Understanding Dumping in International Trade
Dumping, in the context of International Trade, refers to a specific pricing strategy where a company exports a product at a price lower than the price it normally charges in its own domestic market.
Defining Dumping
The core concept of dumping involves price discrimination between markets.
- A firm sells its products in a foreign market at a price lower than in its domestic market.
- This practice can also involve selling below cost in the foreign market to gain market share.
Analysis of Options
Let's analyze the given options based on the definition of dumping:
- Option 1 is incorrect because dumping doesn't typically involve the free distribution of used products.
- Option 2 accurately describes dumping: Selling a commodity cheaper in foreign market and costly in domestic market. This aligns perfectly with the definition.
- Option 3 is similar but less precise than Option 2. While dumping often involves sending cheap goods, the defining characteristic is the price difference relative to the domestic market, not just that the goods are cheap per se or sent only to developing countries.
- Option 4 is incorrect because Option 2 correctly defines dumping.
Conclusion
Therefore, the most accurate definition of dumping in international trade among the choices provided is selling a product at a lower price in a foreign market compared to the domestic market.
Important Questions from International Trade
Consider the following statements about the international financial sources :
I. A Global Depository Receipt (GDR) is a bank certificate issued in more than one country for shares in a foreign country.
II. A GDR is very similar to American Depository Receipt (ADR).
Select the correct option.
Which of the following documents is not required for obtaining export license?
_________ was set up with prime objective of professionalizing the country’s foreign trade management by providing training, research and data dissemination.
Which one of the following does not fall within the ambit of WTO operations ?
The following statements relate to Restrictive Trade Practices (RTP). Choose the correct code for the statements being correct or incorrect.
Statement I: Often the low price is the result of the predatory pricing strategy; prompting selling at prices below cost.
Statement II: This is done with an aim to drive out existing competitors because predatory pricing is a restrictive trade practice.
