What Is Dumping and How It Affects Us

Research Question:- How does the process of dumping in this company reduce their competitiveness in the foreign market? Action Plan: In this report, I am going to implement four main planning stages. Which is: Read and understand the article Identify the main points and formulate a research question Find Graphs related to the research question Doing the report Stage 1- (Reading and understanding the article): In the first stage, I am supposed to read the article again and again in order to the key points inside my head to understand what is the article is talking about.

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I also don’t need to keep looking back at the article again. 3. The other important notes will be identified and analyzed if they are related to the main subject of the article. . Formulate the research question by integrating all the main points into one question that is a doubt being raised by many people. Stage 3- (Find graphs and tables that are related to the research question): In the third stage, I will be researching for some graphs and data that proves how dumping affects their competition in the foreign market.

Stage 4- (Doing the report) After following the entire action plan like above, I probably will have a compilation of the key points from this article which will help me a lot in doing the report. By using graphs, I am able to discuss the trends and the effects of dumping to the intention in the foreign market. Collecting appropriate varied information like graphs, tables that relates with the research question helps me to come up with a sound conclusion which is convincing and reliable. My choices of research questions: * Why does the company being accused of dumping and why they do it? How does the process of dumping in this company reduce their competitiveness and affect the international trade? * How is Indonesian Balance of Trade (deficit) being affected by dumping? * How does both producer and consumer benefit from trade dumping? Who is at a loss? Why? Analysis Draft: What is meant by dumping? And how it affects us, the society, and the economy? Many people oaten raised doubts about the term “dumping” Some may ask: W dumping? Who does trade dumping? And what big effects will happen to the society? Questions are mostly related to the 5 Was and 1 He’s.

Well, I will be straight forward and keep it simple. Dumping occurs when the good produced is being sold at a higher price in its own country. It rather exports the product at a lower price to other countries. It also refers to the act of offloading a stock with little regard of its price. Some economists might ask what the consequences are. Dumping usually involves substantial export volumes of the product; it often has the effect of endangering the financial viability of manufacturers or producers of the product in the “importing” nation.

What are the advantages and disadvantages of Dumping? DVD: * Dumping allows a certain firm to increase their sales. * They sell goods cheaper to gain monopoly in the foreign market. * Sell of unwanted products in the domestic country. * In summary, nations dump products to eliminate competition, secure monopolies and increase their share of international exports. Subsidies (in the exporting country) an lead to aggressive dumping, since goods can be sold profitably at a price that is cheaper than the cost of manufacture.

History also sheds light on the numerous manufacturers that have used dumping to sell off products that were banned in their domestic market. Disarm: * Hurts a country’s domestic industry and producers. * Impacts the sales volume. * Hurts the market shares. * Triggers decline in profitability. * Leads to Job losses. How to tackle the dumping system? The Wet’s Uruguay round of trade negotiations resolved ‘anti-dumping agreement. ‘ Its provisions define dumping, offers tips on how to measure its impact on a country’s mommies industry and how to report and investigate any case that involves dumping.

The WTFO Dispute Settlement Body has the authority to undertake dumping cases and rule out a decree in this regard. Dumping is quite common, which is why most countries have formulated antiquating policies. The European Union, US, Canada and Japan have been the pioneers in formulating domestic anti-dumping laws to curb dumping practices in international trade, although they too stand accused of supporting dumping from time to time. Benefits: * Re-establishes fair trade and fair competition. * Provides protection to the domestic producers and the industry.

Rectifies unfair trade practices pertaining to dumping. ECONOMIC TERMS: Absolute advantage – The ability to produce something with fewer resources than other producers would use to produce the same thing Balance of trade – The part of a nation’s balance of payments that deals with merchandise (or visible) imports or exports. Benefit – The gain received from voluntary exchange. Business (firm) – Private profit-seeking organizations that use resources to produce goods and services. Capita I buildings, equipment and human skills used to produce goods and services.

Competition – The effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms. Consumers – People whose wants are satisfied by consuming a good or a service. Costs of production – All resources used in producing goods and services, for which owners receive payments. Deflation – A sustained and continuous decrease in the general price level. Economic growth – An increase in the total output of a nation over time. Economic growth is usually measured as the annual rate of increase in a nation’s real GAP.

Equilibrium price – The market clearing price at which the quantity demented by buyers equals the quantity supplied by sellers. Exports – Goods or services produced in one nation but sold to buyers in another nation. Goods – Objects that can satisfy people’s wants. Government – National, state and local agencies that use tax revenues to provide goods and services for their citizens. Imports – Goods or services bought from sellers in another nation. Income – The payments made for the use of borrowed or loaned money. Inflation – A sustained and continuous increase in the general price level..

Labor force – That group of people 16 years of age and older who are either employed or unemployed. Producers – People who use resources to make goods and services also called workers). Quantity demented – The amount of a product consumers will purchase at a specific price. Quota – A legal limit on the quantity off particular product that can be imported or exported. Quantity supplied – The amount off product producers will produce and sell at a specific price. Resources – All natural, human, and human-made aids to production of goods and services (also called productive resources).

Revenue – Payments received by businesses from selling goods and services. Supply – A schedule of how much producers are willing and able to sell at all possible prices during some time period. Tariff- A tax on an imported good. Taxes – Required payments of money made to governments by households and business firms. BIBLIOGRAPHY: “Glossary of Economic Terms and Concepts. ” Glossary of Economic Terms and Concepts. N. P. , n. D. Web. 11 Seep. 2013. Report This article proves that the US is accusing one of the biggest and oldest tubular- making firms in Indonesia.

It is said that they did illegal dumping trade against the US aiming to gain monopoly and sell of unwanted products from Indonesia. It was said that the US might slap higher imports from Indonesia due to the cheaper price. But soon they realized that this company had imported raw materials from China and then processed them to demented goods. The act tot dumping is not only illegal. But it will even harm the chain of international trade. Many people often raised doubts about the term “dumping”. Some may ask: What is dumping? Who does trade dumping? And what big effects will happen to the society?

Questions are mostly related to the 5 WAS and 1 He’s. Well, I will be straight forward and keep it simple. Dumping occurs when the good produced is being sold at a higher price in its own country. It rather exports the product at a lower price to other countries. It also refers to the act of offloading a stock with little regard of its price. Some economists might ask what the consequences are. Dumping usually involves substantial export volumes of the product; it often has the effect of endangering the financial viability of manufacturers or producers of the product in the “importing” nation. In this case, it is same as what I have explained above. POT Citric Tubing had imported raw materials from China for a cheaper price and then process these raw materials in Indonesia to produce good demented for the US consumer. Why does Indonesia have to import materials from China? The reason is simple. It is because China’s a populated country. An over-populated country more appropriately. And its divided into the less fortunate class and the more fortunate class, Just like Indonesia. This is why they have excess labor, automatically, the labor get paid less.

Only the country whom is “developing” will to these illegal dumping trade, because they want to improve their economy by gaining more market shares in the foreign market and to obtain monopoly in their other countries as well. There are also many reasons such * From an economist point of view, the profits of producers are being given priority ever consumer welfare. * They encourage local consumers to consume less of that good since the producers are giving higher priority over the good’s consumer. * It is also done because the wages for labors done in Japan are much higher than any other countries.

This is why they set up a higher market price to be sold, but decreases the price when they export their product to other countries. * Producers in one country are trying to stay competitive with producers in another country * Producers in one country are trying to eliminate the producers in another country and gain a larger share of the world market. * Producers are trying to get id of excess stuff that they can’t sell in their own country. Dumping affects the competitiveness in the foreign market in both ways. Benefiting and limiting a firm.

I will give a list on how dumping is benefiting a firm. Advantages: In summary, nations dump products to eliminate competition, secure monopolies domestic mar et. K The tall which is involved in the dumping are mostly tells trot a developing country. They are able to expand their market by selling good at a cheaper price to foreign countries. Not only that they sell goods at a cheaper price, as I have said earlier, many subsidies are there in the foreign and domestic markets. This way they sell good at a cheaper price to the foreign money to gain monopoly over the market.

When they charge a higher price for tubular goods in their own country, only some specific types will be popularly sold in the domestic market, and what do they do with the rest of the products? They sell them off to the foreign market at a cheaper price. Disadvantages: Dumping doesn’t only leads to higher imports, declination of profit, hurt market share, it even leads to Job loss. Dumping is often illegal in a developed country. Why? It’s because the government is afraid, that by dumping, their economy would deflate.

Firstly, they will see an improvement in the GAP of their country, but what none of them see is for a long term. Not only dumping hurts domestic industries and producers, it will increase the sales volume quickly due to higher imports. Then they will hurt the market shares. Slowly, there will be less competition in the domestic market and they soon will realize that they cannot rely dumping for their business. This way they would increase the imports of goods from other developed countries. Letting them increase the Balance of Trade while we trigger our own declination in profitability.

Slowly, their currency will increase and our domestic currency will stay the same, we will be unable to catch up and be at an unimaginable loss. This will lead to Job loss and decrease in population in the country itself. Most citizens will migrate into a better developed country which follows the rule of the anti-dumping system. *In this example, this is a demand price curve showing the difference of the demand of a phone in 2 different countries, the domestic producer, Japan and the importer, United States . The Japanese producer is a monopolist who uses price discrimination o maximize profits in the two markets.

The firm charges a higher price in the Japanese market where the demand curve is less elastic. In the more elastic (more competitive) U. S. Market, the firm charges a lower price for its exported product. This shows us the different prices in Japan and United States and the equilibrium price. This proves to us how does the difference in prices leads to increase in demand, people tends to get interested to buy popular goods and services at a lower price so they can save up money. The graph below shows us how the long-term dumping affects the GAP growth of Indonesia.

It shows that by the year 2007 onwards, the GAP keeps falling year by year, it had raised by a bit, and continues to fall. What is the reason behind this? One of the doctors that attest this graph is dumping. Not only by this company, but also by a lot of different companies that we don’t know. But what this graph proves my statement correct. The GAP of a country does decline eventually due to inequality of trade due to monopoly of a competition that is done above. What we can see forward is, not the process of dumping, but the aftermath of this decline in GAP. After the decline of GAP of Indonesian economy, what will happen ext?

Due to the decline in GAP, the government is forced to inflate prices and charge higher taxes in both domestic goods and imported goods. They will not pay for any subsidies and tariffs for the domestic goods anymore. Now, after the prices have increased, as I have said earlier, people are interested in goods and services with a lower cost. Same as this, foreigners will find other subsidies with a lower price. So automatically, the demands of this good will slowly decrease. When the demand of this good decreases the flow in of currency they receive will slowly decrease as the crease of demand of their own currency also decreases.

This leads to the depreciation of currency due to the decrease of demand of their currency. What the graph above had shown is the slow progress of advancement after the year 2008. This is because of the slow economic growth of the country due to slow rise in the standard of living. What we haven’t seen is how other factors could affect their competitiveness in the supermarket as well. Let us take a natural disaster. When a country faces a hard time in economy and also faces a huge disaster that is striking hem as well, the country seems to not be rising in economic growth, but a decrease.

We will see the decrease in its currency value. They also need to use a lot of money to build back and reconstruct all the heavy damage the city had taken. Not only disasters, but many other factors as well, such as the change in more strict monitoring in this company, which would observe the transactions done by this company strictly, and the change that they didn’t allow this company do the dumping trade anymore would probably be the biggest change that will affect how their competitiveness is being affected in the international market.

Although dumping is bad for this company’s further trade businesses, effects such as Job loss, slow economic growth, increase in imports, boost up sales, etc. Can actually help reduce the Balance of Trade in this country in 2 ways: either in good or bad. But if we are talking for the long period of time. Illegal dumping trades does affect not only their competitiveness but also the country itself. Dumping is caused due to greediness and selfishness of one’s needs. It’s a sin to dominate and to eliminate other producers by doing an illegal method of selling off products to consumers.