Anti-dumping is a commercial policy that prevents companies from dumping in the domestic market.
Anti-dumping is a commercial policy employed by the States. This, in order to prevent foreign products from being sold in the local market at a price lower than the manufacturing cost. Thus avoiding damage to the local industry due to unfair competition. Anti-dumping is a protectionist practice.
However, local companies can also employ this type of strategy, called, in this area, predatory pricing. In this case, measures of this type are also carried out to prevent these unfair practices.
There are various strategies that nations can use to avoid dumping in the domestic market. These can be classified into shares for local and international companies.
- Local scope: The penalization of these actions will depend on the legislation of each country. Some examples of how they could do this would be financial penalties for dumping companies. Also, temporary closures, interventions, expropriations or confiscations could be carried out, depending on the level of severity of the offense.
- International scope: The tools that States use to protect local industry are tariff and non-tariff trade barriers. In this way, taxes are imposed on products considered dumped and the local industry is protected.
Likewise, antidumping could lead to an internal conflict of powers if there is any legislation that implements dumping of some goods. This type of dumping is known as social dumping.
Objectives of antidumping
The main objective of this practice is to protect the domestic industry from unfair competition. It can also be used more frequently to protect sensitive industries.
Difference between dumping and other pricing strategies
Anti-dumping policies do not affect companies' pricing strategies. On the one hand, dumping is a sustained decrease in prices below costs. Meanwhile, other pricing strategies are temporary measures to improve the organization's position in the market.
For this reason, the first (dumping) is an unhealthy practice for trade. The second (pricing strategy) is a competitive business strategy, not sustained.
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