There are a number of circumstances which are considered the main reasons for dumping, a brief description about these conditions are as follows:
- Predatory Dumping: Predation is a situation where a foreign organization/company intentionally lowers the price of its product in the cross border markets. Normally in a predatory dumping the organization/company sells its products at a very low price or at a loss to gain entry in the foreign market. The main object is to price the products in such a way that local competition in the foreign market is completely destroyed. In predatory dumping the prices are initially set to a lower level in order to drive out some competitors; and when the competitors are eliminated the prices of the commodities are raised by the monopolist firm. Predatory dumping is relatively permanent than sporadic dumping however, it is less permanent than persistent dumping.
- Persistent Dumping: Persistent Dumping is the main cause for which antidumping legislations were made. Persistent dumping is relatively permanent form of dumping as compared to predatory and sporadic dumping. In Persistent form of dumping the monopolist organizations/companies continuously sell the product in the foreign region market at a very low price whereas the price of such products are higher in their own domestic region. The sole purpose of persistent form of dumping is to create a presence in a foreign market by lowering the prices in order to enter into new markets and establish its products in those markets. It is an unfair trade practice which aims at the domestic industry to come into the realm of damage or gets kicked out from the business enabling the organizations/companies to become monopoly power in the region. Persistent dumping is possible only if the domestic demand for a particular commodity is less elastic and the foreign demand is highly elastic.
- Sporadic or Intermitted Dumping: A company is involved in practices of sporadic dumping normally if it has a large amount of unsold inventory. The sporadic dumping is a situation where a company sells the product in the foreign market at a price that covers its variable and few fixed cost. The rise in sporadic dumping can be due to deficient experience in pricing the new product or unconscious pricing by an organization/company in such economy where the internal system of pricing is distorted. It can be due to atmosphere in which organizations/companies are working is generally unpredictable and it becomes difficult to control the dumping in such situation. Therefore, the organizations/companies apply the strategy of sporadic dumping whenever there is a large inventory built and such organizations/companies have to liquidate the same.
- Seasonal Dumping: Seasonal form of dumping is done where the exporter has a bumper crop or production and sells the commodities at foreign markets at lower prices.
- Cyclical Dumping: Cyclical form of dumping is one which the company practices for the stabilization of its product over the business cycle when the exporter has slump at home.
- Reverse Dumping: Reverse dumping is the dumping of goods in a reverse manner. The reverse form of dumping means selling the goods at extremely low prices in the domestic market while the same goods are sold at a much higher price in the foreign markets. Reverse form of dumping is followed in those foreign markets where the demand is less elastic.
Read Also: Anti Dumping Laws in Pakistan…
Anti Dumping Act, 2015 ….
