Anti-dumping More A Protectionist Tool Than Remedial Measure

Updated: May 31 2004, 05:30am hrs
The use, or rather, abuse of anti-dumping measures has haunted the multilateral trading system for a while. Although its primary aim is to remedy the material injury caused to domestic industry due to dumping, it is being used more as a protectionist tool. Many have argued that there is no economic rationale behind anti-dumping ac-tivity, that it has a net negative impact on the economy of the imposing country. Supporters of this school of thought argue that in a world free of anti-dumping, the benefits to consumers, because of dumped imports, will outweigh the losses to domestic industry and hence result in a net gain to the economy. But anti-dumping is a reality of global trade and a strong weapon that no country will give up. Hence, pragmatism demands that discussions on the issue focus on how to reduce friction caused by its use.

With this as the basic premise, the Doha Declar-ation, in Para 28, mandated the review of the entire anti-dumping agreement (ADA). Besides, at Doha, in their decision on Implementation-related issues and concerns, members identified a few im-portant issues in the ADA for negotiations. The Doha declaration fixed the deadline of January 1, 2005, to complete these negotiations and stock-taking was scheduled at the Cancun Ministerial meet.

However, the journey of negotiations inter alia on anti-dumping from Doha to Cancun and beyond has been quite tardy and bumpy, without resulting in any fruitful reviewing of the accord. One of the important issues that were identified was how to operationalise the Special and Differential (S&D) clause in the ADA. The issue of limiting anti-dumping actions in those cases where previous actions resulted in negative finding was (back to back initiation) also identified. However, no progress has taken place on these important issues.

Anti-dumping is a reality of global trade and a strong weapon that no country will give up. Hence, pragmatism demands that discussions on the issue focus on how to reduce friction caused by its use
However, there has been a decline in the number of anti-dumping initiations from July 1 to December 31, 2003 from the corresponding period of 2002. A WTO press release issued on April 20, 2004 says the number of anti-dumping actions have drop-ped from 161 in the second semester of 2002 to 115 in 2003.

This decline, however, does not signify much as countries continue to impose anti-dumping measures. The recent US attempts to impose anti-dumping duties on frozen and canned warm water shrimp imports from India, Vietnam, China, Brazil and Thailand is a case in point. Since the US could not stop the imports from these countries through the environmental route (shrimp turtle case), it chose the dumping course. It is estimated that anti-dumping duties in the range of 100-130% would be imposed.

Another recent instance of misuse of anti-dumping is the ECs challenge against anti-dumping duties imposed by India on 22 commodities im-ported from the EU. In this case, the entire procedural anti-dumping law of India was challenged as being inconsistent to ADA. What is interesting is that on many of these commodities, anti-dumping duties were imposed by India in 1999-2000, making one wonder whether the ECs challenge to these duties after al-most 3-4 years was prompted by its loss to India in the second bed linen case decided in April 2003. This signals countries readiness to use not just anti-dumping measures but also the dispute settlement mechanism to settle trade scores.

Another problematic area in anti-dumping has been the enactment of ambiguous laws at the national level. These laws are often enacted to instituionalise unfair and regressive trade practices and im- pose an unfair burden. The US Continued Dumping and Subsidy Offset Act of 2000, popularly known as the Byrd amendment, is a classic example. It provides for distribution of anti-dumping and countervailing duties to US industries, the purpose being to subsidise loss-making industries. This legislation is an unfair trade practice as it provides an extra incentive for domestic industry to petition for imposition of anti-dumping duty. This act was successfully challenged at the WTO, which said that the Byrd amendment is contrary to US obligations under the ADA. The US has introduced a legislation to repeal this Act, but a recent development has pla-ced a big question mark on its sincerity. The US, in its submission to the Negotiating Group on Rules on April 26, 2004, wants discussions on WTO Members right to distribute monies collected from anti-dumping and countervailing duties. By this, the US hopes to change the rules to make illegal measures like the Byrd amendment WTO-consistent.

It is important to understand that the sustainability of the currently reported decline in anti-dumping cases hinges on bringing about substantive reforms in the ADA. The Negotiating Group on Rules and the committee on anti-dumping practices under the WTO have to move fast, first in identifying and second, in bringing about the required amendments. There are three important substantive reforms that need to be made: First, having separate de minimis dumping margins for developed and developing countries. This will operationalise the S&D clause. Second, making it mandatory for countries to impose only that duty which is sufficient to remedy the injury (lesser duty rule) and not impose duty equivalent to full dumping margin. Third, a complete prohibition on imposition of anti-dumping duty beyond the first five years (sunset clause).

Given the nature and kind of impediment that unfair rules of anti-dumping cause to trade, correcting the same should be a top priority. The faster negotiations move on this, the better it will be for the multilateral trading regime.

The author is secretary general of the Jaipur-based CUTS International. He can be reached at cuts@cuts-international.org