What is "Dumping"? In what ways could the EU's anti-dumping policy be said to be problematic?

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What is “Dumping”? In what ways could the EU’s anti-dumping policy be said to be problematic?

        Dumping is a technical term used in countries where exports are purposely sold at prices below their cost of production.  Dumping can occur due to excess capacity in an industry.  Another main reason that dumping occurs is due to companies attempting to quickly gain market share at the expense of domestic businesses.  Dumping is unfair to businesses as it is seen as a form of unfair competition, many governments act to protect their own businesses from the effects of dumping.  They do this by trying to impose tariffs on goods in order to reduce any dumping occurring.  

        The time when dumping is at its strongest is when the foreign nation is in a recession.  The foreign producer does not want to slow down its capability of production in its home country because it anticipates an end to the recession and the foreign producer does not want a result of large costs of financing a slower production of goods.  

        Dumping can be seen as being problematic as it implies that dumped products are being sold at a loss.  This would be considered bad for companies as their profits would be considerably lower than they had previously forecasted.

        Dumpers are engaging in a form of predatory pricing.  Predatory pricing is where a firm sets its prices below average costs in order to drive competitors out of business.  However there are advantages to predatory pricing, which is a form of price discrimination.  Consumers would benefit from having low priced goods.  By having a lower price on goods people who could not previously afford it, can now do so.  This can be known as third degree price discrimination as firms will divide consumers into different groups and change each group into a different price category, but the same price within a group.  In this case a firm has divided different countries up and is charging different prices to each country.  In a firms home country the price of goods are likely to be high, however in a country where the product is being dumped the prices are guaranteed to be at a low.  Firms create predatory pricing by creating monopolies.  A monopoly is a business that has over 25% of the market share.  An example of a business that has created a monopoly would be OPEC.  Another way of driving firms out of business would be by forming cartels and collusions; however these forms of business practices are illegal.  By doing this firms create a price barrier that does not allow goods to be sold under a certain price.  Smaller firms are unable to sell as many products as larger firms due to not having enough money to finance the advertising of their products.  

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        An example of dumping is in the EU the number of Chinese bicycles sold between 1989-1991 the number of bicycles sold rose from 693,000 to 2,100,000.  Cheap imported bicycles from China forced the EU to cut their prices.  Even so, the EU bicycle manufacturers saw that their share of the EU bicycle market fell by 18%.  The EU suspected that Chinese bicycles were being dumped in Europe and imposed an anti-dumping duty of 38.4% of bicycles imported from China.  The EU was forced to lower their prices to keep up with the competition and therefore some firms could be driven ...

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