India holds the distinction of initiating the largest number of anti-dumping cases amongst all WTO members. Under WTO regulations, anti-dumping measures are usually taken to protect the domestic industry. However, critics argue that India has been mostly interpreting and applying the law to protect vested interests and negate competition. And that by initiating an ever-increasing number of anti-dumping cases, the country is hurting its downstream industries and in turn competitiveness. Is it time to review and fine-tune India’s approach towards anti-dumping measures?
TDB INTELLIGENCE | May 2017 Issue | The Dollar Business
If you've been closely following trends in foreign trade in recent years, you would have noticed that anti-dumping initiations (and impositions) across many countries have been on the rise. Dig into some numbers and research and you'll realise that India has been leading the way in this regard! Nothing surprising, you'd reckon. For this is a clear sign of how countries are trying to protect their domestic industry. And India is supposed to be no different. What surprised us though was when one of our readers (who happens to be an importer of jute bags) told a senior researcher at TDB Intelligence Unit (during an educational workshop conducted by TDB at Chennai), that he desires and has decided to continue importing jute bags from Bangladesh even after the imposition of anti-dumping duty by India on imports of jute and its products from Bangladesh and Nepal. We were intrigued by his seemingly carefully thought out intent. It got us curious about anti-dumping measures initiated and enacted by India so far. Were these measures actually protecting the domestic industries or adversely affecting the competitiveness of our finished products? And were India’s anti-dumping laws, knowingly or unknowingly, favouring the big manufacturers at the cost of the smaller ones, those you'd popularly term MSMEs? We needed answers, and thought our readers would do well with a good dose on anti-dumping initiations.
The Origin
The word ‘dump’ is over 700 years old. It is said to have been derived from a Danish word called 'dumpe', which means ‘to throw down in a large mass’. But it wasn’t until the 1930s that the word ‘dump’ was used in a business sense. Today, WTO defines the word ‘dumping’ as “a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country.”
The act of dumping is said to be the result of industrialisation, which was pioneered by the western nations. And so, it’s not surprising to discover that the western countries were also the first to add the prefix ‘anti’ to the word ‘dumping’. Canada was the first country to take anti-dumping measures (in 1904), against American steel companies that were dumping steel at a discriminatory price. And soon, the practice of using anti-dumping duties (ADDs) as a way to protect domestic industries was adopted by other countries including Australia, UK, New Zealand and more. However, anti-dumping laws were formalised across WTO members only under Article VI of GATT in 1994. This article explicitly “authorises the imposition of a specific ADD on imports from a particular source, in excess of bound rates, in cases where dumping causes or threatens injury to a domestic industry, or materially retards the establishment of a domestic industry.” While it may seem strange that WTO - the body that is supposed to promote free trade - is also the body that formalised anti-dumping, by 1995, it was evident that free trade in certain cases was hurting the domestic industry in many countries. So far so good. The problems with the WTO structure of anti-dumping though started unravelling when members started interpreting the laws to suit their domestic industry.
SORE THUMB
As dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value, the whole procedure of arriving at what should ideally constitute the ‘normal value’ is a bone of contention among different firms and countries, with each contesting the other’s version. Going by Article VI of GATT 1994, an anti-dumping process can be initiated (by the importing country) in case the price of the product from the exporting country is less than the comparable price of such product, when destined for consumption in the domestic market of the exporting country. In the absence of such domestic price, either the highest comparable price for the like product for export to any third country in the ordinary course of trade or the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit is taken. This definition presents enough scope for concerned stakeholders to hold diverging opinions on what should ideally be termed ‘comparable price’ or ‘product under consideration’ or ‘like article’, among various other aspects relating to the determination of ‘individual margins for exporters or producers’. And that is the reason why a number of anti-dumping investigations around the world have seen countries and firms up in arms against one another on these counts. But before we get into the problems of how these interpretations are hurting free trade, let us look at the scenario in India.
Canada was the first country to use anti-dumping measures, in 1904, against American steel
companies that were dumping steel at a discriminatory price into Canada.
INDIA & Anti-Dumping
It was in 1992 that India imposed the first anti-dumping duty – on imports of PVC resin originating from Argentina, Brazil, Mexico, South Korea and US. Interestingly, even before 1992, India had an anti-dumping clause mentioned in the Customs Tariff Act, 1975 (Section 9A Anti-dumping duty on dumped articles – The Customs Tariff Act, 1975). So why didn’t India initiate any case before 1992? Experts hold that India already had a highly protectionist trade regime, right from its independence till 1991. Prakash Narayanan, Director - Contracts & Legal Services at Bombardier, in his book, ‘Anti-dumping in India – Present State and Future Prospects,’ mentions, “Combined with restrictive licensing and quantitative restrictions, there was no need for anti-dumping. On the customs tariff side, the import-weighted average tariff for all imports was as high as 87%, for consumer goods as high as 153% and for manufactured goods 92%.” According to Directorate General of Anti-Dumping and Allied Duties (DGAD) annual report, between 1992 and 1995, India initiated only nine anti-dumping cases. But in 1995, coinciding with the creation of WTO, India amended Section 9A and the Centre was given power to impose ADDs when it deemed necessary. And ever since, India has initiated 818 anti-dumping cases - the most by any country! Dr. Biswajit Dhar, Member, Board of Trade, Ministry of Commerce, GoI, explains, “India has been labelled as the largest user of anti-dumping law and criticised for misusing the law. But look at the economic environment in India. Import tariffs in India are relatively higher than that of its peers. And as there is less scope for increasing tariffs, India has been compelled to levy more dumping duties than other developing countries to safeguard the interests of its domestic industry.” On the other hand, only 208 anti-dumping cases have been filed against India. However, there are 1,170 cases against China, followed by 384 cases against Korea and 273 against US. According to many economists though, India has not benefitted from the 818 ADDs it has initiated and the 599 that it has imposed – whereas other countries have immensely benefitted from their carefully selection impositions of ADDs. Rather, India has earned the name of a protectionist state. But has India really turned into a protectionist state, as accused?
PROTECTIONISM
By definition, WTO anti-dumping agreement is aimed at protecting domestic industries. But US, EU, China and a few other countries have of late, accused India of misusing the anti-dumping agreement. In a report titled, ‘Trends and Impacts of India’s Anti-dumping Enforcement’, Robert M. Feinberg of the US International Trade Commission, reveals that "India has filed roughly 20% of all global anti-dumping cases, quite disproportionate to its share of global imports of 2%.” The numbers indicate protectionist tendencies, and M. S. Pothal of M. S. Pothal & Associates, a Delhi-based law firm agrees to some extent. He says, “Protectionism exists everywhere, but one reason why India has filed the highest number of anti-dumping cases is because other developing countries aren’t aware of the process. But they will catch up soon. And, yes, anti-dumping is a form of protectionism and India is protectionist in that sense.”
While that may be true, a large number of cases may be an indicator of a deeper malaise – that India doesn't have the commercial intelligence or the expertise to take other remedial measures like imposition of countervailing duties which is applicable on subsidised imports. India has also tried using local content requirements (LCRs) regulations to help the domestic industry, specifically in the case of solar module installations to thwart solar panel imports from US. US had initiated a dispute in 2013 at WTO because it considered that India's domestic content requirements were inconsistent with WTO rules that prohibit discrimination against imported products. In September 2016, India lost its appeal at WTO having failed to overturn the US complaint that India had discriminated against importers in the Indian solar power sector. This gives credence to the criticism that India lacks the expertise that developed nations have when it comes to protecting the domestic industry while being compliant with WTO norms. Experts also believe that India, as an economy, has not been able to benefit from the large number of anti-dumping measures that it has taken, primarily because the present methodology for initiating anti-dumping measures favour the big firms and not the industry as a whole. Aradhna Aggarwal, Professor of Indian Studies, Department of International Economics and Management, Copenhagen Business School, says, “Despite initiating a large number of cases, India has not benefited from them. ADD has become a firm-oriented movement. Perhaps, India needs to be more careful while selecting cases.”
FAVOURED TREATMENT
Is it then true that India's anti-dumping law tilts in favour of larger companies? Well, that is the case in India and across the globe due to the WTO framework under which anti-dumping laws are enacted. “WTO anti-dumping laws are skewed and favour only the large companies,” says Aggarwal while adding that, “As per the law, the application should come from firms that constitute 25% of the industry. And if you take Reliance Industries as an example, as a big player it may have already cornered around 25% of a particular industry!” What happens then to the remaining 75% of the industry or the larger whole? The small-scale enterprises bear the maximum brunt. Aggarwal points out that except for a few, most countries impose ADDs even when it is not in the interest of the industry as a whole. And when we speak about a country like India, which has a large number of companies in the unorganised sector, it becomes a difficult task for the remaining 75% to come together and form a group that can table their views at DGAD. Aggarwal further adds, “In some countries, instead of individual companies filing the anti-dumping petition, it’s the industry associations that file the petition. But for such practices to become active in India, the associations have to be educated first. In many countries, the associations are trained and equipped with the right tools to deal with the legalities and technicalities of anti-dumping.” As per the current setup, DGAD measures the injury to the domestic industries either by volume (effect on demand, consumption, capacity utilisation, product, sales and inventories) or by price (effect on profits cash flow, return on investment, selling price and employment and wages). A pertinent question - how can the injury be measured precisely if 75% of the industry has no representation in the process? Pothal (of M. S. Pothal & Associates) too agrees that the current system needs a revamp as it favours larger players. The jute industry is an apt example of what happens when all stakeholders are not consulted during an anti-dumping investigation. On January 5, 2017, the Indian government imposed an ADD on imports of selected jute products from Bangladesh and Nepal. And what Manish Kajaria, Chairman, Jute Products Development and Export Promotion Council (JPDEC), has to share with The Dollar Business could be an eye opener. “In India, there are only about 30-40 jute mills – still, the government felt the need to impose the duty. And that too without taking into consideration the more than thousand traders in this industry. And, since there are only a few manufacturers, the duty has ended up in giving pricing power to the manufacturers,” tells Kajaria. So, how can the government ensure that its decisions can evenly benefit the whole chain – including the allied and subsidiary industries? This leads us to the question of ‘public interest’.
"Jute prices in India have gone up 15% after ADD was imposed on its imports"
‘ADD’ING FAIRNESS
In recent years, some countries have been safeguarding their MSMEs and downstream industries from the adverse impact of ADDs when imposed on raw materials. For instance, EU has always protected its downstream industries, and countries like Canada, Brazil, Paraguay, Thailand and Malaysia also have a provision called the ‘public interest test’. “Since June 1, 2004, even China has introduced the concept of ‘public interest’ to protect its downstream industries, but India doesn’t have one till date,” shares Aggarwal. So, what India has clearly neglected is its downstream industries that encompass many manufacturers, traders and small-scale setups – which many argue is an act of favouritism towards the larger companies. “This is where the current law is unfair. India is a growing economy – largely formed by fragmented sectors. The downstream industries are as important as the larger companies. And when we say downstream industries, we mostly mean the MSMEs. Can’t the government redefine or at least fine-tune the law?” questions Pothal. The other point in question is, how do ADDs on raw materials impact the government's 'Make in India' initiative? Clearly ADDs on raw materials make them expensive and result in raw materials suffering a higher duty than finished products, making India made finished products uncompetitive both in domestic and international markets. If the aim of 'Make in India' is to make India a manufacturing hub, how do we plan to make it a success if we keep having inverted duty structures – a duty structure that clearly discourages manufacturers from making in India? Let’s take the automobile industry as an example. In this industry, the cost of raw material constitutes approximately 60% of the cost of an auto component. But the government, on January 13, 2017, imposed anti-dumping duty on imports of colour-coated or pre-painted flat products of alloy or non-alloy steel from China and EU. And the automobile and auto-components industry uses a wide variety of raw materials, which include these pre-painted flat products of steel. Therefore, any increase in raw material prices due to an ADD will have an impact on the automobile industry as well as on other industries that use this steel. Surely, ADD on steel has not benefitted downstream industries like automobiles. And because the auto and auto-component segment also contribute significantly to India's exports, there is a case for introducing a 'public interest' clause.
Automobile and auto-component industries have seen the adverse impact of anti-dumping duties. ADD on iron and steel products have resulted in an inverted duty structure for these industries and made their products uncompetitive in the global markets.
EXPORT Impact
While we are looking at exports, let us also look at the impact anti-dumping has had on exports in different countries. An investigative paper titled ‘The Impact of Anti-dumping on EU Trade' by Jan Baran of Warsaw University, in 2015, reveals, “Anti-dumping introduced by EU reduced the sales of French exporters in foreign markets by 8%. And for French exporters with foreign-based subsidiaries, the decline in exports is even greater and amounts to 17%.” A report titled, 'Anti-dumping Guide: A Latin American Overview for Chinese Exporters' by Uría Menéndez’s Latin America Network, corroborates the fact and says, “Anti-dumping duties may sometimes have an overall negative effect on the overall economy of the importing country. Dumping duties should only be imposed only if they would benefit the overall domestic market.” Kajaria, of JPDEC, compliments the argument, “Prices of jute have increased after the ADD was recently imposed on jute imports. It’s the traders who are suffering – and the aftermath of the government’s decision will be seen in exports of finished goods.” Satish W. Wagh, Chairman, Basic Chemicals, Cosmetics & Dyes Export Promotion Council (CHEMEXCIL), adds, “The SME sector is always hit as they do not have enough volumes to get discounts from the local manufacturers. Also, it has been noticed that when anti-dumping duty is imposed, the local manufacturers increase the price.” And this diminishes India’s competitiveness in the international market when it comes to finished products. So, if the domestic industry is also an exporter, is it better not to impose ADDs? Vinnie Mehta, Former DG of Automotive Component Manufacturers Association of India (ACMA), answers, “The association has asked the government to reduce or eliminate customs duty on raw material, as Indian auto-component industry is burdened with high raw material prices and declining profitability. The dumping duty on steel makes it difficult for the industry to compete with cheap auto component imports from emerging economies and FTA partner countries.” And to add, zero duty on steel and aluminium will help keep a check on domestic prices of raw materials, and keep them closer to international prices. This will create a more conducive environment for the component industry to compete in the global market. Baran’s research paper also suggests that the impositions of ADDs cause an increase in imports from countries not covered by the anti-dumping investigation (the trade diversion effect), thus minimising the protection that anti-dumping offers. There is certainly logic and economics that makes the case of ADDs weak.
While India has initiated a large number of anti-dumping cases in the textile sector, it has also been at the receiving end when it comes to certain product categories. Brazil, Peru, Egypt and Turkey have all at some time or the other imposed anti-dumping duties on Indian textile.
"Anti-dumping duties on raw materials can have an adverse impact on MSMEs"
Resource Crunch
So, is there a way to avoid damaging one industry while protecting others? Is there a way that the DGAD can come up with a methodology that will take into consideration all stakeholders? Indian lawyers, who have been working on anti-dumping cases for the last two decades, believe that the current system has to undergo a major change and employ more manpower. “In India, DGAD takes about 6-8 months to start an investigation, whereas in the west it takes just about 2-3 months,” says Pothal. And this makes critics question: Is DGAD well-equipped to handle the many cases that India files? Mukesh Bhatnagar, Professor, Centre for WTO Studies, Indian Institute of Foreign Trade, says, “DGAD needs to recruit enough manpower. This will help the office perform more efficiently and reduce the time taken for investigations.” At present, a team of officers in the West works on 2-3 cases a year, whereas in India a team of officers works on 10-12 cases a year. Rightly put - since India is a growing economy, the situation will not get any better. A fresh case has to be closed within 12-18 months, but lawyers and accountants in India get less than a quarter of a year to evaluate and close ADD cases, and that’s not a positive sign. Dr. Dhar also echos similar sentiments and points another lacuna. “I think data-related problems do genuinely exist in India and the government must pull up various agencies for the lapse. Simultaneously, the government can improve its commercial intelligence – which is very weak at present,” he says. Mature economies, on the other hand, have a very active commercial intelligence network which involves the embassies. And because obtaining information about key players, sectors and partner countries has become strategically important for formulating a right approach to safeguard the economic interests of a country at the global level, having access to the right information network is important. If India can obtain the information critical to assist the anti-dumping investigation authorities, the injury margins will be more in tune with the ground reality.
TIME TO CHANGE
That there is need for change as far the process applied by DGAD is concerned is almost unanimous. This structural change in the method of initiating and processing an anti-dumping investigation by adding a public interest clause will give Indian MSMEs and downstream industries the much-needed voice that they have lacked for years. In addition, exporters, who are stakeholders, can also actively get involved in the cases. Goes unsaid that while nobody has stopped anyone from questioning the government, MSMEs have never done that as they do not have the wherewithal to do the same. Further, according to experts, first, the industry members lack the knowledge; second, the financial cost involved is too high; and third, India is too unorganised and fragmented. And even if all the above issues are resolved, the government actually has no manpower to address the concerns promptly. With more resources in terms of data and manpower at hand, DGAD officers can take more time to study the pros and cons of cases and also actively educate the neglected sectors – which comprises the bigger whole. Moreover, Indian policymakers need to be more realistic and comprehensive in their approach while handling anti-dumping cases and that alone will make a huge difference. India also has to be careful about picking cases that it wants to pursue. Here, a case in point would be the handling of demand of domestic solar cells and modules manufacturers to impose ADDs on cheap imports from certain countries, and inclusion of the local content clause. Obviously, our case was weak as it was incompatible with WTO norms and we lost the dispute. In fact, had we won, it would have harmed the industry players more. Narender Surana, MD, Surana Solar Ltd., echoing similar sentiments, says, “Any ADD on China, USA, Malaysia and Taiwan could have jeopardised India’s solar programme as the cost of solar energy would have gone up by at least 75%, if we were to use India-made solar cells or module”.
Are ADDs logical? Seriously? Rushabh Shah, President, Trade Association of Information Technology (TAIT), also feels that there hardly is any need to disturb the existing ecosystem in IT trade flow and any imposition of ADD would do more harm than good to the sector. “There are hardly any IT products that are being manufactured in India and only assembling takes place here. Hence, even if some manufacturers demand it there is not much relevance of ADD in my sector," says Rushabh. Clearly, all sectors are not ripe for ADDs. There is nothing wrong with protecting the domestic industry. What is needed though is a holistic view of the industry, while considering to protect it. Industry insiders believe that ADDs imposed by India have hurt the country’s downstream industries, its MSMEs, nay the entire economy. But that does not mean that anti-dumping as a measure is flawed. Fact is, in the current climate India will need to protect its industry from predatory pricing by foreign manufacturers. What needs to change is the method and process. Policymakers need to take the entire industry and all stakeholders into consideration while investigating an anti-dumping case, have an excellent intelligence network to ensure that the right injury margins are applied, and last but definitely not the least, choose our battles wisely. [We cannot carpet-bomb 'fair' exporting nations across industries by doubting their very intentions from the word go.] We cannot miss the woods for the trees in this case. There's too much at stake for India. Too much.
"India needs to choose Anti-dumping cases wisely, Industry-Wise"
Experts say that imposing anti-dumping duties without taking into consideration all stakeholders may
harm a country's economy. Interestingly, over the past decade, India has become the world’s leading
user of anti-dumping measures. India has filed roughly 20% of all global anti-dumping cases, quite
disproportionate to its share of global imports of just 2%.
TDB: The nature of India's foreign trade has changed a lot since the country initiated anti-dumping measures in the 1990s. Is there a need to fine tune our anti-dumping law?
Aradhna Aggarwal (AA): India’s anti-dumping law is quite on par with the WTO Anti-Dumping Agreement, except for the finer nuances that some countries have introduced. But, you cannot change the law according to the business dynamics. There are various specifications and provisions and your law has to be compatible with the WTO framework. And, even if India makes the technicalities clear and incorporates some clear models in the decision-making system, the law remains ambiguous at the international level. Many countries, such as US, pick and choose the way they interpret the law. And for the record, even American anti-dumping law has its share of problems. I have also previously argued that India can consider a better methodology for calculating injury margin.
TDB: Critics believe that the Indian anti-dumping law leans more towards the larger companies. Your take?
AA: The process is complicated. It requires lawyers who understand the process and the cost involved is very high. This is the reason why only large firms tend to file the petitions. And there are studies which have proven that it’s mostly the large companies who have initiated the cases. I agree that the small businesses do suffer because they do not have the competencies and resources. But in the 2000s, the Indian government tried to involve small manufacturers and traders while initiating a case against Chinese toy manufacturers as Chinese toys were killing the entire domestic toy industry. However, the problem was that the industry was unorganised, and no one took the lead. The Ministry of Commerce initiated the case suo moto, but because of the lack of evidence it could not proceed. So, the current law isn’t the right tool for small companies.
TDB: Now that you agree that it’s the larger companies that have the upper hand in India when it comes to anti-dumping law, what’s the situation in other countries?
AA: The law is surely skewed and it favours the large companies. As per the law, the application should come from firms that constitute 25% of the industry. And if you look at large companies, some of them constitute 25% of the industry. And in this case, one company alone can file a petition. But to answer your question, there are countries where industry associations file the petitions instead of individual companies – for instance in Latin America. And this is an easier approach because the associations have both money and enough members. But for this to be achieved in India, the right tools have to be provided – the most important of which is education.
TDB: Most of the anti-dumping measures that India have taken are against the developing countries. Do you think these cases have benefited the country?
AA: Well, most of the anti-dumping cases are against the developing countries because of China’s presence. And this is what I have been critiquing about India. It is not about the law, but it’s about how and where we use the law to benefit a larger section of the industry without causing any damage to the allied industries. This is where the government needs to focus. Even in the past, I have critiqued that India keeps on initiating cases that have very little impact. The impact is not on the wider section of the industry. It has become more firm-oriented. India must take cases which actually matter to the entire country. The law cannot be changed, but the use can be more prudent. Remember that the tool is ambiguous and the ambiguity is very important in decision-making. It is these ambiguities which have enabled many countries to be more prudent. Take EU for example. They have a large staff and they use the tool only where it hits the hardest. India should be wiser.
TDB: Also, is it true that the WTO anti-dumping law is biased towards the developed nations?
AA: Yes, the WTO rules are highly biased in favour of the developed nations. I have written a paper where I have shown that not many developing countries can use anti-dumping measures. I have argued that the tool is complicated and the developing countries do not have the legal expertise. Well, India is the most developed nation among all the developing countries, but even India doesn’t have the expertise in taking up CVD measures. In the past, many developing countries have suggested numerous things, but since the Doha round never took place, nothing has happened.
TDB: If India were to look up to a country, would you have a name to suggest?
AA: I think India can learn a lot from the developed countries – like how they use the law, cleverly manipulate things in their favour and help their industries. In a way, what they say is not what they do while India follows what they say and not what they do. This is where the difference is as India is always listening to what they say. Actually, we can also learn a lot from China too. They have never followed or copied anybody. They have done what is best suited to them.
TDB: Why do you think India has initiated more anti-dumping cases than any other developing country?
Biswajit Dhar (BD): The import tariffs in India are relatively higher than that of its peers. The average import tariff is around 9%, which is higher than the ASEAN nations and other developing countries. In addition, there are some product lines on which tariffs are way higher than the average. So, the scope for higher tariffs is low. In the current scenario, you can protect domestic players either through imposing tariffs or through some non-tariff barriers. And, you can see, we are moving away from tariffs to non-tariff barriers. So anti-dumping duty (ADD) is the alternative. And the exporting countries know that even with a dumping duty, there is a lot to gain in India. So, speaking about sectors like steel, eyes are on India because it’s a growing market that companies find attractive despite ADD. Another key factor that I see is the lack of preparedness among domestic manufacturers. The domestic players are not ready to accept the reality that they need to be competitive. So, there are instances when the domestic producers complain about dumping, when in reality the problem is inefficiency.
TDB: How do you look at India’s approach and track-record of implementing the anti-dumping laws?
BD: I think one country which has been targeted by us quite frequently is China. China, for that matter, remains the bugbear not only for India but for other countries too. We have had a couple of cases with Bangladesh – the anti-dumping duty on the automotive lead acid battery imports and the recent one being the anti-dumping duty on jute. On one hand, I think, we should give a longer rope to the least
developed countries (LDCs). When we imposed anti-dumping duty on Bangladesh, on the imports of automotive lead acid batteries, Bangladesh went to WTO to lodge a dispute – which was first-of-its-kind. So, that instance became a sort of a sore thumb between the two countries. On the other hand, the government should look at initiating anti-dumping in some sectors like agriculture. The price at which some of the European countries and US are exporting some agricultural products is actually dumping. They sell well below the cost price with the help of huge subsidies – for instance, we have been importing fruits at a very low price from developed countries. We need to be alert. We also need to have better commercial intelligence before we decide on policy matters. However, there is a problem with the agriculture sector as it is not organised. The farmers hardly come forward to complain against dumping. So, I feel agriculture is a gray area for India.
TDB: During the investigations, how difficult is the process to ascertain various factors such as ‘country of origin’, ‘like article,’ and determination of ‘individual margins for exporters/producers’?
BD: Identifying the country of origin of a particular product has become quite difficult as sometimes some countries intentionally change the name of the country of origin. In case of free trade agreements, there is a specific provision for rules of origin. But WTO has not achieved an agreement on the concept of rules of origin. The countries which are the immediate source of the product may not be the source of dumping – the reality could be something else. For example, in case of electronic goods that are being imported from South-East Asian countries, the major components come from China. But who knows, those countries could be simply assembling the parts that are being imported from China and exporting. So, the key target for the anti-dumping investigation should be the Chinese company, not the South-East Asian countries.
TDB: Because of a heavy legal cost involved in filing a petition, many argue that MSMEs are put at a disadvantage. What’s the solution in your opinion?
BD: I think the government can think of introducing a facilitation mechanism for the MSMEs. For instance, there are certain organisations under WTO that provide support to the developing countries and LDCs, looking to initiate a dispute. We can look at something similar for MSMEs. Unless we introduce a platform for MSMEs, they will always be at a disadvantage.
TDB: How do you compare India’s use of anti-dumping law as against western countries? And would you agree that India has become a protectionist?
BD: I think the developed countries are much more adept when it comes to using anti-dumping law. They have the expertise, and on top the relationship between the industry and the government is active which is why their trade policies are driven according to the industry’s interest. Whereas in India, the policy formulations are based on top-down method, while in the west the strategy is bottom-up. And yes, anti-dumping duty is a kind of protection – a contingent protection. Hence, I would say all cases of anti-dumping are not fair. Some cases are the outcome of the lack of preparedness of various industries and their inability to face competition. They feel that the anti-dumping route is an easy option to thwart the competition.
TDB: Are countries like Bangladesh and China a threat to our domestic jute market?
Manish Kajaria (MK): China impacts the domestic market, but not directly. China does not produce jute, so the country is not a threat to natural products. They have many other alternatives products that replace jute. But since India also uses many Chinese products, the alternative ones, China has an indirect impact on India. As for Bangladesh, it is no longer a threat because the government has imposed anti-dumping duty – which is an advantage as well as a disadvantage.
TDB: There has been criticism that the dumping duty, rather than protecting the domestic industry is actually harming its long term prospects. What is your take?
MK: The anti-dumping duty has introduced a monopolistic approach in the jute industry. The reason being, in India there are only about 30-40 jute mills. And in a situation like this, the dumping duty inflates the prices of raw materials. The government thinks that it is good to impose dumping duty to protect the domestic industry, but that has not been the impact. India does not have enough land to grow jute and by imposing anti-dumping duty, enormous pricing power has been handed over to those 30-40 players in the industry. And these few players want to have all the power in their hands – thus the anti-dumping duty. But, what’s the result? The prices have gone up. And who suffers? It’s the traders who are being hit. Only a handful of manufacturers reap the benefits. Allowing imports of jute from other countries had introduced a sense of competition among traders and manufacturers. But now that the anti-dumping duty has been imposed, they (the manufacturers) will comfortably sit at a round table and make price decisions. Let me tell you that since the imposition of anti-dumping duty in January 2017, the price of jute has already gone up 15%.
TDB: Would you agree to the idea that all stakeholders must be a part of the decision making? Must the government consider
public interest before imposing dumping duty?
MK: It depends on who you call a stakeholder. If you call manufacturers the stakeholders, then they do get a say. But if you want to include traders, their voice is still not heard. Today, there are more than 1,000 jute traders who are not even listed. Forget about a one-on-one meeting with the government, they are not even given an opportunity to voice their opinions or concerns. The current practice is not fair. But with that said, maybe the anti-dumping duty will result in something positive in the long run – provided more land is demarked to grow jute and farmers are assisted through various schemes. And then when we have enough raw material the scenario will be different. In that environment, the government can protect the domestic market from unscrupulous traders who bring jute from Bangladesh.
TDB: Do you think the government should consider a clause for the downstream sector?
MK: The government must look at the number of people involved – such as manufacturers, traders, suppliers, etc. Because if it can bring people from all parts of the industry, not only will the decisions have a positive impact but will also benefit all. Also, the possibility of changing the current situation will be higher. And by considering the downstream industries in the decision making, the government will see the real picture.
TDB: According to WTO data, since 1995 India has initiated 818 anti-dumping cases against various countries. What do
you think is the reason behind this big number?
Mukesh Bhatnagar (MB): When we speak about numbers, we also need to look at the number of measures a country has imposed against the number of investigations initiated. Having said that, the number of cases are also increasing because an application mostly involves more than one country and each country is counted as one case. And the reason why India has initiated one of the highest number of cases is because Indian economy is a diversified economy – we have a significant number of chemical, dye, textiles and steel industries, which have several allied industries, say from yarn to fabric. Hence, there is a possibility of more number of applications.
TDB: Some critics say that dumping duties do not benefit the overall industries. What is your take?
MB: It does help the industry because levying anti-dumping duty does not mean stopping imports. It just gives a signal that imports should come at a fair price and should not be injurious to the domestic industry. But again, the measure would only help the industry that has come to seek the help and will have an adverse impact on the downstream industries.
TDB: Are there countries that have introduced a provision to protect their downstream industries?
MB: There is a concept called ‘public interest examination’, but it is not mandatory in the WTO Anti-Dumping Agreement. However, there is a section which suggests that the investigating authority has to see that the duties will be in favour of the overall public interest. It allows the industrial users, consumer organisations and consumer groups to share their views regarding dumping and injury rates. And to answer your question, EU has its own public interest test which they exercise invariably. And lately, Brazil has also introduced some provisions. In addition, Canada has also been practising the same on special requests by the affected party.
TDB: Would you agree that the anti-dumping law has favoured mostly the large companies?
MB: When it comes to injury examination, there is a lacuna in the agreement where the domestic producer represents either the whole or a major proportion of the domestic industries. What happens in many instances is that 25% of the inefficient ones may file a petition, leaving out the 75% efficient ones. And this is the weak link of the agreement. However, the authority tries to garner and gather as much as possible support and cooperation from the industry so that the entire domestic industry is not injured because of a few inefficient companies.
TDB: Cases have also been initiated on products that constitute less than 3% of Indian imports. How?
MB: An importing country cannot initiate a case on an exporting country if the imports of that particular product is less than 3% of the country's total imports. However, if there are 10 exporting countries and the total imports from them is more than 7%, then a case can be initiated even if imports from some of the countries is less than 3%. So, the importing countries may choose to pick the second instance even if imports is negligible. And this you will find under Article 5.8 of the agreement.
TDB: Do you think the Indian anti-dumping law is effective and indeed helping the industry?
Satish W. Wagh (SWW): I don’t think the current law is serving the intended purpose. Today, the anti-dumping duties are not only detrimental to the growth of just the pharmaceutical sector but to the entire spectrum of the chemical sector. But, I do admire the idea behind imposing the anti-dumping duty, which is to protect domestic industry players. It is its execution with which I have a problem. Before going about imposing any anti-dumping duty, should the government not build consensus among all the stakeholders and make sure whether they are (and not just a select few) are self-reliant in one given product/item under consideration for dumping measure? Take for example the pharmaceutical sector. Is it not the duty of the concerned Ministry to determine beforehand that how many players in the country are making a substitute of a particular API or intermediary? Also, take a look at the thousands of companies across the length and breadth of the country that import intermediaries and make the final product. But, what is happening now? Only a select few big firms with ‘good networking ability’ with the Ministry are calling the shots – all as per their own whims and fancy. And perhaps, an even bigger irony is that the Ministry seems to be paying heed to such requests and is going about imposing anti-dumping measure suggested by those players.
TDB: Are you hinting that the government is not taking adequate measures to protect the small-scale industries?
SWW: Yes, I am. I believe, an arbitrary imposition of anti-dumping duty, suiting the business interest of a select few has done a lot of damage to the medium and small scale enterprises operating in the sector, which are and have been the backbone of our sector. This is the case in dyes, basic chemicals and organic chemicals, among others. Today, only the top guns who enjoy the virtual monopolies (in select items) are speaking on behalf of everybody across the board. Let me ask this. Shouldn’t there be a well-thought-out plan with respect to anti-dumping duty measures and should the government not consider how many companies are making the API/ intermediary and how effectively they are catering to both domestic and international markets? In many cases, MSMEs have been found to be faring better than their larger counterparts. The government must take this fact into account too because once the anti-dumping duty is imposed, these MSMEs producers are no longer cost competitive. Meanwhile, these big firms, who enjoy the monopoly power and also set the price, raise their prices if MSMEs want to source from them. This makes it increasingly difficult for MSMEs to operate in an already tough economic environment. The government must be holistic in its approach to anti-dumping duties, because a lot of MSME players have either closed down or are on the verge of closing down soon.
TDB: Do you think export promotion councils (EPCs) can be a part of the solution to this problem?
SW: As an export promotion council (EPC), we are well-connected with the small-scale industries and end-users. Thus, the government must consult us before imposing anti-dumping duties and not just listen to Confederation of Indian Industry (CII) or Federation of Indian Chambers of Commerce and Industry (FICCI) or the Associated Chambers of Commerce & Industry of India (ASSOCHAM) alone. We can definitely offer our expertise to the government and help them formulate policies that are in sync with the ground realities of the sector. Anti-dumping duty notifications mostly come as a shocker to many of us. And later, when we knock at the Ministry’s door, we are told that it’s too late for any change but ‘soon some solution will be introduced’. My question here is, if at all, the government is so fine with the idea of modifying its own policies so frequently, then why can’t it spend some more time, making them all-inclusive and effective in the first place?
TDB: In the absence of domestic market price, the normal exports value from China is generally constructed on the basis of ‘best available information’ provided by domestic producers in the importing countries – or on the basis of the costs and prices of a third country comparable to China. Do you think that this is a fair method? Do you think there is a solution to this?
SW: This is one of the issues that is affecting us severely. Most of our imports are from China, so most of the anti-dumping duty notifications are also against China. The Chinese suppliers enjoy very high incentives, which help them export at a much low price. But since there is no transparency on the incentives available to Chinese suppliers or domestic price, our anti-dumping duty investigations may not be correctly reflecting the actual market price in many cases. And as a way out, my suggestion is that our embassy in China play a proactive role. The embassy must be having a full-time Trade Attaché, comprised of officials who are well-versed in commercial data collection and related aspects. I believe, this method can help us in getting the required price information.
Copyright @2024 The Dollar Business. All rights reserved.
