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Insights into Editorial: Trade defence: On anti-dumping duty on Chinese goods

 

Current Affairs

 

Context:

India has imposed anti-dumping duty on five Chinese products, including certain aluminium goods and some chemicals, for five years to guard local manufacturers from cheap imports from the neighbouring country.

According to notifications of the Central Board of Indirect Taxes and Customs (CBIC), the duties have been imposed on certain flat rolled products of aluminium; sodium hydrosulphite (used in dye industry); silicone sealant (used in manufacturing of solar photovoltaic modules, and thermal power applications); hydrofluorocarbon (HFC) component R-32; and hydrofluorocarbon blends (both have uses in refrigeration industry).

These duties were imposed following recommendations of the Commerce Ministry’s investigation arm, the Directorate General of Trade Remedies (DGTR).

 

About Anti-dumping duty:

A remedy sanctioned by the WTO to protect a member country’s domestic industry from imports that have been priced at levels below those prevailing in the exporting nation’s home market,

The anti-dumping duty has become one of India’s most widely used trade weapons, especially against a flood of cheaper Chinese imports.

  1. In international trade practise, dumping happens when a country or a firm exports an item at a price lower than the price of that product in its domestic market.
  2. Dumping impacts the price of that product in the importing country, hitting margins and profits of local manufacturing firms.
  3. Anti-dumping duty is imposed to rectify the situation arising out of the dumping of goods and its trade distortive effect.
  4. According to global trade norms, including the World Trade Organization (WTO) regime, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to domestic manufacturers.

 

Reasons mentioned for Imposing anti-dumping duty:

  1. The DGTR, in separate probes, has concluded that these products have been exported at a price below normal value in Indian markets, which has resulted in dumping.
  2. The DGTR mentioned that the domestic industry has suffered material injury due to the dumping.
  3. The anti-dumping duty imposed under this notification [on Silicone Sealant] shall be levied for a period of five years [unless revoked, superseded or amended earlier] from the date of publication of this notification in the official gazette and shall be payable in Indian currency.
  4. Similarly, it has also slapped the duty on imports of calcined gypsum powder from Iran, Oman, Saudi Arabia and the United Arab Emirates for five years.
  5. While the DGTR recommends the duty to be levied, the Finance Ministry imposes it.
  6. Countries initiate anti-dumping probes to determine if the domestic industry has been hurt by a surge in below-cost imports. As a counter-measure, they impose duties under the multilateral WTO regime.

 

National Authority for imposition of Anti-dumping Duty:

  1. The anti-dumping duty was imposed after the Directorate General of Trade Remedies (DGTR) probe.
  2. Directorate General of Trade Remedies is the apex national authority under the Ministry of Commerce and Industry for administering all trade remedial measures including anti-dumping, countervailing duties and safeguard measures.
  3. It provides trade defence support to the domestic industry and exporters in dealing with increasing instances of trade remedy investigations instituted against them by other countries.
  4. According to global trade norms, including the World Trade Organization (WTO) regime, a country is allowed to impose tariffs on such dumped products to provide a level-playing field to domestic manufacturers.
  5. The duty is imposed only after a thorough investigation by a quasi-judicial body, such as DGTR, in India.

 

Difference between Anti-dumping duty and Countervailing Duties (CVDs)?

  1. Anti-dumping duty is different from countervailing duty. The countervailing duty is imposed in order to counter the negative impact of import subsidies to protect domestic producers.
  2. Countervailing Duties (CVDs) are tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country.
  3. CVDs are meant to level the playing field between domestic producers of a product and foreign producers of the same product who can afford to sell it at a lower price because of the subsidy they receive from their government.
  4. Anti-dumping duty is a customs duty on imports providing a protection against the dumping of goods at prices substantially lower than the normal value whereas Countervailing duty is a customs duty on goods that have received government subsidies in the originating or exporting country.

Anti-dumping measures are taken to ensure fair trade and provide a level playing field to the domestic industry. Both India and China are members of the Geneva-based World Trade Organisation (WTO).

India has initiated maximum anti-dumping cases against dumped imports from China.

India’s exports to China during the April-September 2021 period were worth $12.26 billion while imports aggregated at $42.33 billion, leaving a trade deficit of $30.07 billion.

 

Conclusion:

The effectiveness of the measure in providing timely relief to smaller domestic manufacturers facing an existential crisis on account of suspected dumping has also been undermined in the past by a less than ‘swift’ process with the DGTR hamstrung by a personnel crunch.

With companies worldwide now seeking to de-risk their businesses from an excessive reliance on China in the wake of the COVID-19 pandemic, the prospect of more capacity in that country turning surplus and being used to produce goods for dumping overseas increases.

Indian policymakers have their task cut out to bolster trade defences in time.