Distortion of international trade by dumping

Nature

International trade may be distorted when an enterprise effectively reduces the foreign price of its product below that of the domestic price, where any such difference is not due to actual differences in the cost of selling, production, or transportation. The price reduction may be disguised by quality differentials, spurious quantity discounts, or favourable credit terms. Governments may support such forms of export through special export subsidies, tax rebates, or other special concessions.

Background

The global significance of trade distortion by dumping emerged in the early 20th century, notably after industrialized nations began exporting goods at artificially low prices, undermining local industries abroad. The issue gained prominence with the 1947 General Agreement on Tariffs and Trade (GATT), which recognized dumping as a threat to fair competition. Subsequent decades saw increased scrutiny, as developing economies reported severe market disruptions, prompting international efforts to monitor and regulate anti-dumping practices.