Dumping refers to the set of practices by which a company sells its products at a price lower than what it cost to produce. Therefore, for companies the objective of dumping is none other than to compete directly in the market in order to be above the competition and exercise greater control over the market itself. Therefore, the concept of dumping is also understood as the practice of unfair competition.
The practice of dumping includes the fiscal fraud and it is punishable by the World Trade Organization, at the same time that it is regulated through the General Agreement on Tariffs and Trade. However, for all those who postulate in favor of dumping through free trade, they consider it a practice that benefits the interests of the final consumer.
Types of dumping
There are several types of dumping, but all of them pursue, in short, all of them actively seek a monopoly on the market in which they launch their products. Next, we are going to see which are the most common types of dumping and what each of them entails:
- Persistent dumping: products are continuously exported to international markets. The benefits come through the differences in the price of the product in the domestic market versus abroad.
- Predatory dumping: the exporter will sell its products on the international market. Although at first glance you see how you do not make a profit in the background, what you are doing is eliminating direct competition at the same time that you sneak into the traditional market more easily. In this way, the profits obtained through this modality will come in the long term when there is hardly any competition and we are faced with a monopoly situation. For these reasons, this is the most aggressive and dangerous practice of dumping.
- Sporadic dumping: it occurs in those cases in which there is surplus in production. The surpluses will later be sent to the international market to be sold there at a price lower than its corresponding cost.