Anti-dumping is a commercial policy that prevents companies from dumping in the domestic market.
Anti-dumping is a commercial policy used by States. This, in order to prevent foreign products from being sold in the local market at a lower price than the manufacturing cost. Avoiding thus, a damage to the local industry by unfair competition. Anti-dumping constitutes a protectionist practice.
However, local companies can also use these types of strategies, called, in this area, predatory prices. In this case, measures of this type are also carried out to avoid these unfair practices.
There are various strategies that nations can use to prevent dumping in the domestic market. These can be classified into shares for local and international companies.
- Local scope: The penalization of these actions will depend on the legislation of each country. Some examples of how they could do so would be financial penalties for companies that incur dumping. Also, temporary closures, interventions, expropriations or confiscations, depending on the level of severity of the offense.
- International scope: The tools that states use to protect local industry are trade barriers tariffs and non tariff. In this way, taxes are imposed on the dumped products and the local industry is protected.
Likewise, the anti-dumping could result in an internal conflict of powers if there is any legislation that implements dumping in some assets. This type of dumping is known as social dumping.
Objectives of the anti-dumping
The main objective of this practice is to protect the domestic industry from unfair competition. It can also be used more frequently to protect sensitive industries.
Difference between dumping and other pricing strategy
Anti-dumping policies do not affect the pricing strategies of the companies. On the one hand, dumping is a decrease in prices below costs in a sustained manner. Meanwhile, other pricing strategies are temporary measures to improve the organization’s position in the market.
Therefore, the first (dumping) is an insane practice for trade. The second (pricing strategy) is a competitive business strategy, not sustained.