Dumping is selling exports at less than normal value—a price lower than the price in the home market or lower than the full average cost of production. Exporters may engage in dumping to drive foreign competitors out of business (predatory dumping), during recessions in industry demand (cyclical dumping), to unload excess inventory (seasonal dumping), or to increase profits through price discrimination (persistent dumping). The importing country benefits from the dumped exports because it pays a lower price for its imports. But the importing country could be hurt by predatory dumping (higher prices in the future) or by cyclical dumping (importing unemployment).

The WTO permits the importing country to retaliate with an antidumping duty, if dumping is occurring and it is causing injury to the import-competing industry. It appears that the process of imposing antidumping duties has become a major source of new protection for import-competing producers because the process is biased to find dumping and impose duties. The American steel industry is an example of a set of firms that continually complain about dumping to gain relief from import competition. Proposals for reform of antidumping policy include limiting its use to cases where predatory dumping is plausible, incorporating consumer interests in the analysis of injury from dumping, and replacing antidumping policy with more use of safeguard policy, in which a government offers temporary protection to assist an industry in adjusting to increasing import competition.

Export subsidies are condemned by the WTO, with the exception of export subsidies to agricultural products. If the market is competitive, an export subsidy brings a loss to the country offering the subsidy and to the world as a whole by causing excessive trade. A countervailing duty against subsidized exports brings a loss to the importing country levying it but brings a gain to the world as a whole by offsetting the export subsidy. The combination of an export subsidy and an equal countervailing duty would leave world welfare unchanged, with taxpayers of the export-subsidizing country implicitly making payments to the government of the importing country.

It is at least possible that export subsidies could be good for the exporting nation and for the world as a whole. If export competition takes the form of an oligopoly game between two giant producers, each of which could dominate the market alone (e.g., Boeing versus Airbus), then the government can offer a subsidy to its exporter as a strategic trade policy. This firm then may capture the global market and bring gains both to the exporting nation and to the world as a whole. We do not know that such a case has occurred, but it is possible.