As it relates to international trade, “dumping”: Group of answer choices is the practice of selling goods in a foreign market at less than cost. is a form of price discrimination illegal under Canadian anti-combines laws. constitutes a general case for permanent tariffs. is defined as selling more goods than allowed by an import quota.
The correct answer and explanation is:
The correct answer is: “is the practice of selling goods in a foreign market at less than cost.”
Explanation:
Definition of Dumping: Dumping occurs when a company exports a product to a foreign market at a price lower than its cost of production or below the price it charges in its domestic market. This is often seen as an unfair trade practice because it can harm domestic industries in the importing country.
Purpose of Dumping: Firms may engage in dumping for several reasons:
- Market Penetration: By pricing products very low, firms can gain a foothold in a foreign market and potentially drive out local competitors.
- Surplus Clearance: Companies may offload excess inventory in foreign markets where they face less competition.
- Strategic Objectives: Long-term goals like gaining market dominance or influencing trade dynamics can motivate dumping.
Impact on International Trade: Dumping can lead to significant economic disruptions in the importing country:
- Harm to Domestic Industries: Local manufacturers may struggle to compete with artificially low-priced imports, leading to job losses and potential industry decline.
- Trade Imbalances: Prolonged dumping practices may distort fair trade and lead to retaliatory measures.
Anti-Dumping Measures: Countries implement anti-dumping laws to protect domestic industries. These measures include:
- Imposing Duties: Governments may levy anti-dumping duties to bring the price of dumped goods closer to their fair market value.
- Investigations: Trade organizations like the World Trade Organization (WTO) oversee disputes and ensure compliance with international trade rules.
Legality and Regulation: While dumping itself is not inherently illegal, the WTO allows member countries to act against dumping if it causes material injury to a domestic industry. Therefore, the importing country must prove the harm and justify its protective measures.