Question

What is dumping? Why does prohibiting it often work better in theory than in practice?

Short answer

Prohibition of dumping only work better in theory than in practice.

Step-by-step solution

Step 1. Meaning of dumping.

In economics, dumping is a term used in the context of international trade. It occurs when a country or a company exports a product at a price which is lower in the foreign importing market than the price in the exporter's domestic market.

Step 2. Following are the advantages and disadvantages of dumping.

a) Advantages:-

* Increase in market share and revenue.

* Availability of cheaper products.

b) Disadvantages:-

* Drain of resources.

* Creation of monopoly.

* Disruption of local industries.

Step 3. General prohibition of dumping often work better in theory than in practice.

Because:-

a) Anti-dumping laws are problematic because of the difficulties in determining what the right price should be. Thus, create difficulties to implement the anti-dumping laws.

b) The tendency for political motives to corrupt the process.