What is the likely result of the threat of antidumping action in international trade?

• A. Domestic producers may increase their exports.
• B. Import quotas are automatically imposed.
• C. Foreign exporters may lower their prices to avoid penalties.
• D. Foreign exporters may raise their prices to avoid being accused of dumping.

Answer: (D)

Verified step by step guidance

1. Understand the concept of dumping: Dumping occurs when a foreign exporter sells a product in the domestic market at a price lower than its normal value, often below cost, to gain market share or drive out domestic competitors.
2. Recognize the role of antidumping actions: These are trade defense measures taken by domestic governments to protect local industries from unfair competition caused by dumping. They typically involve investigations and the imposition of tariffs or penalties on dumped imports.
3. Analyze the effect of the threat of antidumping actions on foreign exporters: Knowing that they could face penalties if caught dumping, foreign exporters are likely to adjust their pricing strategies to avoid accusations.
4. Conclude that foreign exporters may raise their prices: To avoid being accused of dumping and the resulting penalties, foreign exporters often increase their export prices to a level that is not considered unfairly low.
5. Note that this price adjustment helps maintain fair competition and protects domestic producers from unfairly low-priced imports.