Question

In 2005, country A exported steel worth $5 billion to country B. Steel producers in country B alleged that country A was steel into country B because country A’s selling price was 20% lower than the normal value. When the claims were proved valid, country B imposed of 20% on steel imports from country A.

Answer 1

The correct answers are 1) dumping. 2) an imported quota.

In 2005, country A exported steel worth $5 billion to country B. Steel producers in country B alleged that country A was dumping steel into country B because country A’s selling price was 20% lower than the normal value. When the claims were proved valid, country B imposed an imported quota of 20% on steel imports from country A.

In trading activities, there is a concept that confuses some people and many times creates severe differences between trading partners: dumping. The term dumping is applied when one country diminishes the price of sale of its exports to have some market share. The price is always fewer than the price of the product sold in that country or even below the cost of production. This represents an enormous disadvantage to the other country. That is why the other country has to impose compensatory charges or imported quota to those products.

Answer 2

1. DUMPING: it is a predatory pricing in which a foreign country exports its goods to another country and sells at a price that is below the price charged in that country.

2. AN IMPORT QUOTA: this refers to the trade restriction which sets a limit on the quantity of a good that can be brought into a country by a foreign country in a specific period of time.

Step-by-step explanation: