Let us consider the case of a dumped export commodity “E” and ask, “Who bears the difference between its export and domestic prices?” There is no standard answer to this question.
The only thing we can say with certainty is that the “cost” of dumping commodity “E” need not be borne by the exporter firm itself.
Dumping may be supported by some form of open or hidden export subsidies by the authorities in which case, its cost is borne by the entire exporting economy.
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Thus, the authorities may help the exporter in one or more of the following ways:
i. They may themselves undertake or subsidise market exploration and development of the export market for commodity E.
ii. The exported quantity of E may be exempted from indirect taxes which are levied on it within the domestic market. Or, the taxes collected may be refunded to the exporter.
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iii. The exporters may be provided credit, freight, and inputs (including imported inputs of raw materials, machinery, equipment, technology), etc., at concessional rates.
iv. They may give a direct subsidy for exporting commodity E.
It should be noted that international markets are characterised by an intense competition between exporters and help by national governments to the exporters is viewed with approval.
Accordingly, exempting exports from indirect taxes is internationally recognised and accepted as a legitimate activity on the part of the authorities.
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Consequently, dumping in the sense of exporting at prices lower than the ones charged from domestic buyers has become a widespread phenomenon.
It is not restricted to individual sellers or individual items but covers a wide range of goods and sections of exporters.
In addition, several countries have adopted measures which “enable” their exporters to “afford” lower export prices. For example, a variety of tax benefits may be extended to earners of income from exports.
In India, this is one of the widely used methods. Similarly, labour laws may be amended in such a way that the producers can minimise their labour costs. China has used this policy tool very successfully and extensively, while India has chosen not to do so.