Tighter anti-dumping rules are good for India

Pradeep S Mehta

Despite of its strong opposition, the United States has reconciled to the review of rules on anti-dumping at the Doha meeting of the World Trade Organisation. It has agreed with other WTO members that an ideal long-term solution to the evil of anti-dumping lies in seeking tighter rules.

This has been another feather in India’s cap, which has been seeking concessions for developing countries in the application of anti-dumping action. Because, the rich countries very often misuse it to give undue protection to uncompetitive domestic industries. Though, lately, many developing countries, including India, have also joined the bandwagon. India with initiation of as many as 16 investigations during January 1 to June 30 2001, was only next to the US in terms of using anti-dumping measures. Despite this, a pressing need for reviewing the anti-dumping regime has been felt rather acutely, as the action is often political and not economic.

The General Agreement on Tariff and Trade (GATT) lays down the principles for the member countries on levy of anti-dumping duties, countervailing duties and safeguard measures. Articles VI of GATT 1994 allows members to apply anti-dumping measures on imports of a product with an export price below its normal value. However, its use is economically justified only if dumping is predatory, meaning that the offending firms sell the product below cost with the objective of driving other firms out of the market, and it hurts the local industry.

Rise of anti-dumping actions has increased dramatically over the last decade, reaching an all time high of 340 investigations in 1999. Interestingly, until as late as 1990, just four developed countries accounted for 80 per cent of all dumping actions: Australia, Canada, European Union and the US, but now developing countries including India, South Africa, Brazil, and Mexico, have been increasingly taking recourse to these laws.

Anti-dumping is more often being used as pure protection than as a trade remedy. The recent years have seen some blatant violation of anti-dumping laws. Notable among them is the Byrd amendment, under which, the US customs authorities are obliged to give anti-dumping duty collected on imports directly to the complaining domestic industry. This is an illegal remedy against dumping because the industries benefit twice, once from the above measure and also from the price increase resulting from the duty.

The developed countries, especially the US and the EU, have been repeatedly accused of misusing anti-dumping laws for protecting domestic industries from foreign competition. In the recent years, however, their own exports have been increasingly encountering the same unpredictable, arbitrary and disruptive obstacles in other countries. The US was the third most frequent target of anti-dumping measures during 1995-2000.

This trend is worrying. Taking increased trade as a necessary condition (but not sufficient) for developing countries to grow, the increasing use of anti-dumping measures may undermine the considerable progress, which has been made in liberalising world trade. However, there is perhaps some hope that policy makers and industry alike are beginning to realise that imposing anti-dumping measures is not always in the interest of their own countries.

In spite of all this, the US government in the past has been continuously resisting demands and efforts to reform anti-dumping provisions in international trade negotiations. This resistance reflects strong political support for the US anti-dumping laws on domestic industry lobbies. Members of the WTO did recognise it at the recently concluded Doha Ministerial Conference, where they agreed to negotiations aimed at clarifying and improving disciplines under the Agreements on Implementation of Article VI of the GATT 1994. For the developing countries the very consent of the US to negotiate on these rules seems to be an achievement. They should take this opportunity to discipline the current anti-dumping regime and seek tighter rules in the next round of negotiations.

As far as India is concerned, it has emerged as new player in the game of anti-dumping. During the period between 1992 to 2000, India initiated a total of 89 anti-dumping cases, the highest number by any country. However, for India as well as other developing countries in order to achieve long-term sustainable growth, it is important to ensure that each global trading partner must aim to minimise the use of anti-dumping measures. If we fail to achieve this, then there will be considerable losses both for the exporting country and for the country imposing the duties.

India should take the Doha Declaration in this regard as an opportunity to have its say during the negotiations. While, we have to remain cautious that building our agenda merely harping on special and differential clauses will belittle our case, we cannot on the other hand, afford to sideline concerns of our own business. We need to keep in mind that majority of our exporters are small and financially not sound to fight anti-dumping cases abroad.

Apart from asking for a reasonable de minimus margin, it is worthwhile to raise that investigations on developing country members should be initiated only if the petition has the support of at least 50 per cent of the domestic industry in the developed country member.

It is also important to recognise that anti-dumping duties are product and source specific. They can, therefore, be circumvented by changing the customs tariff classification, slightly altering the goods or completing a part of production process in the country of import or a third country. The anti-dumping agreement has virtually nothing to say on such circumventions.

With the entry of China into the WTO, all equations are likely to change altogether and the incidence of this “trade remedy” measure is expected to rise further. According to the WTO’s semi-annual report, China with 22 investigations on its exports, is at the top of the list of countries subject to anti-dumping investigations. Ten of the investigations against Chinese exports were initiated by the US and India itself (five each).

The growing realisation that anti-dumping is being used least as trade remedy measure rather than strategic considerations are important explanations for India to participate anti-dumping negotiations with its own proactive gander.

Slackening of the US resistance, towards inclusion of anti-dumping issues in trade negotiations, during Doha conference, is a positive signal and an opportune moment to push for disciplining the anti-dumping regime. India should join together with like-minded governments to stem and then reverse the tide of anti-dumping proliferation.

(The writer is the Secretary General of the Centre for International Trade, Economics & Environment, CUTS, a premier research and advocacy group.)