Clamour for free and fair world trade is loud and clear

Written by Sushim Banerjee | Sushim Banerjee | Updated: Aug 5 2014, 07:24am hrs
World trade in goods grew 2.6% last year and is projected to grow at 4.1% in the current year, according to World Bank estimates. While the WTO is continuously striving to create a seamless flow of goods and services throughout the globe under a free and fair environment, the protective measures of taxes, licences, duties in the form of normal, anti-dumping and countervailing and other non-tariff barriers are not only shrinking the size of the export market, but frequent trade frictions are assuming alarming proportions in escalating into political crises.

The concept of free and fair trade has undergone changes over the years. Exploring mineral resources only for export purposes has now been replaced by value addition within the country before exports. Developed countries are deprived of importing unprocessed raw materials, mostly from developing countries, at a cheap price for use in their export of finished products.

If value addition of unprocessed raw materials within the country is taking time to materialise for want of entrepreneurs, domestic or foreign, and the government is finding it difficult to arrange funds for the purpose, any attempt to preserve resources in the interim period and not to export is considered anti-competitive.

Being a member of WTO makes the country sacrifice hereditary rights of owning rich minerals and preserving them for its own industrial development. This includes all taxes, levies, licences required, quota imposed on exports of minerals to disincentivise the same.

A host of countries such

as China, India, Russia, Ukraine, Indonesia, Malaysia, South Africa, Thailand, Venezuela, Vietnam, UAE and Kazakhstan are allegedly adopting restrictive anti-competitive measures on export of raw material, much to the aggrievement of advanced countries, where excess capacity in many engineering products, including steel, has made it imperative to export finished products.

Under the circumstances, if any exporter of finished products from developing countries utilises its own raw material as inputs at the

base price, without the export levy or enjoying a discount

of the levy, the importing country under SCM rule of WTO can impose countervailing duties on the imports of finished goods from the developing country and make the exporter pay for the discounts, considered as subsidies, and ultimately make the product uncompetitive in that market.

This is what has happened recently in the review of CVD measures imposed by the US against exports of HR Coils from India and WTO panel finding certain provisions in US subsidy laws being inconsistent with WTO rules on SCM, while rejecting all other issues raised by India against the duty imposition.

Earlier, on various occasions WTO has advised the US to modify rules of injury margin, including negative margin and sunset review clauses in tune with WTO provisions and it is not known if the restrictive anti-competitive clauses have been removed by the US while dealing with fresh cases.

Fighting anti-dumping and countervailing duty cases is expensive and the exporter spends much more in fighting these cases than what he earns from exports. Fighting cases in the US is all the more costly and it may very well serve the purpose of US steel producers to dissuade exporters from India from any future venture in that country and look for alternate destinations.

The clamour for free and fair trade is loud and clear, even by China which faced more than 34 fresh AD/CVD/review cases involving steel pipes, HRC, CRSS, silicon steel, plate/coated products, coiled bar and other steel products in 2013 from as many as 14 countries and is continuously on the lookout for fresh destinations.

In all probability, world trade is shrinking and multilateral trade is increasingly replaced by bilateral FTAs, with another new set of anti-competitive implications for global trade.

The author is DG, Institute of Steel Growth and Development. The views expressed are personal