5 ms·

I see your point, but there is a good deal of hypocrisy in the way this kind international "trade" is viewed. Giving away second hand clothes to developing cou

I see your point, but there is a good deal of hypocrisy in the way this kind international "trade" is viewed. Giving away second hand clothes to developing countries is indistinguishable from "dumping", a trade practice which more developed countries (including the U.S) frequently take trade action against. https://en.m.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.m.wikipedia.org/wiki/Dumping_(pricing_policy)

WalterBright 10y ago
Dumping is a losing game for the dumper. It's nearly as bad as paying someone to buy your products. It only "works" as long as you keep paying, things revert to normal when you stop paying. Meanwhile, the dumpees are better off at your expense.
- xyzzy123 10y ago
  Then rationally no one would do it, right? And U.S border protection wouldn't need to enforce anti-dumping tariffs. I think you're accounting only for first-order effects and ignoring costs to reboot industries that have been shut down. EDIT: To clarify, I think your position is logically consistent and my guess is that you'd explain WTO actions / anti dumping enforcement as regulatory capture and protectionism.
- twblalock 10y ago
  > things revert to normal when you stop paying Not if you do it right. If your goal is to destroy an industry in another country, you can stop dumping after that industry has been destroyed. Then, the people of that country will have no choice but to buy from you, because there is nobody left in that country that produces the goods you produce.
  - WalterBright 10y ago
    Can you provide a case history of an industry destroyed in this manner (selling below cost), where the dumper goes on to enjoy monopoly profits?
    - DanBC 10y ago
      Steel industry in UK has been destroyed, and part of that is the complex pricing of Chinese steel.
      - WalterBright 10y ago
        Did Chinese steel sell in the UK below cost? After it was destroyed, did the cost rise to monopoly levels?
    - xyzzy123 10y ago
      None of the cases I could read about discussed monopoly profits (so I guess, no - although it was not my argument). Rather they focused on the destruction of what were otherwise perfectly good industrial bases. So I suppose the point I'd like to refute is that "dumping is always a losing game for the dumper". The following article: http://www.nap.edu/read/5902/chapter/28 http://www.nap.edu/read/5902/chapter/28 Discusses the case of the British steel industry between about 1880 to 1914. It's not 100% clear that dumping was the proximate cause of their industrial decline (these things are very hard to be sure about!), but a strong case is made that it was a major factor. It's actually a pretty interesting read. Britain had a free market for steel, while the U.S. and German industries enjoyed substantial protection in their home markets. It's better to run a steel plant at 100% capacity, so it actually makes sense to sell extra production overseas even at a loss. Quote: "The U.S. Consul General in Berlin reported in 1916 that "the Steel Verband believes in dumping. They justify their position as follows: Large steel plants must work at a certain maximum capacity without interruption if they are to remain efficient and produce at a minimum cost. It is impossible for the home market of any plant in any country to absorb a large output without interruption in the flow of orders due to periods of depression, from economic causes outside the influence of the steel industry. Also, the increased complication of the coal, iron, and steel industries, the increased use of furnace gases for industrial purposes (gas engines), for running lighting plants for neighboring towns, also the concentration of all stages of production in a few large mills, have made it increasingly difficult to reduce production in any one line of all the allied processes, without causing grave losses and disorganization in other lines. The Steel Verband therefore maintains that it is better for the entire economic life of the country in slack years at home to dispose of surplus products abroad at prices which may even cause a loss, inasmuch as the loss incurred by dumping abroad is in no comparison to the losses which would be incurred if production were reduced at home. " Of course in an ideal world everyone in Britain was now "free to do other things than make steel" but of course that ignores the fact that when the steel industry goes, so does a lot of related industry, manufacturing investment, industrial expertise and research and development. This means that a country which falls behind due to dumping will tend to fall further behind. Interestingly enough if you look through US anti-dumping / countervailing duties messages here: http://adcvd.cbp.dhs.gov/adcvdweb/ http://adcvd.cbp.dhs.gov/adcvdweb/ it seems like steel is still pretty relevant today.
  - brownbat 10y ago
    Well, there's one hiccup. You can't privately dump. Well, you can try. Since you're selling at a loss on the open market, others with capital will see an unexpected price and wonder if you have developed a unique efficiency. After some basic research, some will guess at what you're trying to do. They then have some great options. Invest in competitors or substitutes for the coming reduced supply. Or, stockpile the goods you sell, buying cheaply from you and even undercutting you in the future. Or, develop ways to reduce fixed costs. Build "fast spin up" sites with on-call labor so you can quickly return to market. The dumping strategy works pretty well in a game with only two players. It does not work against the entire global system of capital and investment.
    - emp_zealoth 10y ago
      Right, the Free Market Fairy that always produces results consistent with rules that can be written on one A4 page /s
      - brownbat 10y ago
        > the Free Market Fairy That's a straw man. Markets have lots of failure modes, this just isn't one of them. It's like an underpants gnome plan. Maybe it looks OK on paper, but it falls apart under any outside strategic pressure.
    - legulere 10y ago
      > Invest in competitors or substitutes for the coming reduced supply Which will be at a loss, so you need just as much money. This is especially hard in developing countries. The market will still be destroyed, and you'll end up with a oligopoly. > Or, stockpile the goods you sell, Many things can't be stockpiled, and stockpiling also costs money (see the above) One example where private dumping is tried, is uber with the taxi business. Uber regularly subsidizes fares (e.g. [1]). Local independent taxi drivers don't have the economic backing of investors and can't fight against dumping. [1]: http://economictimes.indiatimes.com/news/international/business/why-uber-is-paying-its-china-drivers-more-than-the-fares-they-collect/articleshow/47600297.cms http://economictimes.indiatimes.com/news/international/busin...
- reitanqild 10y ago
  Not always: Often there exists a price point where it is more profitable to sell less than 100% at a larger price point instead of lowering the price until you can sell everything. At this point the question is what to do with the rest supply. Physically dumping it is one option that might not be legal. Selling it to another market[0] may net you a small profit on top of the already good profit of the amount sold at the optimal price point. [0]: this might be another country or even as white label to local distributors. (Source: farming school economics. : )

WalterBright 10y ago

Dumping is a losing game for the dumper. It's nearly as bad as paying someone to buy your products. It only "works" as long as you keep paying, things revert to normal when you stop paying. Meanwhile, the dumpees are better off at your expense.

xyzzy123 10y ago
Then rationally no one would do it, right? And U.S border protection wouldn't need to enforce anti-dumping tariffs. I think you're accounting only for first-order effects and ignoring costs to reboot industries that have been shut down. EDIT: To clarify, I think your position is logically consistent and my guess is that you'd explain WTO actions / anti dumping enforcement as regulatory capture and protectionism.
twblalock 10y ago
> things revert to normal when you stop paying Not if you do it right. If your goal is to destroy an industry in another country, you can stop dumping after that industry has been destroyed. Then, the people of that country will have no choice but to buy from you, because there is nobody left in that country that produces the goods you produce.
- WalterBright 10y ago
  Can you provide a case history of an industry destroyed in this manner (selling below cost), where the dumper goes on to enjoy monopoly profits?
  - DanBC 10y ago
    Steel industry in UK has been destroyed, and part of that is the complex pricing of Chinese steel.
    - WalterBright 10y ago
      Did Chinese steel sell in the UK below cost? After it was destroyed, did the cost rise to monopoly levels?
  - xyzzy123 10y ago
    None of the cases I could read about discussed monopoly profits (so I guess, no - although it was not my argument). Rather they focused on the destruction of what were otherwise perfectly good industrial bases. So I suppose the point I'd like to refute is that "dumping is always a losing game for the dumper". The following article: http://www.nap.edu/read/5902/chapter/28 http://www.nap.edu/read/5902/chapter/28 Discusses the case of the British steel industry between about 1880 to 1914. It's not 100% clear that dumping was the proximate cause of their industrial decline (these things are very hard to be sure about!), but a strong case is made that it was a major factor. It's actually a pretty interesting read. Britain had a free market for steel, while the U.S. and German industries enjoyed substantial protection in their home markets. It's better to run a steel plant at 100% capacity, so it actually makes sense to sell extra production overseas even at a loss. Quote: "The U.S. Consul General in Berlin reported in 1916 that "the Steel Verband believes in dumping. They justify their position as follows: Large steel plants must work at a certain maximum capacity without interruption if they are to remain efficient and produce at a minimum cost. It is impossible for the home market of any plant in any country to absorb a large output without interruption in the flow of orders due to periods of depression, from economic causes outside the influence of the steel industry. Also, the increased complication of the coal, iron, and steel industries, the increased use of furnace gases for industrial purposes (gas engines), for running lighting plants for neighboring towns, also the concentration of all stages of production in a few large mills, have made it increasingly difficult to reduce production in any one line of all the allied processes, without causing grave losses and disorganization in other lines. The Steel Verband therefore maintains that it is better for the entire economic life of the country in slack years at home to dispose of surplus products abroad at prices which may even cause a loss, inasmuch as the loss incurred by dumping abroad is in no comparison to the losses which would be incurred if production were reduced at home. " Of course in an ideal world everyone in Britain was now "free to do other things than make steel" but of course that ignores the fact that when the steel industry goes, so does a lot of related industry, manufacturing investment, industrial expertise and research and development. This means that a country which falls behind due to dumping will tend to fall further behind. Interestingly enough if you look through US anti-dumping / countervailing duties messages here: http://adcvd.cbp.dhs.gov/adcvdweb/ http://adcvd.cbp.dhs.gov/adcvdweb/ it seems like steel is still pretty relevant today.
- brownbat 10y ago
  Well, there's one hiccup. You can't privately dump. Well, you can try. Since you're selling at a loss on the open market, others with capital will see an unexpected price and wonder if you have developed a unique efficiency. After some basic research, some will guess at what you're trying to do. They then have some great options. Invest in competitors or substitutes for the coming reduced supply. Or, stockpile the goods you sell, buying cheaply from you and even undercutting you in the future. Or, develop ways to reduce fixed costs. Build "fast spin up" sites with on-call labor so you can quickly return to market. The dumping strategy works pretty well in a game with only two players. It does not work against the entire global system of capital and investment.
  - emp_zealoth 10y ago
    Right, the Free Market Fairy that always produces results consistent with rules that can be written on one A4 page /s
    - brownbat 10y ago
      > the Free Market Fairy That's a straw man. Markets have lots of failure modes, this just isn't one of them. It's like an underpants gnome plan. Maybe it looks OK on paper, but it falls apart under any outside strategic pressure.
  - legulere 10y ago
    > Invest in competitors or substitutes for the coming reduced supply Which will be at a loss, so you need just as much money. This is especially hard in developing countries. The market will still be destroyed, and you'll end up with a oligopoly. > Or, stockpile the goods you sell, Many things can't be stockpiled, and stockpiling also costs money (see the above) One example where private dumping is tried, is uber with the taxi business. Uber regularly subsidizes fares (e.g. [1]). Local independent taxi drivers don't have the economic backing of investors and can't fight against dumping. [1]: http://economictimes.indiatimes.com/news/international/business/why-uber-is-paying-its-china-drivers-more-than-the-fares-they-collect/articleshow/47600297.cms http://economictimes.indiatimes.com/news/international/busin...
reitanqild 10y ago
Not always: Often there exists a price point where it is more profitable to sell less than 100% at a larger price point instead of lowering the price until you can sell everything. At this point the question is what to do with the rest supply. Physically dumping it is one option that might not be legal. Selling it to another market[0] may net you a small profit on top of the already good profit of the amount sold at the optimal price point. [0]: this might be another country or even as white label to local distributors. (Source: farming school economics. : )