Economics Dictionary of ArgumentsHome
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| Dumping: Dumping in economics occurs when a country or company exports a product at a price lower than its normal value, often meaning lower than its domestic price or its cost of production. It's generally considered an unfair trade practice aimed at gaining market share or eliminating competition, potentially harming domestic industries in the importing country. See also International trade, Price, Cmpetition, Tariffs. _____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Robert C. Feenstra on Dumping - Dictionary of Arguments
Feenstra I 7-2 Dumping/Feenstra: We suggest that this phenomena can be viewed as a natural attempt of imperfectly competitive firms to enter each others markets, as in the “reciprocal dumping” model of Brander (1981)(1) and Brander and Krugman (1983)(2). As such, it is likely to bring gains to consumers through lower prices. These gains will be offset by the use of anti-dumping duties, especially since these duties must be treated as endogenous: their application will depend on the prices charged by the exporting firms. Cf. >Tariffs/Feenstra. Exporting firms will have an incentive to raise their prices even if there is only a threat of antidumping duties being imposed, and to raise them even further if the duties are actually imposed. For these reasons, consumer and social losses due to antidumping actions are particularly high. We review empirical work by Prusa (1991(3), 1992(4)), Staiger and Wolak (1992)(5) and Blonigen and Haynes (2002)(6), who estimate the price and quantity effects of antidumping actions. Feenstra I 7-44 If there is a case to be made for infant industry protection, whereby an increase in the import price allows a firm to survive, then the reverse should also be true: a decrease in the import prices might lead a firm to shut down. >Infant industry/Feenstra. This would be an example of “predatory dumping,” whereby a foreign exporter would lower its prices in anticipation of driving rivals in the domestic country out of business. A model of predatory dumping is developed by Hartigan (1996)(7), and like the infant industry argument, it relies on a capital market imperfection that prevents the home firm from surviving a period of negative profits. To the extent that predatory dumping occurs at all, it is presumably rare. In contrast, allegations of dumping are a widespread phenomena and growing ever more common. Furthermore, charges of dumping are often made against trading partners in the same industry, e.g. the U.S. will charge European countries and Japan with dumping steel in the U.S., and likewise those other countries will charge the U.S. with dumping steel there! This does not sound like “predatory dumping” at all, but must have some other rationale. In his classic list of reasons for dumping, Jacob Viner referred to “long-run” or “continuous” dumping, to “maintain full production from existing facilities without cutting prices” (Viner, 1966(8), p. 23, as cited by Staiger and Wolak, 1992(5), p. 266). This can occur in markets with oligopolistic competition and excess capacity. Ethier (1982)(9) presents a model emphasizing demand uncertainty and excess capacity, leading to dumping. Feenstra I 7-45 But subsequent literature has focused on a simpler framework without uncertainty, where dumping is a natural occurrence under imperfect competition as oligopolists enter each other’s markets. This is demonstrated (…) using the “reciprocal dumping” model of Brander (1981)(1) and Brander and Krugman (1983)(2). 1. Brander, James A., 1981, “Intra-industry Trade in Identical Commodities,” Journal of International Economics, 11, 1-14. 2. Brander, James A. and Paul R. Krugman, 1983, “A Reciprocal Dumping Model of International Trade,” Journal of International Economics, 15, 313-323. Reprinted as chapter 1 in Gene M. Grossman, 1992, Imperfect Competition and International Trade. Cambridge: MIT Press, 23-30. 3. Prusa, Thomas J., 1991, “The Selection of Anti-Dumping Cases for Withdrawal,” in Robert E. Baldwin, ed. Empirical Studies of Commercial Policy. Chicago: Univ. of Chicago and NBER. 4. Prusa, Thomas J., 1992, “Why Are So Many Antidumping Petitions Withdrawn?” Journal of International Economics, 33, 1-20. 5. Staiger, Robert W. and Frank A. Wolak, 1992, “The Effect of Antidumping Law in the Presence of Foreign Monopoly,” Journal of International Economics, 32, May, 65-287. 6. Blonigen, Bruce A. and Stephen E. Haynes, 2002, “Antidumping Investigations and the Pass-through of Antidumping Duties and Exchange Rates,” American Economic Review, forthcoming. 7. Hartigan, James C., 1996, “Predatory Dumping,” Canadian Journal of Economics, 29(1), February, 228-39. 8. Viner, Jacob, 1966. Dumping: A Problem in International Trade. New York: Augustus M. Kelley, Publishers. 9. Ethier, Wilfred J., 1982, “Dumping,” Journal of Political Economy, 90(3), June, 487-506._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Feenstra I Robert C. Feenstra Advanced International Trade University of California, Davis and National Bureau of Economic Research 2002 |
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