By itself dumping increases total trade of the dumped commodity because of reduction in its trade price. But the other effects associated with dumping depend upon the type of dumping and can also differ for the dumping and the dumped countries. Thus, acceptability of dumping varies from case to case.
In case of a two-way dumping of differentiated goods, intra-industry trade increases. This type of dumping is more or less confined to trading between advanced and rich countries. It is not only sustainable but also adds to their combined output, income and employment.
It leads to higher consumption standards and provides added incentives for technological innovations. Individual firms may go out of business, but economies as a whole gain in efficiency and a reduction in resource cost.
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In contrast, predatory or sporadic dumping is more likely to be disruptive for the importing country. Producers in the importing country face a slump in demand with disastrous spill-over effects for the rest of the economy.
The effects are more damaging for a small country because of its inability to quickly restructure itself. Its growth process receives a setback on account of reduced output, income and domestic investment.
Its foreign exchange reserves may also register a dip. Though consumers may appear to benefit from dumping, even they suffer in the long run when the price of the dumped good is increased later, unless the goods in question are consumer durables with lifetime-use capability.
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Equally relevant is the type of commodity being dumped. If it is a new product, it promotes consumerism which exerts a dampening effect on domestic saving and capital accumulation. The ill-effects of dumping get multiplied if the dumped item is a junk food or a health-hazard, etc.