Dumping is a term that is used in financial markets as well as in international trade. In the context of buying and selling securities, dumping refers to the practice of selling large blocks of securities. More specifically, when dumping securities the seller is primarily interested in getting rid of the securities at any price. One simply dumps, or unloads, on the market with no regard to the selling price of the securities.
Dumping is also used in a commercial sense in the context of international trade. It refers to the practice of one country selling commodities or finished products in another country below cost or fair market value. Predatory dumping occurs when one nation exports goods to another nation below cost or fair market value in order to obtain market share at the expense of domestic competitors. In many cases, predatory dumping drives out domestic competition. Then, having established a dominant marketing position in the industry, the predatory dumpers raise their prices well above previous levels.
Many nations, including the United States, have enacted antidumping laws that provide for the imposition of antidumping penalties or tariffs when a case of dumping can be proven. Following the Uruguay Round of Multilateral Trade Negotiations in 1993, the General Agreement on Tariffs and Trade (GATT) contained provisions to standardize antidumping measures by different nations. Antidumping measures affect not only the practice of dumping goods into the U.S. market, they also affect the ability of U.S. companies to export goods to other countries at competitive prices.
