As soon as a competing product begins to be imported, the foundation of the export trade, viz., a large domestic market, is cut away, and the whole industry (through the collapse of individual concerns, of course) may be injured or destroyed. The same situation might come. upon an industry depending primarily upon one foreign market and dumping in another. Hence under a "dumping" price policy large exports are not an indication of ability to meet foreign competition in the domestic market. On the other hand, if prices are based on average cost, the presumptions run the other way. If for example, the export industries of Great Britain can sell abroad in face of competition, it is safe to assume that likewise they can protect their domestic market without a tariff. All this, of course, is familiar doctrine to the economist, but it is well to reiterate it here to emphasize the enormous complexity of the problem of tariff and anti-dumping legislation.

Under a permanent dumping policy the surplus shipped abroad is regarded as a by-product, and like other by-products it has no definite cost price but is sold for whatever it will bring. As in the case of other by-products, however, it may be a real source of income and profit for the industry as a whole. When there is a deliberate intention to dump, the manufacturer, instead of restricting his output to meet domestic needs. only, fixes a price for the home trade that yields a profit and sells all that the market will take at that price; he then exports the remainder of his production and sells it for what it will bring.

Dumping, in the third place, may take the form of unfair price cutting for the purpose of putting a competitor out of business in a neutral market or for the

purpose of destroying or preventing the rise of a foreign competing industry. Such practices are unjustifiable, and international as well as national action should be taken to stop them.*

Superficially it may seem poor logic to argue against the importation of cheap goods. Why, it may be asked, should we in this country object if foreigners are willing to sell us their goods at or below cost? Why should we not allow them to increase our national wealth at the expense of their own? If this were all there were to the question, it would probably not be necessary to discuss it further. Naturally cheap goods, other things being equal, are desirable. But are dumped goods actually, and in the long run, cheap goods? If we could be sure that the industries of foreign nations would furnish us without interruption with a certain supply of goods at less than cost, it might be well for us to consider a change in our national policy. If we could be certain that we should always receive dumped goods, dumping might be a blessing. But dumping in fact brings cheap goods only intermittently. Even when some industries abroad have adopted a permanent policy of dumping, their surplus, from the very nature of the case, could not supply the whole of our market, nor could we feel certain that even this condition of dumping would last. The advantages of dumping even to the consumer are doubtful. The consumer may profit temporarily. When the Greeks come bearing gifts, however, they are most to be feared. Timeo Danaos et dona ferentes. The inevitable result of dumping is to destroy the industry producing goods similar to those dumped. It can continue in the market only if it meets the price at which the dumped goods See Chapter XII.

are sold, whereas the foreign rival is selling the bulk of his goods at a profitable margin. Only one result can come from this unequal competition. As soon as the American competition is removed, the foreign producer may particularly in case of foreign monopoly raise the price. He will, in fact, have to do so, since he cannot afford to supply our entire needs at the price of the dumped goods. He will then control the market and the consumer will pay what is asked. The consumer, it

should not be forgotten, has a real interest in the maintenance of the industries of this country in vigor and strength.

Any temporary cheapness of goods to the consumer that results when foreign manufacturers dump their goods on our market in no way compensates for the shock that dumping gives to American industry. It is only justice to our industries that we protect them from unfair methods in competition from abroad. We do not permit these methods among our own manufacturers. There is a better reason for forbidding them in the case of imported goods. During the war new industries have grown up in the United States to supply goods formerly imported from Europe. While the war lasted, these young industries were protected, but when their European competitors begin again to produce for export, measures of self-defense will be necessary. Not only will some of the industries abroad, because of their longer experience, be in a stronger position for competition, but all will be willing to make temporary sacrifices if thereby they can crush their young competitors in America and regain full control of our market. Dumping in its worst form may be adopted by the foreign

5 Sherman Anti-Trust Act and Federal Trade Commission Act; see Chapter XII.

producer to win back what he has lost by the war. Our industries must be protected from such unfair methods. European nations will soon make supreme efforts all along the line to regain their industrial prestige. They may do it by industrial combinations, bounties, and tariff duties, and by the practice that usually accompanies these dumping. It will be the policy of European nations to keep their industries running full time in order to make up for the frightful waste of war, and whatever surplus their home markets do not absorb, they will throw upon foreign markets.

Under these conditions a more or less permanent policy of dumping will become profitable, both because it will enable the foreign producer to run his mills full time and give him a profit on his surplus shipped abroad, and because it will also assist him in regaining his foreign markets. Great quantities of goods will no doubt be produced that the foreign consumer, impoverished by the war, will not be able to purchase. These bankrupt goods will be shipped abroad, and our market, if unprotected, will be a favorite dumping place.

Dumping legislation in force in other countries falls naturally into two classes: (1) legislation increasing tariff rates to be charged on dumped goods; (2) legislation defining dumping as an unfair method in competition and forbidding it.

The Canadian law is the most familiar and the pioneer example of tariff legislation directed against dumping. It was copied by the Union of South Africa. It was also the basis of the dumping clause incorporated by the House of Representatives in the Tariff Act of October 3, 1913, but rejected by the Senate. The Canadian Congressional Record, 63d Cong., 1st Sess., vol. 50, pt. 6, p.

5323.

law provides that in case of articles exported to Canada of a kind made or produced in Canada, if the export or actual selling price to an importer in Canada be less than the fair market value of the same article when sold for consumption in the country whence exported, there shall, in addition to the duties otherwise charged, be charged, collected, and paid a special or dumping duty not to exceed 15 per centum. This special or dumping duty applies to the free as well as the dutiable list. The possibility of evasion, as, for example, by consignment without sale, is provided against by giving the Governor-General in Council power to deal with such a situation.

The Industries Preservation Act of 1906 of the Commonwealth of Australia deals with dumping as an unfair method in competition. Unfair competition in the law has, in all cases, reference to competition with those Australian industries the preservation of which, in the opinion of the Comptroller-General of Customs or a Justice of the High Court, is advantageous to the Commonwealth of Australia, having due regard to the interests of producers, workers, and consumers. Competition is deemed to be unfair, unless the contrary is proved, if in ordinary circumstances of trade it would probably lead to the Australian goods being no longer produced, or being withdrawn from the market, or being sold at a loss unless produced at an inadequate remuneration for labor; or if the means adopted by the importer are unfair in the circumstances; or if the competition would probably or does in fact result in an inadequate remuneration for labor in the Australian industry; or if the competition would probably or does in fact result in creating a substantial disorganization of Australian industry or 7 For full quotation see Appendix VII.