Why is the act of 'dumping' considered to be an unfair practice?

[Frances]

Hi,

In Module 15, it speaks about how dumping is an unfair practice, where one country 'dumps' cheap goods into another. Why is this an unfair practice? Also, why would restricting trade prevent dumping and other unfair practices?

Thanks

 

[Whippet1]

Dumping is unfair if it undercuts domestic producers and so forces them out of business. It's similar in a way to predatory pricing.

Introducing quotas, i.e. physical limits on the volumes of goods that can be imported (dumped or otherwise), will reduce dumping. In fact, if the quota is set equal to zero on imports form the country doing the dumping, then dumping from that country will be eliminated entirely.

Equally, imposing tariffs on the dumped goods will make them more expensive and so can be used to eliminate their competitive advantage.

 

[Frances]

Thank you!