This is again a very interesting and eye opening article by M. R. Venkatesh.
It is not exaggerated to say that US Dollar will lose the unrivaled prestige that it enjoyed since post Breton Wood arrangement. It will lead US consumption dearer. In Present era, US is acting as global growth engine by consuming the production of surplus production of China and other emerging economies.
In the new envisaged scenario of US Dollar collapse, it is imperative that we, including other emerging economies promote domestic consumption to avoid another global recession. It is really a very serious challenge before entire world.
However I would be thankful if you could explain the linkage between likely antidumping cases, as pointed out in your article and the exchange rate appreciation.
RE:Otherwise face global recession !
by gatzzz on Jun 21, 2007 03:48 PM Permalink
Dumping means that exporting a product at a lower rate than what you charge in your local market. Govt's take anti-dumping measures to prevent their local companies and people working in them.
Take for example a person exporting a product and getting $100 back. 1 year back he would be getting 4500 from his exports. Now with rupee at 40 against dollar, that person will be getting 4000. But if he has to get 4500, the product should now be exported for $112.5. Because of exports getting hit due to increase in price, exporters tend to keep the existing price just like that. This results in dumping. Because if the same product is being manufactured in US and they are importing raw materials from other countries and if their cost of manufacturing has increased due to the weaking of dollar, then they would hike the prices to $112.5 (in case of above example). If our exporters continue selling that product for $100 taking their profits a hit, that would result in dumping and govt's coming into picture preventing these exports to help their companies and employees within.
Thus every exporters have to do their risk analysis because of the rupee appreciation.
RE:Otherwise face global recession !
by Surya Gagan on Jun 24, 2007 09:34 PM Permalink
No You've confused. Dumping is if you sell a product for less than what you charge in your home country.
Gatzz...your $ 100 and $112.5 example is wrong. In fact this is the whole idea behind importing somethng from abroad. That if you can't make it cheaper domestically, import it from where it is produced cheaply. This has to do with comparative advanatage and competitivness in producing something. Please see the link for furhter clarification on dumping...
