that domestic producers can't compete with. Consumers may be happy in the short run due to the availability of cheaper goods and services however in the long run they may be faced with unemployment as domestic firms fail to compete with the dumped goods.

    2.Dumping occurs when goods are sold at a price below production costs in the producing country. This distinction is important because the opposite, selling products below the production costs in the consuming country, is the result of free trade. The producing country has the absolute/comparative advantage and thus is able to produce with lower production costs. In this case trade should continue as the consuming nation can devote its resources elsewhere to industries that have comparative advantages on the global market.

    3.The principle of comparative advantage is being undermined because it gives consumers the false impression that imported goods have an equal or higher price than domestically made goods. It gives domestic industries an allocated market share, free from international competition. Yet resources are being wasted on domestic industries that are inefficient compared to their international rivals. However, in the case of dumping, there is an argument to impose protectionism. The prices being offered, in this case, by the foreign firms do not reflect their production costs and ability to produce the good or service. They have been strategically lowered to harm the production of the same good in which the good is being sold.

  18. Quinn Richardsonon 11 Oct 2011 at 5:28 pm

    @ HEppler

    I agree with your answer to the first question. The lower prices in the short run will be adventageous for consumers however in the long run this could result in unemployment due to the declining production of pricier domestic goods. I also agree that protectionism should be used in the case of dumping as this is an unfair burden put upon domestic consumers to produce at unrealistically low prices. The use of protectionism should be limited as overuse may result in higher domestic prices (inflation) as well as reciprocal (retaliation) implementations by other countries.

  19. huanni_Wuon 11 Oct 2011 at 6:20 pm

    1.Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    This is because import form developing countries having their low cost and labor and other comparative advantages will threaten the domestic industries. The increased competition becomes a pressure and a threat as the foreign exporters keep the prices of good low. Once local customers are all attract by import goods, the domestic industry face sever bankrupt and unemployment problems.

    Consumers surely are happy about cheap goods, but producers aren’t, especially the ones with lower competitiveness.

    2. Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    It is below the cost of production in the exporting country and it matters because it will be natural if one resource is way cheaper in country A than in country B, making the goods made form such resource way cheaper in A than in B. Such selling doesn’t involve any bad motive but a desire to make profit by exporting. However, if A dumps its goods to B it means A is trying to get rid of the competitor B even by suffering the loss itself.

    The former means that country B has totally no comparative advantages against A in producing such good and it will be better off for both economies if B just quits the industry. It reflects a fact and serves as an alarm. While the later situation is more like a price war, in which either both lose or one drops. Both will lose if the situation lasts long and neither one of A and B has money to sustain the “war”. Even if one “wins” – usually A – there may be waste of resource and low efficiency because A might not be the one who has comparative advantage. Furthermore, A may even gain monopoly power as it sweeps out its competitors, which will be the worse situation as both industry and customers in B suffer.

    3. When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    If the question (as I understand) is describing a situation when a nation uses protectionism to avoid dumping done by other countries, the answer to whether it will undermine the principle of comparative advantage is no. In my opinion, dumping is the action that has violated such principle because the final winner – the one who sells – is not determined by the fact that who has lower opportunity costs but who can sustain a price war for longer time. The winner may not have higher efficiency in producing such goods as the “loser” and it doesn’t lead to better off for both trading country. Protectionism in this case, therefore is a means to protect the principle of comparative advantage as it prevents countries from dumping. (Although free trade is restricted, it is better than the situation I described in question 2)

    @Asucan_Odcikin,

    If dumping does mean that goods are sold in foreign country at lower price than the production cost in the importing country, as you said, don’t you think the exporting country may also suffer the low price if they have equal comparative advantage? Free trade, which is meant to be fair, decides the one who has comparative advantage to win and dumping is not in the category because it goes beyond the principle of comparative advantage. I don’t agree with you as I think you suggest dumping is making use of comparative advantage.

  20. A.Aydoganon 11 Oct 2011 at 8:35 pm

    1.)Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy? Domestic products are much more significant then the cheap products for a country. Of course the countries need cheap products in order to fulfill the consumers' needs more with cheap prices. However, with supporting domestic products, the small markets made up of local producers won't have to be in a shut down position, supporting those domestic products will save their jobs.

    2.)Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    Dumping refers to the sale of a country’s goods below the importing country’s costs of production. However, the second explanation which is 'costs of production in the country where the good is made' is totally the case in free trade with a comparative advantage as the exporting country is advantageous so as its own land.

    3.) When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    I don't agree with this statement at a point. Dumping is when the exporting country sells with lower cost; but if the exporting country sells higher, in this case we can think about the principle of comparative advantage.

  21. Chloe Colbergon 11 Oct 2011 at 8:38 pm

    1. A nation might want to keep cheap imports out of its domestic market since cheap imports hurt domestic firms. While consumers might want to buy cheaper goods, there are some consumers that would prefer to help out domestic firms and buy their goods.

    2. Dumping refers to the sale of a country’s goods below the costs of production in the country where the good is made. This is an important distinction to make because it demonstrates the winners and losers in this situation. The country that is exporting the good benefits from dumping whereas the country that is importing is more negatively affected.

    3. This is not undermining the principle of comparative advantage. When dumping occurs, the importing country is taking advantage of its own surplus to be able to sell a good at a lower cost. Comparative advantage is a different concept, where both countries can benefit from trade.

  22. Chloe Colbergon 11 Oct 2011 at 8:45 pm

    @Chamonix,

    I agree with what you answered for question 1 about how cheap goods make consumers happy, but don't necessarily make producers happy. I think you make a good point that these cheap goods have negative consequences such as more unemployment and drops in output. However, do you really think the competition from outside should be considered unfair? I think that obviously the competition is not good for domestic firms, but I don' think it can be considered unfair. I think it is better explained by saying that these countries just have a comparative advantage in producing this good.

  23. Suyeon Soon 11 Oct 2011 at 9:58 pm

    Nations are not willing to import cheap products because it often destroys the domestic market. Of course if the cheap imports is on the goods that is not produced or resources does not exist in the nation, there is no reason to keep it out of the country. The basic market theory says that if there are same goods in the market, consumers tend to buy cheaper goods. Therefore, if cheap products are imported, then consumers would buy imported goods not the domestic good, which would damage domestic output seriously

    Dumping refers to the sale of a country’s goods below the importing country’s cost of production, not below the cost of production in the country that exports the good. This distinction is tells reason why developing nations targets developed nations, such as Europe, to ‘dump’ their goods. If the cost of goods were below the cost of production of country that produces the good, the firms would not be able to make any profit but would rather loss money, because they even cannot compensate their cost by selling products. However, if it’s below the cost of production of importing nation, it would cause no harm but rather increase the market share in the market and eventually help those exporting nations to increase their profit. For instance, in China, cost of production is cheaper than that in Europe, because labor force is abundant. Let’s say the cost of production in China is 100$ per goods and 200$ per goods in Europe. If China exports their goods in 170$, it is really profitable for Chinese firms but it would be really harmful for European economy, as people would buy cheaper Chinese goods, not expensive European goods. Chinese goods will defeat European goods in price competition, because its price is even lower than the cost of production of European goods.

    The principle of comparative advantage is undermined in this situation, as it means nations have to import relatively cheap goods in more expensive cost, but it causes no harm for nation as it is designed to protect the domestic market. This would lead to the increase of output in the domestic market by limiting imports, which would contribute to the economic growth of domestic market.

  24. Suyeon Soon 11 Oct 2011 at 10:06 pm

    @Chloe Colberg

    I agree with your idea that cheap goods are limited to protect the domestic market. You mentioned the consumer’s willingness to buy cheaper imported product, so I just wondered if the protectionism is a violation of consumer’s right to buy cheap and good products. I also agree with your idea about the second question. But for the third question, I think dumping is related with the comparative advantage, because nation with comparative advantage is the one that is capable of providing goods in cheaper price – it can be cheaper than the cost of production of importing nation, which is related with the dumping. I see the points in your argument, but I think it does undermine the theory related with the comparative advantage.

  25. cleon 12 Oct 2011 at 1:25 am

    1. Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    -yes, however if there is s surplus, and if there are sales at lower than the production price, It can ruin the economy of complementary products and other producers in the countries.

    2. Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    -It refers to the sale of the countries goods below the cost of production of the importing countries. This is because the importing country is the one who’s economy will be affected by the dumping.

    3. When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    -Sort of, because the comparative advantage can’t be imported, however if dumping has allowed the local comparative competition to go out of business, then It doesn't matter because then the country can’t sustain itself.

  26. cleon 12 Oct 2011 at 1:37 am

    # Quinn Richardson

    i like your response to question number three, how it gives consumers false impressions about the prices of imported goods, and how dumping can ruin the local economy.

  27. Ozge_Elifon 15 Oct 2011 at 3:52 pm

    1-) Countries want to keep cheap products out because these products can threathen the domestic goods. Cheap goods can be satisfactory for consumers, but it will result in profit loss for local producers. Thus, the economy of the country can face with some problems because of the trade imbalance.

    2-) Dumping means that the goods are sold below the cost of production in the country in which the goods are made. Dumping is important because it can result in affecting a country that the local firms will not be able to compete with other markets.

    3-) The principle of comparative advantage is being undermined. However, comparative advantage undermines the purpose of free trade because it can create a huge difference between poor and rich. I think there are two possible results of comparative advantage. First is all countries will depend on each other. Second is that countries will choose to have the resources by wars instead of depending on each other.

  28. Ozge_Elifon 15 Oct 2011 at 3:55 pm

    Hi Suyeon,

    You said that the protectin of local firms can be violation of consumers' right to have cheaper products.However, I believe that if we think of the long term, protection of local firms means protection of citizens, because the improvement of local firms will make more people employed and it will raise the standard of living.

  29. Dogan Ozcanon 17 Oct 2011 at 8:10 am

    Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    -Of course cheapness is a good thing for consumers. Because they pay less money to buy something. Also this is a good situation for governments, too. Because government pay less money to import those products. Until this point cheapness is a good term for consumers and government. But for domestic firms it is not a good thing. Because of the low prices the firms are going to decrease their prices. After this, a situation occurs:"Dumping". In international trade, this occurs when one country exports a significant amount of goods to another country at prices much lower than in the domestic market. (http://www.investopedia.com/terms/d/dumping.asp#axzz1b10Eyb8U) Because of this situation unemployment will increase because production will be less.

    Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    -In international trade, this occurs when one country exports a significant amount of goods to another country at prices much lower than in the domestic market. (http://www.investopedia.com/terms/d/dumping.asp#axzz1b10Eyb8U) Distinction is important for a country because distinction give to the country the chance of exporting the products with a lower price which is lower than the production cost.

    When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    -Comparative advantage occur when a country use lower opportunity costs to produce the goods.

  30. Dogan Ozcanon 17 Oct 2011 at 8:13 am

    @Ozge_Elif

    Thanks for your answers. Especially for the 3rd question. I couldn't undrstand the question but after reading your answer I undrstood better.

  31. Muhammet Murat SEKBAon 17 Oct 2011 at 2:38 pm

    A country wouldn’t want cheap goods in its domestic economy in order to protect its own firms. Because with cheap imports, there will be less domestic manufactures of same good and the workers who are working in these firms would lose their jobs. On the other hand the consumer welfare increases with cheap goods as more people are able to pay the price for that product, while these cheapness may harm some domestic firms.

    Dumping is basically the sale of a country’s goods with a price that is lower than the price that the exporting country sells the goods in their own country. The distinction is important because otherwise, if it was the sale of a country’s goods below the importing country’s cost of production it would mean that its simply free trade and not dumping.

    No because if a nation does not prevent the domestic market from dumping it will have negative effects on the internal industry of the country. However, if a country’s domestic market is protected, it is protected from all outside effects.

  32. abredeeon 04 Dec 2011 at 11:42 pm

    I agree with your last point, but does it undermine comparative advantage. I believe it does not.

  33. Muhammet Murat SEKBAon 17 Oct 2011 at 2:40 pm

    @Ozge_Elif

    I agree with your first response. Especially the "Cheap goods can be satisfactory for consumers, but it will result in profit loss for local producers." sentence gives the answer of the question.

  34. Muhammet Emin Uylason 18 Oct 2011 at 10:29 pm

    1. Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    Cheap imports affecting domestic markets in a bad way because they cannot compete with cheap imports so their profit becoming less so a country want to keep cheap imports out of its domestic markets. Consumers may satisfied by cheap goods but it is affecting domestic firms in a bad way so domestic economy affecting in a bad way by cheap imports so a country want to keep cheap imports out of country. For example, in Turkey there are lots of cheap good came from China and government try to reduce them in order to protect domestic markets.

    2. Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    It refers to the sale of a country’s goods below the importing country’s costs of production, because if there was no distinction matter, it will be free trade and there won’t be dumping. There is this distinction because for example China has big labour force so it can easily produce goods at lower costs so when it export its goods to other country there can be dumping.

    3. When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    Yes it is undermined because consumers won’t be able to buy goods at lower prices but also it is necessary to protect domestic market because they important for economic growth of country.

  35. Muhammet Emin Uylason 18 Oct 2011 at 10:33 pm

    @Muhammet Murat Sekban

    I agree with your definitions and comments but I think that you should explain your comments with some examples.

  36. woverhauseron 25 Oct 2011 at 2:56 pm

    • Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

    The cheap goods might make consumers happy, but the domestic industry that produces those goods will not be happy. Unable to compete with the lower prices, the workers might become unemployed.

    • Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?

    The importing country's costs of production. This is an important distinction because if the dumped goods were sold at a price greater than the importing country's costs of production, then the domestic industry would be able to compete and stay healthy. The costs of production for the country where the goods are made is more or less irrelevant, except that it should be less than the importer's.

    • When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.

    It is undermining the principle of comparative advantage, but for a good reason. Protecting domestic markets may lower the possible consumption for consumers, but the workers will still have jobs.

  37. woverhauseron 25 Oct 2011 at 2:58 pm

    @Ozge

    But comparative advantage is the argument behind free trade, isn't it?

  38. abredeeon 04 Dec 2011 at 11:41 pm

    1.Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?
    Although cheap imports benefit domestic consumers they harm domestic producers. If domestic producers cannot compete with the cheap prices from abroad they will have to reduce average production costs or shut down as a consequence they will have to fire workers. Thus overly cheap imports can lead to unemployment and thus harm domestic economy.
    2.Does dumping refer to the sale of a country’s goods below the importing country’s costs of production or the costs of production in the country where the good is made? Why does this distinction matter?
    It refers to the sale of a country’s goods below the cost of production in the country where it is made. This distinction matters because the principles of comparative advantage and thus the gains from trade will be eliminated.
    3.When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.
    No because a country which dumps products may not actually have comparative advantage. It may produce with more production and opportunity costs than the country the good is dumped to but simply understates the goods value.

  39. EEG (Electroencephalogram)on 21 May 2015 at 8:49 am

    EEG (Electroencephalogram)

    Fair trade vs. free trade: the problem with ?dumping? | Economics in Plain English

  40. Chiropractors Santa Monicaon 02 Jul 2016 at 5:28 am

    Chiropractors Santa Monica

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