Dumping (pricing policy)

In economics, "dumping" is a kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production. The purpose of this act is sometimes to increase market share in a foreign market or to drive out competition.

A standard technical definition of dumping is the act of charging a lower price for the like goods in a foreign market than one charges for the same good in a domestic market for consumption in the home market of the exporter. This is often referred to as selling at less than "normal value" on the same level of trade in the ordinary course of trade. Under the World Trade Organization (WTO) Agreement, dumping is condemned (but is not prohibited) if it causes or threatens to cause material injury to a domestic industry in the importing country.

The term has a negative connotation, as advocates of competitive markets see "dumping" as a form of protectionism. Furthermore, advocates for workers and laborers believe that safeguarding businesses against predatory practices, such as dumping, help alleviate some of the harsher consequences of such practices between economies at different stages of development (see protectionism). The Bolkestein directive, for example, was accused in Europe of being a form of "social dumping," as it favored competition between workers, as exemplified by the Polish Plumber stereotype. While there are few examples of a national scale dumping that succeeded in producing a national-level monopoly, there are several examples of local 'dumping' that produced a monopoly in regional markets for certain industries. Ron Chernow points to the example of regional oil monopolies in Titan : The Life of John D. Rockefeller, Sr. where Rockefeller receives a message from Colonel Thompson outlining an approved strategy where oil in one market, Cincinnati, would be sold at or below cost to drive competition's profits down and force them to exit the market. In another area where other independent businesses were already driven out, namely in Chicago, prices would be increased by a quarter.

...
Wikipedia