What is Dumping in the Economy?

Is a tactic that occurs when a company sells its products in another territory at a reduced price, at a level that harms local companies.

This is an unfair competition practice, since it can prevent companies already established in the market from lowering their prices.

dumping concept 

The dumping tactic   begins with a kind of price discrimination, which occurs when a company has the possibility of charging for its product abroad, an extremely low value to what it charges in its country of origin.

The intention of a lower price is to compete with companies that are already installed in the importing country, which  allows a competitive advantage  with  dumping  .

With this practice, other companies in the country cannot reduce prices to the same level, mainly due to fixed costs, which can lead to bankruptcy.

The result of  dumping  is that the industries of the importing country may be affected, which allows the company that carries out this practice to form an oligopoly, or even a monopoly of its activities.

Meaning of  dumping

The word  dumping  does not have a direct translation into Portuguese, but this term derives from the word ”  dump  “, which has the following meanings:  empty or dump  .

Therefore,  dumping  is considered an intentional practice to eliminate competition in another market where possible.

anti-dumping measures

In several countries, there are measures to control  dumping  through the World Trade Organization (WTO).

Anti-dumping measures are taken to protect domestic producers, while the importation of goods and services is hindering their activities, either through taxes or limitation through quotas.

Examples of  dumping

One of the most common examples, mainly in Brazil, is to import Chinese products, which are generally cheaper than Brazilian ones.

The  dumping  of Chinese products requires the authorities to constantly investigate and apply taxes to protect Brazilian merchants.

 social dumping

Another concept is  social dumping  , which occurs when the company seeks to produce at a low labor cost, motivated by low wages or lack of assistance to workers, elsewhere.

With this, it is possible for the company to install its production at lower costs, which increases the profits of the business.