Pros And Disadvantages Of Dumping

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The tariff question was the foremost political issue during the period of 1903 and 1904 in Great Britain, and a huge output of contentious literature which marked the controversy of Tariff. After that the term Dumping founded its way into the economic terminology of the German, French and different other languages. Originally it had a very ambiguous and dubious meaning and is still used indiscriminately for different such practices, customs, pricing cutting and selling in one market at a lower price than in another market. According to Dale, the origin of the word “Dump” is ambiguous. It’s an act of throwing down a mass, as with a load from a cart and it was then a natural extension to apply the word to the discarding a market of surplus stock.…show more content…
Persistent Dumping: This type of Dumping is a continuous, long term one. It’s probability increases when international trade is characterized by product differentiation and monopolistic competition. The reason for its persistence is that no single exporter finds it’s easy to get out of this pattern of activities. If it tries to do so, it ruins the risk of getting competed out of the market. This condition can be solved only if all the firms take a collective action, but this is highly unlikely. This phenomenon of two-way dumping may also be termed Reciprocal Dumping. This type of dumping was first given due importance by James Brander’ in 1981, Brander elaborated a theoretical case of two-way dumping of an undifferentiated product. Factually, however, two-way dumping is widely prevalent in differentiated products and should be recognized for what it is. Elaborating further, let us start with the conventional case of two different countries, each having a domestic monopoly in item H, and with common simplifying assumption of identical cost and demand-functions of both monopolies. This would result in identical prices of H in both countries with no trade in H between them. It can be shown that [assuming zero transport cost] that if home-country firm dumps, profit can only be added by raiding the foreign- country firm’s market. However, if the foreign-country firm also dumps, two ways will emerge as a result of the same, trade even though there is no initial difference in the price of the dumped item in the two markets. It should, however, be noted that reciprocal dumping cannot be sustained under constant or retreating returns. In contrast, under economies of scale, both countries can gain and trade is
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