Dumping is exporting a product at a price which is either below the price it charges in its home market or is below its costs of production (Wikipedia).Dumping is usually not easy to spot and therefore it is hard to prevent. However many countries, in order to intimidate foreign industries in selling products below the domestic price level, set very high fines consisting in paying the difference on each unit sold between the fair price and the price which the good was sold (working like a tariff).A company would never go against its business (usually). In dumping cases the companies sell below cost because they have a comparative advantage in producing the good, for example: government could subsidize the good or the good could be produced at lower production costs. In fact this is the reason why they are advantaged and can control the market price, making the other companies adjust to the new price and increase competition.
Dumping is however condemned, not prohibited. As long as a domestic industry is not materially injured or not threatened with material injury (ia.ita.doc.gov), a foreign company is not guilty of dumping.Dumping is a threat for a country’s economy. However this is only one negative aspect of free trade and is a very uncommon one due to the very strict restrictions. Even if a government feels dumping a tariff will solve the problem, pushing the prices back up and increasing revenue.
*if a country does have a comparative advantage in producing a good, the government could still act like the U.K. did in the 19th century, as described in the book “the choice”.*by putting tariffs to prevent dumping the only thing a country does is hurt itself. This is because by putting tariffs foreign companies would export less or even cut the trade and at the same time put tariffs on your country or refuse to trade.7)Protect product standardsProtecting product standards does not mean eliminate trade, instead I think a country can only protect a standard if there is trade. Without free trade the government will not be able to produce highly efficient goods because it will not have the need to produce them since it is the only one producing them. Like in the choice there will be fewer variability which of course effects the quality of the goods and leads to fewer companies (monopoly) and higher prices.
With free trade the government is able to compare the quality and the price of the goods produced in foreign countries, enabling it to improve the standards so to compete against the international market and optimize its goods to a higher standard.Without free trade it will be impossible for us to export and learn about other people’s wants. This in addition to improved technology increases competition which stimulates production and decreases the domestic price level.If the government might import less expensive and poorer goods, it will still be able to switch the import or even stop it from coming in the country.If a country is independent and can produce any good by itself, how can it be possible for them to improve the quality without looking at foreign competitors? This is why a nation cannot improve its quality standards without having to deal with other nation’s products. Trade therefore gives the chance to have a wider range of opportunities which a company can learn from and adjust to.8)Raise government revenueA country produces goods and services which are then paid for and consumed. This is how basically a government earns his revenue.
With trade there are changes. Other countries have access to our goods and we have access to their goods as well. This interaction between countries makes it possible for them to compare the goods they are offering and therefore to modify them in order to make them more efficient and cheaper for the consumers. Now if there is no trade how is it possible to increase revenue? It is possible but it will not be as profitable as it will be if there was trade.
The term comparative advantage means that a country has convenience in producing good/s and therefore has a lower opportunity cost than other countries producing the same good. With trade countries can specialize in the production of endowed goods and export them while importing goods which they have a higher opportunity cost, spending less money and increasing their productivity.If a company decides to export products it will, logically, have more opportunities of selling them and therefore increase its revenue. If it was only selling in its mother country, let’s say Luxemburg, the income would far less than if it was trading with other countries. Now, if all the countries trade using their endowed goods, it will be easier to increase the domestic revenue and therefore the entire world’s revenue.2)Protecting the economy from low cost laborWorkers in developed countries are usually more expensive to keep, but they are more skilled because they have been through better education. Instead in developing countries the average skill is low and therefore there is more demand for low skilled jobs which influences the quality, quantity and price of a firm’s final product.
In the choice David Ricardo talks about Mexico and the U.S. and how American firms were moving to Mexico for low wages. He says that the American workers closest to the Mexican worker’s skills were the low skilled ones. The poorly paid industries opening in Mexico were attractive to Mexican standards but were not allowed by the American standards. Low wages are still better than no wages. “The tragedy of Mexico and other poor nations is low skills and insufficient education.
I don’t think it does the people of Mexico any good to keep out low-wake foreign employers if the alternative is even lower wages paid be domestic companies”(Roberts 85).As we can read in the above paragraph taken from the choice, in developing countries there is less and poorer education, which leads to low wages and unskilled workers. The jobs are not paid well and with the help of a developed country’s company it would be easier for those less developed countries to slowly increase their standards and at the same time increase their national income.
If a country does face lower cost labor with low skilled workers coming into the country, it can still increase the minimum wage and prepare training programs for those unskilled workers. If it is too expensive for a nation it could move those workers in foreign countries and still make income but at the same time increase another countries’ standards of living.;