Comments on: Fair trade vs. free trade: the problem with “dumping” http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/ for students and teachers of AP and IB Economics Fri, 12 Mar 2010 01:36:41 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Kenneth.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-2/#comment-10001 Kenneth.ecsla.f09 Mon, 01 Feb 2010 17:00:34 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-10001 @alan i see dumping as the sale of a good below the price of production in the country that made it. it called dumping since the country is just dumping there goods on another country @alan

i see dumping as the sale of a good below the price of production in the country that made it. it called dumping since the country is just dumping there goods on another country

]]> By: Kenneth.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-2/#comment-9999 Kenneth.ecsla.f09 Mon, 01 Feb 2010 16:56:44 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9999 When a country gets cheap imports it makes that item easier for consumers to buy them. This is a positive, but it means that the countries domestic production companies will not make as much money and could eventually put them out of business. Dumping refers to the sale of a country’s good below the cost of production in the country where the good is made. It’s important to make this distinction so it doesn’t give free trade a bad image. Selling goods under the cost of the country importing cost of production is just a good allocation of resources. I believe that the principle is not being undermined. The country that is dumping voids the comparative advantage so it is fair game to protect from. When a country gets cheap imports it makes that item easier for consumers to buy them. This is a positive, but it means that the countries domestic production companies will not make as much money and could eventually put them out of business.
Dumping refers to the sale of a country’s good below the cost of production in the country where the good is made. It’s important to make this distinction so it doesn’t give free trade a bad image. Selling goods under the cost of the country importing cost of production is just a good allocation of resources.
I believe that the principle is not being undermined. The country that is dumping voids the comparative advantage so it is fair game to protect from.

]]> By: Alan.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9899 Alan.ecsla.f09 Mon, 25 Jan 2010 02:41:49 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9899 @Diana That's a great point you made on the first question. It's very often that the consumers want something that isn't necessarily food for the whole country. @Diana

That’s a great point you made on the first question. It’s very often that the consumers want something that isn’t necessarily food for the whole country.

]]> By: Alan.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9898 Alan.ecsla.f09 Mon, 25 Jan 2010 02:38:59 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9898 1. A country would want to keep cheap imports out of its domestic markets because even though it does make consumers happy, it takes business away from local businesses. Local businesses who can't afford to make their goods as cheap as the foreign ones would suffer, leading to a loss of jobs as well. 2. Dumping refers to the sale of a country's goods below the importing country's costs of production. The distinction is important because this can fluctuate due to each country's different economies and policies. 3. Yes by protecting its domestic market from dumping, the principle of comparative advantage is being undermined. However, sometimes this has to be done in order to protect a country's domestic businesses from economic trouble. 1. A country would want to keep cheap imports out of its domestic markets because even though it does make consumers happy, it takes business away from local businesses. Local businesses who can’t afford to make their goods as cheap as the foreign ones would suffer, leading to a loss of jobs as well.

2. Dumping refers to the sale of a country’s goods below the importing country’s costs of production. The distinction is important because this can fluctuate due to each country’s different economies and policies.

3. Yes by protecting its domestic market from dumping, the principle of comparative advantage is being undermined. However, sometimes this has to be done in order to protect a country’s domestic businesses from economic trouble.

]]> By: Olajumoke.ecslb.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9876 Olajumoke.ecslb.f09 Wed, 20 Jan 2010 01:23:34 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9876 reply to Theresa.ecslb.f09 Theresa, wouldn't countries only participate in dumping if it could be to their advantage? This would then mean that they would sell their products at a point which would give them a comparative advantage over the domestic markets. This advantage would allow them to eliminate competition and increase their profit over the mid to long-term. reply to Theresa.ecslb.f09

Theresa, wouldn’t countries only participate in dumping if it could be to their advantage? This would then mean that they would sell their products at a point which would give them a comparative advantage over the domestic markets. This advantage would allow them to eliminate competition and increase their profit over the mid to long-term.

]]> By: Katharine.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9875 Katharine.ecsla.f09 Wed, 20 Jan 2010 01:23:05 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9875 Response to john.ecsla.f09, I agree that a country would not want to have a lot of cheap imports flooding into the economy, as it is bad for domestic firms and workers. Cheap imports are dangerous, as they can cause the downfall of an industry. I agree that the principle of comparative advantage technically is being undermined, however leaving a nation to pick its own poison is dangerous. The country must truly consider all possible implications of such practices, which doesn't always seem to be the case. Response to john.ecsla.f09,
I agree that a country would not want to have a lot of cheap imports flooding into the economy, as it is bad for domestic firms and workers. Cheap imports are dangerous, as they can cause the downfall of an industry. I agree that the principle of comparative advantage technically is being undermined, however leaving a nation to pick its own poison is dangerous. The country must truly consider all possible implications of such practices, which doesn’t always seem to be the case.

]]> By: Katharine.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9874 Katharine.ecsla.f09 Wed, 20 Jan 2010 01:22:47 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9874 1. A country would want to keep cheap imports out of its domestic markets to preserve domestic jobs and firms. If a country has too many cheap imports, the firms and workers in those industries cannot compete with the low priced imports, and therefore those firms shut down and the workers lose their jobs. An industry can disappear in a country if it is filled with cheap imports. They may keep consumers happy for a while, but when other consumers/workers in the country lose their jobs, they won't be so happy anymore. 2. Dumping refers to the sale of a country's goods below the costs of production. This distinction matters because a country would not want to "dump" a good at prices that are less than the production costs, however it occurs when a country is desperate to get rid of those goods, or they could possibly have a hidden agenda regarding the selling of such goods. 3. When a nation protects its domestic market from dumping, the principle of comparative advantage is being undermined in most cases. This means that a firm is producing a good at a lower cost than another firm, and because it does so, one of the firms loses out on this particular good. 1. A country would want to keep cheap imports out of its domestic markets to preserve domestic jobs and firms. If a country has too many cheap imports, the firms and workers in those industries cannot compete with the low priced imports, and therefore those firms shut down and the workers lose their jobs. An industry can disappear in a country if it is filled with cheap imports. They may keep consumers happy for a while, but when other consumers/workers in the country lose their jobs, they won’t be so happy anymore.
2. Dumping refers to the sale of a country’s goods below the costs of production. This distinction matters because a country would not want to “dump” a good at prices that are less than the production costs, however it occurs when a country is desperate to get rid of those goods, or they could possibly have a hidden agenda regarding the selling of such goods.
3. When a nation protects its domestic market from dumping, the principle of comparative advantage is being undermined in most cases. This means that a firm is producing a good at a lower cost than another firm, and because it does so, one of the firms loses out on this particular good.

]]> By: Olajumoke.ecslb.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9873 Olajumoke.ecslb.f09 Wed, 20 Jan 2010 01:16:24 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9873 1. The main reason a country wants to protect against dumping is that it means that their domestic businesses will either lose the consumers or have to drop their prices to a point where they are no longer gaining a profit. This means that the country would then become dependent on imports which would allow the countries providing the exports to raise prices dramatically as there would be no more competition for their goods. 2. I believe that dumping refers to the sale of a country's goods below the importing country's cost of production. The distinction does matter because different countries could have different costs of production. For example, the costs of production in Mexico are much higher than the costs of production in China. If a country operates below their own costs of production, they will face a deficit while the other country's economy may only suffer marginally depending on the strength of their businesses. If they operate below the importing country's costs of production, they will be able to quickly eliminate the country's domestic producers and once they are gone, they will be able to raise the prices dramatically. 3.When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss. Yes, the principle of comparative advantage is being undermined, but in some cases, comparative advantage is immoral and undermines the entire purpose of free trade as it really creates great disparity between the rich and the poor nations. It could either lead to a world where every nation depends on another nation entirely for a good or to many wars based on resources and such. This could lead to a return to the imperial era which also goes against the concept of economic growth and development. 1. The main reason a country wants to protect against dumping is that it means that their domestic businesses will either lose the consumers or have to drop their prices to a point where they are no longer gaining a profit. This means that the country would then become dependent on imports which would allow the countries providing the exports to raise prices dramatically as there would be no more competition for their goods.

2. I believe that dumping refers to the sale of a country’s goods below the importing country’s cost of production. The distinction does matter because different countries could have different costs of production. For example, the costs of production in Mexico are much higher than the costs of production in China. If a country operates below their own costs of production, they will face a deficit while the other country’s economy may only suffer marginally depending on the strength of their businesses. If they operate below the importing country’s costs of production, they will be able to quickly eliminate the country’s domestic producers and once they are gone, they will be able to raise the prices dramatically.

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

Yes, the principle of comparative advantage is being undermined, but in some cases, comparative advantage is immoral and undermines the entire purpose of free trade as it really creates great disparity between the rich and the poor nations. It could either lead to a world where every nation depends on another nation entirely for a good or to many wars based on resources and such. This could lead to a return to the imperial era which also goes against the concept of economic growth and development.

]]> By: diana.ecsl1.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9872 diana.ecsl1.f09 Wed, 20 Jan 2010 00:18:45 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9872 Theresa you are correct. Dumping hurts the weaker party. Comparative advantage is most certainly undermined by dumping because as you said, with the principle of comparative dumping no one loses. It's a win-win situation and even though one party may gain more than the other, its completely fair game. Theresa you are correct. Dumping hurts the weaker party. Comparative advantage is most certainly undermined by dumping because as you said, with the principle of comparative dumping no one loses. It’s a win-win situation and even though one party may gain more than the other, its completely fair game.

]]> By: diana.ecsl1.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9871 diana.ecsl1.f09 Wed, 20 Jan 2010 00:14:19 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9871 Michael that's a great and brief explanation for why countries would not desire cheap imports. I like how you listed the effects during and after dumping. As you stated, they can be very detrimental. Michael that’s a great and brief explanation for why countries would not desire cheap imports. I like how you listed the effects during and after dumping. As you stated, they can be very detrimental.

]]> By: diana.ecsl1.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9870 diana.ecsl1.f09 Wed, 20 Jan 2010 00:11:13 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9870 1) Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy? A country would want to keep cheap imports out of its domestic markets so that it would not need to contend with foreign competitors. Cheap imports may make consumers happy but domestic suppliers lose large profits. Thus the economy could suffer due to trade imbalance. Sometimes what the public wants isn’t always in the sellers’ best interests. The government does not want anything hurting the gross revenue of 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? “Dumping” refers to the sale of a country’s goods below the costs of production in the country where the good is made. This distinction is significant because this determines which country is more negatively affected. Because the cost of production is less, the exporting country is making a profit while the importing country is losing revenue. Dumping is condemned if it causes or threatens to cause material injury to a domestic industry in the importing country. It has the potential to severely damage a country as its domestic markets won’t be able to compete causing internal economic issues. –– 3) When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss. There is a fine line between comparative advantage and dumping. Dumping is a predatory practice as it seeks to cause domestic markets of importing countries to suffer. On the other hand, comparative advantage is just a matter of strength; some economies are just stronger than others. Some just happen to have the upper hand in the trade balance. These are just the economic facts of life. Dumpling has the power to cripple the domestic markets of a nation; this is simply taking advantage of the situation. In economics, the law of comparative advantage refers to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than another party. In a nutshell, dumping is unfair trade and comparative advantage isn’t. 1) Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?

A country would want to keep cheap imports out of its domestic markets so that it would not need to contend with foreign competitors. Cheap imports may make consumers happy but domestic suppliers lose large profits. Thus the economy could suffer due to trade imbalance. Sometimes what the public wants isn’t always in the sellers’ best interests. The government does not want anything hurting the gross revenue of domestic markets.
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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 costs of production in the country where the good is made. This distinction is significant because this determines which country is more negatively affected. Because the cost of production is less, the exporting country is making a profit while the importing country is losing revenue. Dumping is condemned if it causes or threatens to cause material injury to a domestic industry in the importing country. It has the potential to severely damage a country as its domestic markets won’t be able to compete causing internal economic issues.

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

There is a fine line between comparative advantage and dumping. Dumping is a predatory practice as it seeks to cause domestic markets of importing countries to suffer. On the other hand, comparative advantage is just a matter of strength; some economies are just stronger than others. Some just happen to have the upper hand in the trade balance. These are just the economic facts of life. Dumpling has the power to cripple the domestic markets of a nation; this is simply taking advantage of the situation. In economics, the law of comparative advantage refers to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than another party. In a nutshell, dumping is unfair trade and comparative advantage isn’t.

]]> By: michael.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9846 michael.ecsla.f09 Tue, 19 Jan 2010 01:20:52 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9846 Derek.ecslb.f09, That's a good point. People will demand fewer domestic goods, which will put domestic companies out of business and lead to the losses of lots of jobs. Derek.ecslb.f09,

That’s a good point. People will demand fewer domestic goods, which will put domestic companies out of business and lead to the losses of lots of jobs.

]]> By: michael.ecsla.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9845 michael.ecsla.f09 Tue, 19 Jan 2010 01:19:13 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9845 1) Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy? Dumping in the form of cheap imports can work for a short period of time, although there are some costs as workers in the relevant industries are deemed unnecessary and laid off. However, once the dumping ends, the affected country will be left without a means of producing or easily gaining that good, ruining their economy and forcing them into trade deficits. 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 the country’s goods below their own costs of production. This matters because the country would not be selling goods for less than the production costs unless they are desperate to unload those goods or have a hidden motive. 3) When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss. No, because dumping only takes place when the exporter is selling below-cost in their own country; if it was below the costs of the importing country, then the principle of comparative advantage applies. However, under those circumstances, the exporting would also not be considered to be dumping. 1) Why would a country want to keep cheap imports out of its domestic markets? Don’t cheap goods make consumers happy?
Dumping in the form of cheap imports can work for a short period of time, although there are some costs as workers in the relevant industries are deemed unnecessary and laid off. However, once the dumping ends, the affected country will be left without a means of producing or easily gaining that good, ruining their economy and forcing them into trade deficits.
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 the country’s goods below their own costs of production. This matters because the country would not be selling goods for less than the production costs unless they are desperate to unload those goods or have a hidden motive.
3) When a nation protects its domestic market from dumping, is the principle of comparative advantage being undermined? Discuss.
No, because dumping only takes place when the exporter is selling below-cost in their own country; if it was below the costs of the importing country, then the principle of comparative advantage applies. However, under those circumstances, the exporting would also not be considered to be dumping.

]]> By: theresa.ecslb.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9839 theresa.ecslb.f09 Mon, 18 Jan 2010 20:25:11 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9839 Pedro, If the domestic industry and economy is destroyed due to dumping, isn't that exactly undermining comparative advantage? In comparative advantage, both parties are supposed to gain.. but in the situation you proposed, there is not any advantage in the destroyed economy Pedro,
If the domestic industry and economy is destroyed due to dumping, isn’t that exactly undermining comparative advantage? In comparative advantage, both parties are supposed to gain.. but in the situation you proposed, there is not any advantage in the destroyed economy

]]> By: theresa.ecslb.f09 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/comment-page-1/#comment-9838 theresa.ecslb.f09 Mon, 18 Jan 2010 20:13:02 +0000 http://welkerswikinomics.com/blog/2008/10/21/fair-trade-vs-free-trade-the-problem-with-dumping/#comment-9838 A country wants to keep cheap imports out of its domestic markets. While consumers are happy that there are cheap prices, the domestic economy is suffering on a whole because the consumers are only happy with the imported goods and are not supporting the domestic market. For this reason, governments put in place reactionary protectionist measures to exclude cheap imports so as to keep out the competition. Dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is below the price it domestically charges and therefore below the cost of production. The distinction concerning whether or not the price is below the domestic or the importing country is important because domestically, prices of products are unique to the market specific to every country in the world. There are anti-dumping measures taken because when firms contribute to dumping, they are hurting their own domestic economy by offering prices lower than costs of production and they are contributing to comparative advantage in foreign countries. The law of comparative advantage refers to the ability of a firm to produce a particular good at a lower opportunity cost than another firm. It is the ability to produce a product most efficiently given all the other products that could be produced. Comparative advantage explains how trade can create value for both parties and is the main concept of the pure theory of international trade. The practice of dumping definitely undermines comparative advantage because with dumping in place, both parties are not advantageous. A country wants to keep cheap imports out of its domestic markets. While consumers are happy that there are cheap prices, the domestic economy is suffering on a whole because the consumers are only happy with the imported goods and are not supporting the domestic market. For this reason, governments put in place reactionary protectionist measures to exclude cheap imports so as to keep out the competition.
Dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is below the price it domestically charges and therefore below the cost of production. The distinction concerning whether or not the price is below the domestic or the importing country is important because domestically, prices of products are unique to the market specific to every country in the world. There are anti-dumping measures taken because when firms contribute to dumping, they are hurting their own domestic economy by offering prices lower than costs of production and they are contributing to comparative advantage in foreign countries.
The law of comparative advantage refers to the ability of a firm to produce a particular good at a lower opportunity cost than another firm. It is the ability to produce a product most efficiently given all the other products that could be produced. Comparative advantage explains how trade can create value for both parties and is the main concept of the pure theory of international trade. The practice of dumping definitely undermines comparative advantage because with dumping in place, both parties are not advantageous.

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