Dumping Exposed: Are Cheap Imports Really a Win?

Introduction:

From steel to solar panels, India’s markets are often flooded with extremely cheap imports, goods are priced so low that they damage domestic industries in such a way which almost threatens to wipe out domestic sectors.

This practice is known as ‘dumping,’ which is one of the most controversial tactics in global trade. While it benefits consumers in the short term, it can cripple local manufacturers, distort competition, and deepen India’s trade imbalances.

In simpler terms, dumping can be understood as a situation where the price of goods is lower in the importing country as compared to the cost of the goods in the exporting country.

So, if the price of goods is cheaper in the importing country, then how does it affect the importing country?

Dumping can be beneficial for the people of a country as they have to pay lower prices. However, people need to understand that these discounted goods have lower prices, but this raises a question about the quality of the goods.

Dumping not only affects people with low-quality goods, but it also impacts the economies of developing nations. It can cause significant interference in competitions, impacting the local companies and industries negatively in the importing country. This results in affecting the domestic sectors as well as producers in the long term.

Hence, we can also say that while the consumers may initially benefit from lower prices, dumping in the later stage distorts fair competition and leads to deindustrialization, job losses, and dependence on foreign goods. Once domestic players shut down, foreign firms may later raise prices which hurts the same consumers who once benefited.

Illustration:

For instance, a large electronics manufacturer in Country A produces high-end smartwatches. Its production cost is ₹50 per unit because of its size and automated factories. It sells these smartwatches to neighborhood retailers for ₹100 each (the "normal value") to optimize profit in its protected domestic market.

Nevertheless, the business has too much inventory and a strategic goal to increase its market share in Country B, a developing country, as soon as possible. To accomplish this, the business exports a significant number of identical smartwatches to Country B, where they are sold at a steep discount of ₹70 each.

This price is much lower than the ₹100 it charges its domestic customers in Country A, but it is still higher than the manufacturer's own cost of ₹50. The local smartwatch manufacturers, who sell their devices for ₹85 each, are unable to compete with the ₹70 import price when they enter Country B's market.

Selling a product in an export market for less than its normal value (the domestic price) is illegal dumping. Because of the harm to the local industry, Country B is legally able to impose anti-dumping duties on the imported smartwatches. The developed countries export goods at very low prices of not-so-good quality to such countries, and this scenario is referred to as dumping.

Action against Dumping:

As stated earlier also, dumping goods negatively impacts developing countries by causing damage to domestic manufacturers, which results in job losses and factory closures, as they can't compete with such low prices.

To stop such practices, countries impose anti-dumping duties such as tariffs, which results in raising the price of imported goods to a general price level, which doesn’t impact the domestic industries. Many countries take this step to take action against dumping to defend their domestic industries.

The WTO actions discipline the anti-dumping actions, and such actions are often referred to as “Anti-Dumping Agreements”. It focuses on how companies can react to dumping. WTO allows only those governments to act where there is a serious concern or damage to the manufacturing and the economy as a whole. In this case, the WTO allows only those economies to take action where the imports have affected the competing & developing domestic industry due to the unfair pricing of the goods. 

India is actively investigating and addressing the practice of dumping, using anti-dumping duties to protect its domestic industries from the reach of cheap foreign goods, especially from countries like China, Indonesia, and Vietnam. India ranks as the second-largest initiator of anti-dumping investigations worldwide, after the US.

The Directorate General of Trade Remedies (DGTR), a body under the Ministry of Commerce & Industry, is the main body responsible for starting and conducting anti-dumping investigations. To safeguard the Indian economy from becoming a dumping yard,  the anti-dumping duty comes into play.

Anti-dumping duty is a type of customs tax created by the DGTR to help local industries by stopping foreign companies from selling their products at very low prices. The primary goal of this duty is to reduce the negative effects caused by dumping. The final decision to impose duties, usually valid for five years unless reviewed and extended, is made by the Ministry of Finance, Government of India.

Under section 9A of The Customs Tariff Act, 1975, this measure ensures fair competition and promotes a balanced market environment. The World Trade Organisation (WTO), formerly GATT (Article 6), allows economies to take actions against dumping to safeguard the affected industry. It regulates how the governments of different countries can react to dumping. 

It is also imperative to understand that not all cases of price differences in international trade are necessarily dumping. Sometimes, lower prices result from genuine efficiency, better technology, or economics of scale can also be achieved by foreign producers. Therefore, governments must carefully investigate before labelling imports as dumped goods.

In India, the DGTR conducts detailed investigations that consider production costs, profit margins, and the impact on domestic industries before recommending any kind of anti-dumping duties. This ensure that protectionist measures are applied only when unfair trade practices are clearly proven, maintaining a balance between free trade and fair trade.

The economic chain reaction caused by dumping can be understood with the help of following flow diagram:

India has repeatedly faced such challenges across sectors, from glass to steel, where cheap imports threaten strategic industries.

Case Study:

Case: Indian Steel Industry
It can be understood with other cases as well. One of such cases is the Indian steel industry. The Indian steel industry is one of the most important parts of the country’s infrastructure and the 'Make in India' initiative.

However, recently, steel manufacturers in India were attacked by the predatory pricing of foreign steel. China's, Indonesia’s, and Vietnam’s steel markets are experiencing stagnant demand, which has driven overcapacity.

Consequently, cold-rolled flat stainless steel was dumped in the Indian market. As a result, Indian domestic players such as Jindal Stainless and SAIL were forced to lower their prices to a level that was economically unsustainable, thereby eroding profit margins. To make matters worse, their capacity utilization fell to crisis levels.

The Indian Stainless Steel Development Association (ISSDA) declared this situation a crisis, which caused the Directorate General of Trade Remedies (DGTR) to initiate anti-dumping investigations. As a result, the Indian government placed provisional safeguard duties, anti-dumping duties to prevent Indian manufacturers from predatory pricing and to protect the market.

These example clearly show how dumping affects multiple stakeholders like consumers, producers, and the overall economy in different ways. The table below summarizes the short-term and long-term effects of dumping and how anti-dumping measures help to restore balance:

Conclusion:

In essence, dumping is a double-edged sword. On one hand, it brings temporary relief to consumers seeking lower prices, but on the other hand, it inflicts lasting harm on domestic producers and employment opportunities, creating a ripple effect in the economy. Understanding this delicate balance, India has implemented anti-dumping duties as a strategic mechanism to level the playing field for its industries.

These duties, meticulously regulated by the rules of the World Trade Organization (WTO) and rigorously enforced by the Directorate General of Trade Remedies (DGTR), play a crucial role in safeguarding India from becoming a dumping ground for foreign excess production. Through this proactive approach, India upholds the essence of 'Make in India' and paves the way for sustainable economic growth.

References:

1. https://www.dgtr.gov.in/en 

2. https://www.wto.org/english/tratop_e/adp_e/adp_e.htm 

3. https://study.com/academy/lesson/dumping-in-economics-definition-effects.html

4. https://www.researchgate.net/publication/4792771_Dumping_in_Developing_and_Transition_Economies

5. https://www.credlix.com/blogs/what-is-dumping-in-international-trade-and-how-does-it-impact-markets

6. https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm

7. https://www.shiprocket.in/blog/anti-dumping-duty/#:~:text=Let%20us%20understand%20anti%2Ddumping,place%20in%20the%20Indian%20market.

8. https://www.reuters.com/world/asia-pacific/india-proposes-five-year-extension-anti-dumping-duty-malaysian-glass-2025-11-07/

9. https://unicustomsconsulting.com/en/india-opens-anti-dumping-investigation-into-300-400-series-stainless-steel-from-china-indonesia-vietnam/

10. https://stainlesstoday.com/india-launches-anti-dumping-probe-on-stainless-steel-imports-from-china-indonesia-and-vietnam/

11. https://etedge-insights.com/featured-insights/geopolitics-and-strategy/india-launches-anti-dumping-probe-to-protect-its-stainless-steel-industry

12. https://www.investopedia.com/terms/d/dumping.asp

13. https://corporatefinanceinstitute.com/resources/economics/dumping/

14. https://www.shs-conferences.org/articles/shsconf/pdf/2021/03/shsconf_glob20_06033.pdf

Blog by Sudhakar and Neel, M.Com Students