Product Dumping and the Dangers It Poses to Foreign Markets

A Dangerous Practice to Foreign Markets

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Dumping is an informal name for the practice of selling a product in a foreign country for less than either the price in the domestic country or the cost of making the product. It is illegal in some countries to dump certain products into them because they want to protect their own industries from such competition, especially because dumping can result in a disparity in the domestic gross domestic products of impacted countries, such was the case with Australia until they passed a ​tariff on certain goods entering the country.

Bureaucracy and International Dumping

Under the World Trade Organization (WTO) dumping is a frowned upon international business practices, especially in the case of causing material loss to an industry in the importing country of the goods being dumped. Although not expressly prohibited, the practice is considered bad business and often seen as a method to drive out the competition for goods produced in a particular market. The General Agreement on Tariffs and Trade and the Anti-Dumping Agreement (both WTO documents) do allow for countries to protect themselves against dumping by allowing tariffs in cases where that tariff would normalize the price of the good once it's sold domestically. 

One such example of a dispute over international dumping comes between neighboring nations the United States and Canada in a conflict that came to be known as the ​​Softwood Lumber Dispute. The dispute began in the 1980s with a question of Canadian exports of lumber to the United States.

Since Canadian softwood lumber was not regulated on private land as much of the United States' lumber was, the prices were exponentially lower to produce. Because of this, the U.S. government claimed the lower prices constituted as a Canadian subsidy, which would make that lumber subject to trade remedy laws that fought such subsidies.

Canada protested, and the fight continues to this day. ​​

Effects on Labor

Workers' advocates argue that product dumping hurts the local economy for workers, especially as it applies to competition. They hold that safeguarding against these targeted cost practices will help detract the consequences of such practices between varied stages of local economies. Oftentimes such dumping practices result in an increased favoritism of competition between workers, a sort of social dumping that results from making a monopoly of a certain product.

One such example of this on a local level was when an oil company in Cincinnati attempted to sell below-cost oil to diminish profits of competitors, thereby forcing them out of the market. The plan worked, resulting in a local monopoly of oil as the other distributor was forced to sell to a different market. Because of this, oil workers from the company who outsold the other were given preference in hiring in the area.