The practice of selling a product in a foreign market at a price lower than what it commands in the producer’s domestic market is called dumping. Critics of free trade often argue that foreign governments give substantial support to their own exporting companies. Government support may permit these firms to extend their export markets by offering lower prices abroad. In retaliation for this kind of interference with free trade, the United States adds import tariffs to products that foreign firms dump on U.S. markets to bring their prices in line with those of domestically produced products. That is the current situation in the U.S. steel industry. However, businesses often complain that charges of dumping must undergo a lengthy investigative and bureaucratic procedure before the government assesses import duties.
Some 9,000 U.S. apple growers in 30 states recently asked the U.S. Commerce Department to impose a penalty tariff of up to 90 percent on apple juice concentrate from China. They hoped to stop the unfair Chinese practice of selling concentrate in the U.S. market at prices below the cost of production or the home market price. Not only did the number of shipments of concentrate rise from 1 percent to 18 percent of the total U.S. market, the price of the imported concentrate fell more than half. U.S. marketers were forced to cut their prices by 50 percent to meet competition. With the U.S. economy growing and so many foreign countries in recessionary periods, many domestic industries will continue to see increased foreign competition and a decline in domestic market share.
U.S. firms that claim dumping threatens to hurt their business can file a complaint with the U.S. International Trade Commission (ITC). Between 1990 and 1995, nearly 300 cases were filed. If the ITC agrees, it can assess fines that, in theory, equalize the price for the goods in question. The ITC rejected about half of the claims filed.