EU Justifies Anti-dumping Measures On Linen Export As Trade Defence

Written by Malcolm Subhan | Brussels, Dec 8 | Updated: Dec 9 2002, 05:30am hrs
If you thought bedsheets were just something you slipped between at the end of a long and tiring day, think again. The fact is that they are an important export item: India has been earning some $100 million a year on average from its exports of bed linen to the European Union (EU) alone in recent years. But these exports are seriously threatened by the measures taken by the 15-nation EU, which though designed to protect the European industry, are in fact giving Pakistani exporters a free run of the European market. The only silver lining to the clouds which threaten Indian exporters is the attempt by Eurocoton (the Committee of the Cotton and Allied Textile Industries of the European Community), the Brussels-based body representing the European cotton-based textile industry, to stem the flood of imports from Pakistan. Eurocoton has put the dumping margin at around 46 per cent, on the basis of EU imports from Pakistan during the first 10 months of this year. It has therefore lodged a complaint against Pakistan with the European Commission, which represents the EU on all trade matters. As a result, the Commission is expected to announce, before Christmas, that it is opening an investigation into the dumping of cotton-type bed linen by Pakistan. Under the EUs anti-dumping legislation, it has nine months in which to set provisional anti-dumping duties, and a further six months in which to ask the EU governments to convert the provisional duties into definitive duties.

But India, too, faces a considerable period of uncertainty. On September 3 Eurocoton asked the European Commission to open an expiry review of the anti-dumping measures applicable to Indian exports of cotton-type bed linen. These measures, adopted in November 1997, were due to expire on December 5.

The European Commission having initiated an expiry review on December 4, the measures could well be extended for another five years. Adding to the uncertainty is the fact that the anti-dumping duties imposed in 1997, on imports from not only India but also Pakistan and Egypt, were suspended by the EU in August 2001, as regards imports from India. They will remain suspended in fact, until the European Commission has concluded its newly launched expiry review, on the one hand, and its partial interim review of dumping by India, launched in February 2002.

Whether the original anti-dumping duties are confirmed at their original rates, modified, or even allowed to lapse will depend on the outcome of these reviews. EU legislation has set a mandatory maximum period of 15 months for the completion of a new review. In the case of an expiry review, the European Commission applies a soft deadline, usually of 12 months. The partial interim review, on the other hand, should be finally concluded by next February. This sorry tale does not end there, however. Eurocoton reportedly has asked the European Commission to take action against Indian bed linen exports under the EUs anti-subsidy legislation also. A decision by the latter, to launch an anti-subsidy investigation, is expected before Christmas. Eurocoton plans to make a similar request to the Commission as regards Pakistan also, though the task of gathering the evidence needed to open an anti-subsidy investigation is proving more difficult.

Ironically, there was a time when Eurocoton was hoping to make common cause with India against Pakistan. The fact is that the European textile industry resented, as much as its Indian counterpart, the concessions which the EU granted Pakistan, under the terms of their bilateral textile agreement, on the one hand, and the changes to its GSP regulation, under the regime to combat drug trafficking, on the other.

Eurocoton had hoped at one point that India would conclude a bilateral agreement with the EU, similar to those which the latter had concluded with Sri Lanka and Pakistan. Under these agreements, the EU has granted these two countries improved access to its market, in return for better access for European products to their markets. India justified its refusal to enter into a bilateral agreement on the grounds that its domestic market is already sufficiently open to textile imports, as compared to the EU market. Even textile exporters - and importers - can be forgiven if the latest developments in what has now come to be known as the Indian bed linen case leave them hopelessly confused.

Their tribulations began some eight years ago, in 1994, when the European Commission first initiated anti-dumping proceedings against India. These proceedings were terminated in 1996, when Eurocoton withdrew its complaint. But the respite accorded Indian exporters was of short duration. Fresh anti-dumping proceedings were launched in September, 1996, this time against not only India but also Pakistan and Egypt. They resulted in the imposition, in November 1997, of definitive anti-dumping duties, ranging from 2.6 per cent to 24.7 per cent on Indian exports of cotton-type bed linen. Egyptian exports attracted anti-dumping duties of up to 10.5 per cent, Pakistani exports of duties of up to 6.7 per cent. India challenged the EUs decision. When its consultations with the EU failed, New Delhi turned to the WTO Dispute Settlement Body (DSB) for a ruling. In March 2001, the WTO Appellate Body concluded that some of the methods used by the EU to calculate dumping were not in line with the WTO Anti-dumping Agreement. The EU duly revised its initial duties, in line with the DSB ruling. The duties were revised downwards, but their application was suspended on August 7, 2001 in the case of India and Egypt, while the action against Pakistan, and later Egypt, was terminated.

The August 7 regulation also provided for the expiry of the amended measures within six months after it came into force, unless a review had been initiated before that date. Which is what happened, of course. On February 13, 2002 the day before the regulation was to expire, the EU initiated the partial interim review mentioned earlier. By July it had determined definitive anti-dumping duties on Indian bed linen exports, ranging from 2.7 per cent to 27.7 per cent. The average rate for cooperating companies was set at 13.8 per cent. But as the interim review has not yet been officially concluded, these rates are held in reserve, as it were.

India challenged the revised rates, set by the EU under the terms of the DSB ruling of March 12, 2001. It claimed that the EU had not correctly implemented the DSB ruling. This time India lost its case. On November 29, 2002, a WTO panel found that the EU had fully complied with the DSB ruling. The panel in fact rejected all eight claims brought forward by India.

What is more, it held that since imports of bed linen may enter the EU free of any anti-dumping duties, there was no need for the EU to explore constructive remedies other than anti-dumping duties with regard to India. The EU could have done so, under a special developing country provision of the WTO Anti-dumping Agreement.

Given the systematic manner in which the EU has sought to limit imports of Indian bed linen over the last eight years, you would conclude that they pose a very real threat to the European textile industry. True, India is the second largest exporter of this item to the EU, after Pakistan. The fact is that Indian exports to the EU amounted to $111 million in 2000, and to $91 million in 2001. They seem to have fallen even further this year: during the first six months they stood at $39 million, as compared to $43 million for the corresponding period last year. While Indian bed linen exports declined by 6 per cent in volume and by 8.5 per cent in value between January and June of this year, Pakistans exports soared by 53 per cent and 39 per cent respectively.

How does the EU justify a course of action that could well result in Indian bed linen exports being totally shut out of its market It maintains that like any law-abiding country, it is simply implementing its own trade defence measures, even while taking into account WTO legislation and WTO rulings.