dumping


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dumping,

selling goods at less than the normal price, usually as exports in international trade. It may be done by a producer, a group of producers, or a nation. Dumping is usually done to drive competitors off the market and secure a monopoly, or to hinder foreign competition. To counterbalance international dumping, nations often resort to flexible tariffs. In international trade, acute competition from foreign producers often leads to charges of dumping. A policy of dumping depends for its effectiveness on the possibility of maintaining separate domestic and foreign markets, on monopolistic influences maintaining a high price in the home market, on export bounties, or on low import duties in the foreign market. Dumping disturbs those markets that receive dumped goods, and it may drive local producers out of business. Governments may condone, or even sponsor, dumping in other markets for either political reasons or to achieve a more favorable balance of payments. In the late 19th cent., dumping became part of the trade policy of great European cartels, especially German cartels. Britain, France, Japan, and the United States also have practiced dumping. Antidumping legislation was first passed (1904) by Canada. In the United States various tariff acts have been passed to deal with different types of dumping; in particular the 1921 Emergency Tariff Act imposed special duties on goods imported for sale at less than their fair value or cost of production. It was amended by the Customs Simplification Act of 1954. The General Agreement on Tariffs and Trade (GATT) prohibits dumping and provides for increased import duties to combat the practice.

Bibliography

See R. Dale, Anti-Dumping Law in a Liberal Trade Order (1981).

Dumping

 

the sale of goods in foreign markets at “throw-away” prices, that is, prices that are lower than production costs. Dumping is a tactic of monopolies, companies not involved in production, and government organizations.

The economic nature and the mechanism of dumping were thoroughly revealed in the works of V. I. Lenin. Pointing out that the system of “exporting at cut-rate prices” is typical of cartels and financial capitalists, Lenin characterized the practice as follows: “Within a given country the cartel sells its goods at high monopoly prices but sells them abroad at a much lower price to undercut the competitor to enlarge its own production to the utmost, etc.” (Poln. sobr. soch., 5th ed., vol. 27, p. 412). While limiting production for the domestic market, cartels expand production for the foreign market, selling goods at a loss and charging customers within the country monopoly prices. The distinguishing traits of dumping are a sharp distinction between high domestic prices and low export prices, expansionist methods of suppressing competitors, and a systematic rather than occasional practice of exporting at throwaway prices. Dumping is practiced by monopolies that engage in marketing both within the country and abroad. When export is carried on by firms not involved in production or by government organizations, dumping means exporting at prices lower than those at which the corresponding goods were bought on the domestic market; in this case the losses are covered out of state budget capital. In a majority of cases the existence of export subsidies is evidence of dumping, especially when these subsidies reach significant dimensions. The exporter’s losses are the most important characteristic of dumping, regardless of the method used to cover them.

In the legislation of the capitalist countries, dumping is defined as selling goods on foreign markets at prices lower than those in effect on the domestic market in the country of export. In this case the importing country has the right to impose the so-called antidumping tariff in addition to the standard tariff. The antidumping tariff may be as large as the difference between the domestic price in the country where the goods originated and the export price. The General Agreement on Tariffs and Trade (GATT), which was signed in 1947, defines dumping as distributing the products of one country in the market of another at a price lower than “normal,” if this practice causes or threatens to cause significant harm to some industry started by one of the participating countries or if it substantially retards the creation of national output. An international antidumping code adopted in Geneva in 1967 by a conference on tariffs of the GATT countries and known as the Kennedy round provides for corresponding legislation to include a section on “damage caused” to local enterprises and a section on preliminary submission of proof of damage.

In the last analysis, dumping aggravates the contradictions among the capitalist countries, disrupts traditional trade relations, increases the supply of goods on the world market regardless of the level of the exporter’s production costs, intensifies competition, and leads to an undermining of the established level of world prices. In this respect the 1962 antidumping law in Austria is interesting. It is the first to specify quantitative criteria on dumping prices: a price 20 percent or more below the price on the domestic market in the country of origin or at least 8 percent lower than the price existing in the world market.

In countries that practice dumping, the standard of living of the toiling masses is lowered as a result of the rise in domestic prices and taxes. In countries that are the object of dumping, the development of national industries becomes more difficult and unemployment increases. By means of dumping, large monopolies suppress their competitors and capture new sales markets, thereby expanding the sphere of their dominance and increasing profits. This commercial dumping is frequently called “price dumping.”

Since World War II, the United States has carried on dumping of agricultural products on a large scale. For example, between 1961 and 1965 subsidies for wheat export were 23 percent and for cotton they were 36 percent. From 1954-55 to 1963-64 the amount of export financed by the state was 54 percent of all US agricultural export. At the end of the 1960’s the forms and methods of dumping became more concealed in nature; export subsidies showed a tendency to decrease, but at the same time direct supplementary payments, a concealed form of subsidizing the export of agricultural output, were being introduced for the agricultural producers.

The governments of the capitalist states are taking steps against dumping. For example, in February 1970 the British Board of Trade adopted a decision to institute a temporary antidumping tariff on the import of nitrogen fertilizers from Belgium and West Germany. This tariff was later expanded to include the same products coming from Italy, Austria, the Netherlands, and Sweden. This decision was made because foreign suppliers were selling their goods in Great Britain at dumping prices. Because all foreign suppliers of nitrogen fertilizers to Great Britain obligated themselves not to sell these products at such low prices, it was decided not to impose the antidumping tariff as long as the firms carry out their obligations.

A typical variation of dumping in the current stage of the general crisis of capitalism is currency dumping, which arises as a result of a discrepancy between the domestic and foreign buying power of the national currency.

REFERENCE

Shil’dkrut, V. Problemy tsen mirovogo kapitalisticheskogo rynka. Moscow, 1963. Pages 76-89.

V. A. SHIL’DKRUT

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