Reciprocal dumping

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Reciprocal dumping (English reciprocal dumping ) arises when there by dumping comes to a mutual exchange of the same product. In international trade , it is very rare for similar goods to move in both directions at the same time. This is more likely with intra-industrial trade .

Definition

Reciprocal comes from the Latin ( reciprocus ) and means something like "in relation to one another", "alternately". Mathematically it means “reversed” or “reciprocal value”: this is the value that results from swapping the numerator and denominator of a fraction, i.e. the reciprocal value .

Dumping (English to dump , unloading) is a trading method in which domestic goods are favored on the foreign market. Dumping arises from private sector initiative. In an international context, one speaks of dumping "when the foreign price of a good is lower than the domestic price." In common parlance, dumping is often understood to mean the sale of goods at a price below their actual value.

Intra-industrial trade refers to the exchange of similar products or goods. It can also be partially blamed for an increasing volume of trade. This type of trade is also known as "substitutive trade", since the goods in trade compete with one another and can also be exchanged for one another.

Example of reciprocal dumping

For one and the same homogeneous good , e.g. B. Bricks, which are manufactured in Germany and abroad, each a brick company. In other words, both the domestic and the foreign market are each dominated by a monopoly . These two monopolists produce at the same constant marginal cost .

There are also transport costs that would arise from transport between the markets. If both monopolists took the same price for their goods, there would be no trade. However, if dumping is allowed, foreign trade can occur. When exporting the goods, the bricks, there are transport costs. In order not to destroy the price on the domestic market, a monopoly will try to keep domestic supply tight. If he sells part of his production abroad at a lower price (net transport costs), he can increase his profit without lowering the price on the domestic market. Overall, this can be a profitable strategy.

There is trade between the domestic and foreign countries and thereby an oligopoly , although in the initial state there is no price difference between domestic and foreign countries. In addition, intra-industrial trade arises in one and the same good. The situation in which domestic and foreign dumping are practiced is now referred to as reciprocal dumping.

Ie a brick factory from country A transports its bricks to country B, at the same time a brick factory from country B transports its bricks to country A.

Reciprocal dumping softens the existing structure of the market, which without dumping would be dominated by two monopolists alone. Goods are offered at a lower price due to the competition between the two companies, so that the consumer surplus increases. On the other hand, there are social costs due to the transport of goods from one country to another. Among other things, there are also costs from the environmental pollution associated with the transport. Reciprocal dumping leads to a net increase in welfare if the welfare gain due to lower prices exceeds the welfare loss due to transport costs. Otherwise there is a loss of welfare.

Individual evidence

  1. ^ See: Krugman, Paul R./Obstfeld, Maurice: Internationale Wirtschaft. 7th edition, p. 189.
  2. ^ Adebahr, Hubertus: Foreign trade. Volume 2: Foreign Trade and World Economy. Berlin 1987, p. 155
  3. ^ See: Krugman, Paul R./Obstfeld, Maurice: Internationale Wirtschaft. 7th edition, p. 189
  4. ↑ See: www.tiberian.ch/files/auwi.pdf of April 14, 2008
  5. ↑ See Pfaffermayr, Internationale Wirtschaftsbeektiven, Part 1 - Real Foreign Trade Theory, as of October 1, 2002, page 57/58
  6. ^ See: Krugman, Paul R./Obstfeld, Maurice: Internationale Wirtschaft. 7th edition, p. 189
  7. ↑ See: www.tiberian.ch/files/auwi.pdf of April 14, 2008

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