Something unusual, perhaps inexplicable, has been happening in the arena of anti-dumping duties in India. For many years, India was one of the leading users in the world of this policy instrument to counter the unfair practice of dumping. However, over the past 1-2 years, the number of cases in which India has imposed anti-dumping duties has declined rather sharply. This requires an examination.
At the outset, it should be noted that based on an investigation regarding dumping and the consequent injury to the domestic producers, the directorate general of trade remedies (DGTR), under the department of commerce, recommends the imposition of anti-dumping duties. Thereafter, it is up to the department of revenue under the finance ministry to decide whether to impose the anti-dumping duties. Generally, the department of revenue is expected to take a comprehensive view of overall public interest, before accepting the recommendations of the DGTR.
To appreciate the reversal in the trend in imposition of anti-dumping duties by India, it should be noted that during January-December 2019, the department of revenue accepted the findings of the DGTR and imposed anti-dumping duties in all the 13 cases in which the latter had recommended imposition of the duties. This was in keeping with the overall trend since 1995, whereunder the department of revenue agreed with the recommendations of DGTR to impose anti-dumping duties in almost all cases. In sharp contrast, during January-December 2022, the department of revenue imposed these duties in seven cases, while rejecting the DGTR’s recommendations in 29 cases. These figures are based on India’s semi-annual notifications to the Anti-Dumping Committee of the WTO. What could explain this reversal in trend?
First, an argument could be made that unlike the distant past, the incidence of dumping has declined in the past 1-2 years. However, this argument does not bear scrutiny. The detailed investigations undertaken by the DGTR and its findings clearly demonstrate the existence of dumping which caused injury to India’s domestic producers in each of the 29 cases in which its recommendations were rejected by the department of revenue.
Second, another argument could be that there has been a sudden decline in the quality of investigations and findings of the DGTR, which has created a doubt with the department of revenue regarding the credibility of the recommendations. However, this, too, does not appear to be borne out by facts. A comparison of the findings of the DGTR over the past 1-2 years, with those of an earlier period, does not reveal much difference in the level of details and the legal explanation of the recommendation to impose anti-dumping duties.
Third, it could be argued that the department of revenue has decided to show deference to the interests of downstream users of products by rejecting the recommendation of the DGTR to impose anti-dumping duties. As imposition of anti-dumping duties on a product raises the costs for its downstream users, this argument may appear appealing. However, even this strand of reasoning does not appear consistent with facts. Some of the products on which the department of revenue agreed to impose anti-dumping duties during 2022 include stainless steel pipes and tubes, electro-galvanised steel, polyurethane leather etc. These products have important downstream uses. Hence, it would not be completely correct to argue that the reluctance of the department of revenue in imposing anti-dumping duties stems from the concern that these duties raise the costs for downstream users.
In short, there does not appear to be any reasonable explanation for the department of revenue’s reluctance in accepting the recommendation of the DGTR to impose anti-dumping duties in a large number of cases. What should be the way forward?
Rejection of the recommendations of the DGTR by the department of revenue in a large number of cases should not be treated lightly as a ‘case-by-case’ decision. It appears to be a manifestation of fundamental difference between two different arms of the central government on an important matter. The cabinet secretary needs to step in to resolve the impasse. Two important systemic improvements could be considered. First, the DGTR could provide more details of how its investigation took into account the interests of downstream industrial users of the product on which anti-dumping duty is proposed. On its part, the department of revenue could provide a comprehensive and reasoned explanation of how the larger public interest is served in the cases where it rejects the recommendation of the DGTR to impose anti-dumping duties.
For many years, the resort by India to anti-dumping duties in many cases has drawn the ire of many. Questions have been raised regarding the robustness of investigations undertaken by the DGTR. Apprehensions have also been aired that anti-dumping duties are being used by a handful of industrial houses for protectionist purposes. Some prominent economists have even gone to the extent of arguing for dumping anti-dumping duties. Following this dictum would be tantamount to throwing the baby out with the bath water. The departments of commerce and revenue need to work hand in hand in ensuring that this important policy instrument for protecting the domestic industry from the unfair trade practice of dumping is preserved, and also used judiciously.
The writer is an expert on international trade issues.
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