Dumping and Antidumping Measures, Indo-china relations

Meaning Of Dumping
Firm charges a lower price for exporting goods than it does for the same goods sold domestically Price Discrimination: share of exports is usually lesser than the domestic demand Capture new market

Condition mandatory for dumping to take place:

o Presence of an imperfect market (firms are price setters) o Segmented markets

Antidumping
Antidumping duties: nullify the effect of market distortions created due to unfair trade practices (dumping) Remedial in nature Levied on the exporting country

Antidumping measures:
o Antidumping duty o Price undertaking

Justifications
Material injury to domestic producers Long start up period and high start-up costs

Once these firms are forced out of the market as a result of dumping; difficult to restart
Intention of dumping is to wipe out the domestic industries and eventually acquire monopoly power in the foreign market

Introduction
GATT/WTO (1995) : promote free trade Barriers to free trade: tariff barrier or non-tariff barrier (Antidumping, countervailing measures) Article VI of the GATT, 1945 Agreement to give effect to Article VI (1994): provisions strictly followed during anti-dumping investigation

WTO and Anti-Dumping Agreement

The Agreement governs the application of antidumping measures by Members of the WTO

The provisions of the Agreement were first negotiated during the Kennedy Round (1967) of GATT negotiations The Agreement lays the sunset provision
The Agreement applies to trade in goods only

Anti-Dumping Law in India ,Legal Framework

Based on Article VI of GATT 1994 Customs Tariff Act, 1975 - Sec 9A, 9B (as amended in 1995) Anti-Dumping Rules [Customs Tariff (Identification, Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination of Injury) Rules,1995] Investigations and Recommendations by Designated Authority, Ministry of Commerce Imposition and Collection by Ministry of Finance

Determination Of Dumping
Difference between Normal Value and Export Price: Margin of dumping (% of export price) Normal Value: comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country If the normal value cannot be determined by means of domestic sales, following two alternative methods Export Price: price paid or payable for the goods by the first independent buyer Like Articles: The article produced in India must either be identical to the dumped goods in all respects or in the absence of such an article, another article that has characteristics closely resembling those goods

Injury To The Domestic Industry

The Indian industry must be able to show that dumped imports are causing or are threatening to cause material injury to the Indian domestic industry Injury analysis can broadly be divided in two major areas:
o The Volume Effect: The Authority examines the volume of the dumped imports, including the extent to which there has been or is likely to be a significant increase in the volume of dumped imports, either in absolute terms or in relation to production or consumption in India o The Price Effect: Extent to which the dumped imports are causing price depression or preventing price increases for the goods which otherwise would have occurred

Causal Link: A causal link must exist between the material injury being suffered by Indian industry and dumped imports

Relief To The Domestic Industry

ANTI-DUMPING DUTIES: Non-cooperative exporters are required to pay the residuary duty (highest of the co-operative exporters)
o Lesser Duty Rule: Government is obliged to restrict the anti-dumping duty to the lower of the two i.e. dumping margin and the injury margin o Injury Margin: Difference between the fair selling price due to the domestic industry and the landed cost of the product under consideration o De Minimis Margins: Any exporter, whose margin of dumping is less than 2% of the export price and the volume of the dumped imports are below 3% of the total imports, shall be excluded from duties

PRICE UNDERTAKINGS: Exporter concerned must furnish an undertaking to revise his price

Shortcomings Related To The Enforcement of Antidumping Laws

Under current anti-dumping rules, national authorities are allowed to exercise enormous discretion. Since the criteria for determining the export price and the normal value are neither stringent nor specific, the importing country can determine incidents of dumping at will. It can lead to the protection of inefficient domestic industry. A firm is likely to be subject to an anti-dumping investigation if it exports a product at a price lower than the normal value in the home market, regardless of whether there is a predatory intent or not.

Shortcomings Related To The Enforcement of Antidumping Laws

Anti-dumping rules allow exporters to avoid antidumping actions if exporters agree to raise their prices. Such agreements are a means of suspending ongoing anti-dumping cases and can be used to promote anticompetitive behaviour.

Anti-dumping cases initiated by India

Country India United states European Union Argentina South Africa Australia Brazil China Canada turkey No of cases initiated in year 1995-2009 596 440 406 270 212 208 179 178 151 144

Source: http://www.wto.org/english/tratop_e/adp_e/adp_e.htm Korean Republic 108

Sectors getting affected

Sectors in Anti-dumping investigations 1995-2008 Chemicals Metals Machinery Textiles & Footwear % of total anti-dumping cases initiated by India 33 28 11 9

Paper & Wood

Agriculture Other Source:

6
5

8 http://commerce.nic.in/traderemedies/productprofile/cases_1.pdf

Anti-dumping duty on Poly-

Propylene(PP) exported into India

PP used as a raw material in a variety of industries including packaging, woven sacks for cement, fertilizers, sugar and various consumer items such as house ware, auto components, pipes, water tanks, furniture, and medical appliances Appeal by Reliance Industries, supported by Haldia Petrochemicals corporation Ltd. (HPCL), the only two producers of PP in the country, against PP imports from Saudi Arabia, Oman and Singapore.

Reliance industries and Anti-dumping

Reliance industries
among the top 8 producers in world. holds a 70 percent share of the domestic market caters to 3 percent of global consumption of PP Directorate General of Anti-dumping and Allied Duties (DGAD) has imposed definitive anti-dumping duty of up to USD 323.5 per tone of PP imported from Saudi Arabia, Oman and Singapore.
a significant price rise of the raw material (PP); in some cases the price may rise to almost double as the amount of duty is almost equivalent to the international market price. most of the units associated with processing industry are small and medium enterprises (SMEs) and there is a fear of hurting them in case of price rise in the domestic market.

It will lead to

INDO-CHINA SCENARIO
According to a survey conducted by Federation of Indian Chambers of Commerce and Industry (FICCI), majority of small and medium-sized manufacturers (SMEs) had suffered a serious erosion of their market share, because of cheaper Chinese products. Chinese imports were 10 to 70 percent cheaper than comparable Indian products. claimed that China is not a fair trading partner and is capturing Indian market at a very fast pace through anticompetitive trade practices such as predatory pricing.

 Range of sectors included processed food, light engineering, building materials and heavy engineering, chemicals and textiles Due to high rise in imports of Chinese toys, Government announced a six-month ban on the import of Chinese toys. The ban was lifted after two months, when Beijing threatened to take the issue to the World Trade Organization (WTO). In India, it takes 10 to 12 months for investigation which is more than enough for Chinese firms to damage the Indian industry.

Conclusion
It can be agreed that overall the anti-dumping policy of India helps to check unwanted imports and hence might qualify as effective. Do little when it comes to the trade diversion that takes place during the initiation of an anti-dumping case against a certain country Re-initiation and re-investigation on the potential similar imports from a different country is time consuming

Thank You