From: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Newsgroups: sci.econ,misc.legal
Subject: Re: "Dumping"
Date: 12 Dec 92 00:35:29 GMT
Reply-To: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Distribution: na
Organization: Pyramid Technologies, Mt. View, California.

> 
> I personally don't care if the U.S. has a flat-screen industry or
> not.  I want the cheapest, highest quality product available, regardless
> of where it is made.  Flat screens have decreased, not increased
> in price so the detrimental effects of 'dumping' aren't evident.  In
> addition. the low cost of flat screens helps U.S. firms such as
> Apple and IBM who use these screens in their own products.
> 
> 

Jim's making a really nice point here.  I would like to elaborate on it.

Though some have claimed it, no-one has yet posted an example of
a Japanese company or companies which successfully executed the following
strategy in its entirety:

      Form a cartel
      Overprice goods in your local market
      Get the government to protect the local market from foreign 
	  competition
      "Dump" into a monopoly position in a foreign market
      Exploit the monopoly by raising prices enough to recoup the 
	  losses incurred from dumping.

(Notice that if you complete all but the last step, then essentially 
Japanese consumers are subsidizing cheap American products.  Can you say, 
"Thank you.")

We've been given various example of pieces of this equation, none totally
relevant in my opinion, but no whole model which succeeded.  I think that
some of the "turn-of-the-century" examples *were* true, at the turn of the
century, but are there any current, Japanese examples?  

The point that I wish to make, which is the point Jim made, is that
"dumping" in a relative parity market would seem to set up a kind of 
competitive arbitrage.  If you were really selling below cost, then why 
wouldn't your competitor just buy up your supply and resell at market, 
making the profit?

Its a silly example, maybe, but Jim is pointing to a more complex interaction
where the arbitrage is hidden, but still passed along. 

Flat screen dumping in the U.S. market could make U.S competitors stronger, 
since they could reduce their cost structures.  Maybe IBM
could use the flat-screen technology to become more competitive by
*finally* offering a cheaper terminal.  Now suppose that Hitachi or NEC is 
an IBM 3278 terminal competitor who previously enjoyed a price advantage 
over the IBM 3278 terminal.  Now there's parity.  IBM can offer the dumped
flat-screen at the same low price.  NEC takes it on the chops.

You can't pinpoint the "damage" when dumping into a competitive free
market.  It can and will effect other members of the so-called cartel.  

Would NEC then chastise Matsushita in the cartel and say, "Look here 
Matsushita, your killing us with these dumped flat screens."  Or would they
simply gang up with the other Japanese terminal manufacturers and raise
prices in the local markets to keep their margins the same?  If they keep
local prices high, won't they eventually have to pay higher local wages?
If they pay higher wages so that Japanese consumers can pay higher prices
for the overpriced goods, won't that show up in their own costs?  How will
they afford to keep dumping?

It seems to me, that if you don't establish a monopoly, then dumping is
not a very smart strategy.  Barring monopoly, I agree that the best way
to protect a free market is to keep it free.  I really agree with the
guy who invited the Germans to start dumping BMW's on us.  Dump away.  

Paul Collacchi