Making Economic Sense Of Anti-dumping Activity

Written by Malcolm Subhan | Updated: Mar 13 2004, 05:30am hrs
Is there one activity in which India now leads the world, having overtaken not only the EU but also the US Not an activity to be encouraged, according to most economists, because of its negative effects on the national economy.

The activity being mentioned here is combating dumping. India initiated 313 anti-dumping cases between 1996 and 2002, compared with 292 investigations for the US and 262 for the EU. The US took the lead, however, with 266 measures in force by 2002-end, compared with Indias 191 and the EUs 174.

Anti-dumping and anti-subsidy activity is likely to be a permanent feature of global trade. Although the EU launched only eight anti-dumping investigations last year, compared with a record 65 in 1999, it has just tightened its anti-dumping rules. EUs trade supremo Pascal Lamy has described as modest the changes introduced in response to demands from EU companies suffering from unfair trading practices. These could well result in a rise in anti-dumping and anti-subsidy activity by the EU after May 1, when EU membership jumps from 15 to 25 countries.

Most of the new members are small and relatively poor. Their farmers and manufacturers may seek protection from competition, by asking Mr Lamy to launch anti-dumping or anti-subsidy investigations.

As matters stand, a simple majority is needed of the 15 member states to adopt definitive anti-dumping and anti-subsidy measures. A state which abstains is considered to have voted against the measure. This makes it harder to secure the necessary majority.

Mr Lamys modest measures are designed to force EU countries off the fence. Here-after, every country will have to clearly state whether it is for or against the measure. Although 13 votes will be needed after May 1, for an anti-dumping or anti-subsidy measure to be adopted, this should be relatively easy, given the less-developed status of the new member states.

The EU has also decided to deal strictly with exporters who have undertaken to respect a minimum price (in lieu of an anti-dumping duty), and then fail to do so.

Mr Lamy has offered a sop to exporters, many of whom had complained of the slow pace of investigations, aimed at revi-ewing existing anti-dumping or anti-subsidy measures or changing the form of such measures or the level of duties. These reviews must now be concluded within 15 months.

So, the EU clearly will keep anti-dumping in its arsenal of trade defence measures. At the same time, India and some other developing countries, including South Africa and Brazil, are taking recourse to using anti-dumping and anti-subsidy action more often.

The EU is not taking this flurry of activity by India lying down. Last December, it challenged the legality of 27 anti-dumping steps by India against EU exporters. It maintained that India had failed to comply with the WTO agreement. New Delhi had failed, for example, to demonstrate that the dump-ed imports were causing injury to Indian industry.

Have the Indian authorities been over-enthusiastic India had fewer than 10 officials working in its anti-dumping unit in 1998, compared with around 20 in the EU, according to an Indian economist. Their number presumably had risen in 1999, when India initiated as many anti-dumping investigations as the EU 65.

Can anti-dumping action, on any scale, be justified in economic terms Not according to economists who attended the workshop on the implications for labour market relations in the EU and China of the strategic use of European law, held in the London School of Econ-omics last December. A report on anti-dumping action taken by the EU over the past 25 years, in many cases against China, made some interesting points, according to an article to be published in EurAsia Bulletin of the Brussels-based European Institute for Asian Studies. The report noted that many of the complaints had been lodged by small and med-ium companies. This suggested a conflict within the EU, with European multinationals on the one side and small and medium-sized firms on the other.

This conflict is latent within the European textile and clothing industry, for example, and is reflected in the policies favoured by the industry. The large clothing manufacturers, and retailers, import clothing from countries in Asia, thus forcing smaller firms on the defensive. However, rather than press the EU authorities to adopt anti-dumping measures, the industry is largely united in urging them to force Asian countries, notably India, to open up their markets to European exports.

Consumer lobbies, whether in the EU or India, have far less political clout than manufacturers and trade union lobbies. As a result, their interests will continue to be sidelined when anti-dumping measures are under discussion, be it in Brussels or New Delhi.