Chapter 10: Pushing Exports Topics in chapter 10: What do we mean by dumping? How should the importing country respond to dumping? Export subsidies Countervailing duties Strategic trade policy

Dumping Selling exports at a price that is “too low,” a price below “normal value” or fair “market value” The export price is lower than the price charged for comparable domestic sales in the home market of the exporter. The export price is lower than the full unit cost (including a profit margin).

How do companies dump? Various forms of dumping: Predatory dumping Cyclical dumping Seasonal dumping Persistent dumping (price discrimination) Is dumping good or bad for you? Should the importing country be allowed to retaliate, and if yes, how? What exactly is unfair trade?

Initiators of Antidumping Cases

Export subsidies Countries sometimes subsidise exports Can be fairly open or ”hidden away” such as low interest loans Quite common in agricultural trade Export subsidies lowers price paid by foreign buyers but increases price paid by domestic buyers Export subsidies normally reduce national welfare in the exporting country

Export subsidies – figure 10.3

Export subsidies – large country Export subsidies may be even more harmful in the large country case, since terms of trade may be worsened Export subsidies are ”illegal” and may be met with retaliatory measures

Export subsidies may turn an importer into an exporter How export subsidies may turn an importer into an exporter is shown in figure 10.5 Assume that the world price is $2 The exporters now receive a $2 subsidy What happens to trade structure and welfare?

Countervailing duties - figure 10.6

Strategic trade policy

Strategic trade policy