What is dumping? What are the possible effects of dumping on a country's economy?
Answer: When companies export below cost or below their home country price, this is called dumping. Most countries prohibit imports of dumped products, but enforcement usually occurs only if the imported product disrupts domestic production. If there is no domestic production, then the only host country effect is a low price to its consumers. Companies may dump because they cannot otherwise build a market abroad. They can afford to dump if the competitive landscape allows them to charge high domestic prices or if their home country government subsidizes them. They may also incur short-term losses abroad if they believe they can recoup those losses after eliminating competitors in the market. Home country consumers or taxpayers seldom realize that they are, in effect, paying so that foreign consumers have low prices. A company believing it is competing against dumped products may ask its government to restrict the imports.