Why is it difficult to determine whether a country is dumping? Explain fully.

What will be an ideal response?


According to the WTO rules, dumping occurs when an exporter sells a product at a price below what it charges in its home market. It is not always possible to compare the home market and foreign market prices, however, and wholesalers, transportation costs, and other price add-ons may limit the comparison’s usefulness. Two other measures may be used. Comparisons can be made between the price in the import market and either the price charged in third-country markets, or to an estimate of the cost of production. Comparison to prices in third-country markets is similar to that between prices in the exporter’s home market and the importer’s market, and it may be uninformative for the same reasons. A comparison of the import price and the estimated cost of production, including a normal rate of return on invested capital, assumes that production costs in an exporting country can be measured with accuracy. Thus it is difficult to determine when a country is dumping, and many elements of this determination are somewhat subjective.