8 ms·

> 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 t

> 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.
  - WalterBright 10y ago
    If you're selling surplus steel at a discount because it would cost more to not make it, that is not dumping. It's maximizing profits. I'm aware that many countries have anti-dumping laws and protective tariffs. I suspect the "dumping" charge is just an excuse to insulate oneself from competition. The cost of protecting an industry in this way is higher prices for everyone else in the country. Economic prosperity comes from exploiting comparative advantage, not blunting it.
  - douche 10y ago
    There were also certain national-defense aspects. Keeping Krupp open, profitable, and competitive with Armstrong meant that the Kriegsmarine could have top-of-the-line armor and armament, to try to keep up with the Royal Navy.
  - angry_octet 10y ago
    It is interesting that the forerunner of the EU was the ECSC, the European Coal and Steel Community. It created a free trade zone with a large enough market for big efficient plants, transitioned inefficient mines and plants out of operation without causing social shock, and provided a collective tariff defence against US dumping.
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...

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.
- WalterBright 10y ago
  If you're selling surplus steel at a discount because it would cost more to not make it, that is not dumping. It's maximizing profits. I'm aware that many countries have anti-dumping laws and protective tariffs. I suspect the "dumping" charge is just an excuse to insulate oneself from competition. The cost of protecting an industry in this way is higher prices for everyone else in the country. Economic prosperity comes from exploiting comparative advantage, not blunting it.
- douche 10y ago
  There were also certain national-defense aspects. Keeping Krupp open, profitable, and competitive with Armstrong meant that the Kriegsmarine could have top-of-the-line armor and armament, to try to keep up with the Royal Navy.
- angry_octet 10y ago
  It is interesting that the forerunner of the EU was the ECSC, the European Coal and Steel Community. It created a free trade zone with a large enough market for big efficient plants, transitioned inefficient mines and plants out of operation without causing social shock, and provided a collective tariff defence against US dumping.

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...