The previous blog is about a tariff placed on solar panels by the Department of Commerce. The basis for this tariff are dumping laws.
The idea of dumping is based on the flimsiest nonsense about business.
The presentation to the Department of Commerce for a dumping argument is always based on trying to provide evidence that a foreign business, (or group of businesses in this preposterous case) are selling some product in the United States at below fair market value. In reality, fair market value becomes defined as the price American sellers are currently selling their products.
There is no such thing as dumping in business. It is not an intelligent or functional business practice. Neither for domestic nor foreign businesses.
I know where the idea comes from. Ordinary non-business people see sale items in grocery stores and occasionally in a department store for sale below customary price. These are called loss leaders and are intended to bring customers into the store. Presumably those customers buy other higher-priced high markup items to offset the loss leaders.
The reality is that this type of discount sale only occurs in retail stores and industries that have very high markups to begin with and the loss leaders are a tiny fraction of the daily revenue.
I always explain to my clients that this is a losing market strategy. The type of customer attracted is not a future reliable repeat customer, and that such a persnickety customer seldom buys anything but the loss leader.
To think that some industrial supplier to the United States would price their product actually at or below their own costs is based on ignorance. While this may be a tactic to gain market share it does not work because the market begins to expect to buy the product at the low price. You cannot raise the price in the future even if you have actually driven other companies out of business because it is easy, from the perspective of the world, to create new businesses who will compete with you.
Such a dumping strategy doesn't work.
On occasion where the technology and economies of scale are at work it is possible to sell at current cost and anticipated future reductions in your own costs. This is rare and only happens in the high-tech world where domestic producers are somehow blind to the same high-tech or economy of scale available in their future too.
Even in the outrageous instance where a dumping may occur the protective tariff is a waste of everyone’s money.
It is very rare in the history of the world for a protected industry that has accused others of dumping to survive very long after a tariff for protection has been put in place. Such companies are usually too lazy to make the necessary changes to compete in the future when the tariff is legally or politically outmoded.
Dumping is not a valid business strategy. The dumping idea that unions promote and the American government continues to protect is harmful to everyone.
Fortunately the world has the WTO to protect us all from this stupid idea. Unfortunately the American government installs anti-dumping tariffs and it takes many years for the WTO to unwind the mess.
The idea of dumping is based on the flimsiest nonsense about business.
There is no such thing as dumping in business. It is not an intelligent or functional business practice. Neither for domestic nor foreign businesses.
I know where the idea comes from. Ordinary non-business people see sale items in grocery stores and occasionally in a department store for sale below customary price. These are called loss leaders and are intended to bring customers into the store. Presumably those customers buy other higher-priced high markup items to offset the loss leaders.
The reality is that this type of discount sale only occurs in retail stores and industries that have very high markups to begin with and the loss leaders are a tiny fraction of the daily revenue.
I always explain to my clients that this is a losing market strategy. The type of customer attracted is not a future reliable repeat customer, and that such a persnickety customer seldom buys anything but the loss leader.
To think that some industrial supplier to the United States would price their product actually at or below their own costs is based on ignorance. While this may be a tactic to gain market share it does not work because the market begins to expect to buy the product at the low price. You cannot raise the price in the future even if you have actually driven other companies out of business because it is easy, from the perspective of the world, to create new businesses who will compete with you.
Such a dumping strategy doesn't work.
Even in the outrageous instance where a dumping may occur the protective tariff is a waste of everyone’s money.
It is very rare in the history of the world for a protected industry that has accused others of dumping to survive very long after a tariff for protection has been put in place. Such companies are usually too lazy to make the necessary changes to compete in the future when the tariff is legally or politically outmoded.
Dumping is not a valid business strategy. The dumping idea that unions promote and the American government continues to protect is harmful to everyone.
Fortunately the world has the WTO to protect us all from this stupid idea. Unfortunately the American government installs anti-dumping tariffs and it takes many years for the WTO to unwind the mess.