Anti-Dumping Is A Ban Or Boon

Liberalization, Privatization and Globalization [known as LPG] have tremendously changed the functioning of the developing and developed economies. As the developing economies discard their trade restrictions and open their markets for trade in goods and services, a number of new issues are emerging. One of the important issues in trade led development is the use of anti-dumping provisions by the developing country Governments in dealing with the problem of dumping. In the globalised economy ‘dumping’ is one of the most controversial issues. The supporters of anti-dumping measures1 argue for the protection of home industry against unfair competition.

However, the exponents of free trade would like to ignore it (dumping) either as one of the effects of the free cross-border trade in which plus points overweigh the small negative effects, or support it on the ground that consumers are benefited by getting goods at the cheapest possible price.2 They further contend that the price of regulating dumping is much more than the price of training the employees in the new skill wherein the concerned country has an advantage. This is the view of the Classical School of International Economics3.

Dumping is defined by Jacob Viner4 as “Price discrimination between purchasers in different national markets”. According to this definition, a firm can sell goods at a higher price in the domestic market than abroad because it has more market power in the domestic market, while it faces increased competition from other companies in the foreign market. According to WTO “A product is to be considered as being dumped i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade for the like product when destined for consumption in the exporting country5”.

Central to all these definitions, however, is the concept of “price discrimination” in different markets. This paper first discusses about the evolution of anti-dumping law, and then describes anti-dumping cases initiated by and against India and finally ends with a conclusion that in the present scenario of recession there is an absolute need to include a public interest clause in our national Anti-dumping law which will benefit the Indian consumers from the harmful effects of anti-dumping duty.

Evolution of Anti-dumping Law:
The first anti-dumping law passed in Canada was a novel piece of legislation intended to satisfy local manufacturers who desired higher customs duties on products which were sold in Canada below the domestic prices. However, the genesis of the modern anti-dumping law could be traced back to the developments in the United States. Being mindful of the trade distortive effects of dumping, the U.S. Congress in 1914 enacted the Clayton Act to curb price discrimination within the United States6. Discussions concerning the development of comprehensive anti-dumping rules continued with GATT Working Parties in the 1950’s and 1960s. Article VI of the GATT did not outlaw dumping, but only “condemned” the practice. The Uruguay Round (GATT 1994) that followed the Tokyo Round and came into force in 1995, more precisely defined the rules and procedures of anti-dumping measures. The new Agreement introduced more detailed procedures for initiating and conducting anti-dumping investigations are reduced discretion with respect to methods used to determine dumping and injury margins, sun set clause, and particular standards for dispute Settlement Panel to apply in anti-dumping disputes.

The revised Agreement provides for greater clarity and more detailed rules in relation to the method of determining that a product is dumped, the criteria to be taken into account in a determination that dumped imports cause injury to a domestic industry, the procedures to be followed in initiating and conducting investigations and the implementation and duration of anti-dumping measures.7 It was expected that higher standards of initiations of anti-dumping causes would restrain its use by member countries by making it more difficult to file complaints and to prove dumping and injury, and by strengthening the dispute settlement system. However, contrary to the expectation, there was a dramatic increase in the use of anti-dumping activity by developing countries in the post Uruguay Round. Anti-dumping has now evolved into a global phenomenon with an increasing number of developing countries adopting these laws and making use of them. At international level the law which governs the legal imposition of anti-dumping duty is the Agreement on Implementation of Article VI of The General Agreement on Tariffs and Trade, which is adopted in the year 1995. At National Level Section 9A, 9B, 9C of Customs Tariff Act (amended 1995), and Customs Tariff Rules1995 are the guiding laws for anti-dumping.

Anti dumping cases initiated by and against India
Dumping has become a major issue in India in the post liberalization period. This section covers the Indian experience with dumping and anti dumping in the post liberalization period. Developing nations like India that had erected high tariff and non tariff barriers to protect the domestic industries have been forced to reduce the tariff and non tariff barriers under WTO agreements. India has also been fulfilling her commitment to WTO in the matter of bringing down the trade and non trade barriers. The peak tariff rate has fallen from 110% in 1992-93 to 20 % by 2004-058. India has abolished QRS by April 20019.In terms of application of new final anti-dumping measures; India reported applying 16 new measures, registering a 78 per cent increase during January-June 2008 over the nine new measures it reported for the first half of 200710.

The European Communities was in second place reporting eight new measures for the first half of 2008, followed by Indonesia (five new measures), Argentina, China and Ukraine (four new measures each), Brazil and South Africa (three each). Products exported from China were the most frequently subject to new measures during January-June 2008, accounting for 13 of the 54 new measures during this period. This represented a 40 per cent decline from the 22 new measures applied on Chinese exports during the first half of 2007. Exports from Chinese Taipei were in second place, with six new measures applied, and compared with three new measures during the first half of 2007. The sector most frequently affected by the new measures applied during January-June 2008 was the chemicals sector, which accounted for 16 of the 54 new measures reported.

If we look at the recent statistics of WTO between the months of January to June, 2008, as many as 16 WTO Members initiated a total of 85 new investigations, compared with 61 initiations reported by 16 Members for the corresponding period of 2007. A total of 12 Members reported applying 54 new final anti-dumping measures during the first semester of 2008, six per cent higher than the 51 new measures reported by 17 Members for the corresponding period of 200711. Thirty-one of the 85 new investigations were opened by developed Members, and 13 of the 54 new final measures were applied by developed Members, during the first half of 2008.

Turkey accounted for highest number of cases numbering 13, followed by the United States, reporting 12, India (11), Argentina and the European Communities (10 each), Brazil (7), Australia and Colombia (4 each), Ukraine (3) and China (2). China was the most frequent subject of the new investigations, with nearly one half (37) of all of the new initiations reported for January-June 2008 directed at its exports. This was a 76 per cent increase over the 21 new investigations opened in respect of exports from China during January-June 2007. Thailand was next, with seven new investigations directed at its exports, followed by the European Communities (including individual member states) and Indonesia (five each), Korea, Malaysia and Chinese Taipei (four each), and Vietnam (three). Brazil, Canada, India, and the United States were the subject of two new investigations each. In terms of products, base metals sector suffered the most with 21 initiations, the textiles sector (20 initiations) and the chemicals sector (10 initiations).

Going by these latest statistics compiled by the WTO, it is quite clear that having seen the tell-tale signs of recession, all those economies which feared the mortal blow to their growth cycle, wittingly or unwittingly, began to resort to this most popular Non-Tariff Barrier (NBT) much ahead of others. And some of them are the USA, EU, India Australia and China. Although anti-dumping duty is a WTO-sanctioned policy instrument to grant temporary relief to domestic industries in case of unfair trade practices resorted to by exporting countries which may cut prices below their costs to dump goods in the importing countries, but it is popularly resorted to under tremendous pressure from powerful lobbies owing allegiance to certain sectors of the economy.

Anti dumping Actions initiated by India:
India has established the necessary legal machinery according to the guidelines provided by WTO. Directorate General of Anti Dumping (DGAD) is designated authority to investigate the cases of dumping by foreign firms. The Customs Tariff Act of 1975 amended in 1995 provides the rules on the basis of the WTO guidelines12. The domestic producer share of 25% in production of a like article within India which is similar to the imported article or producer and supporters accounting for more than 50% or majority of the production can appeal to the authority for initiating anti dumping action13. They are expected to give the necessary information in a Performa14. On receipt of the application the anti dumping authority notifies in the gazette and seeks information from the exporter in a specific Performa. The consulates of the exporting country are also notified15. Generally the interested parties are expected to submit the information within 40days of notification16. However the authority extends the time limit when specific request is made by the exporter or interested party. While the petitioner has to necessarily provide information regarding cost, production price and such details they may claim confidentiality for certain details. In that event the non confidential information is shown to the other interested parties.

When the authority is satisfied with the claims they calculate the normal value and the export price of the imported good and find the dumping margin if any17. If the dumping margin or the imports from a specific country are found to de-minimis as per the WTO guidelines then anti dumping duties are not levied against such countries18. Otherwise a provisional duty is levied which may be equal to less than dumping margin. The duty is levied only if the dumped imports cause injury to the domestic producer in terms of parameters like price repression, loss, non- utilization of capacity fall in employment loss of sales etc19. The designated authority visits the premises of the domestic producer or the exporter if necessary to ascertain the facts20. Specific hearing is also arranged for the interested parties to state their views. The final duty is levied afterwards21. Any duty recommended by the DGAD has to be actually confirmed and levied by the revenue department of finance ministry. ADD once levied is valid for 5 years after which a sun set review is initiated22. Similarly new shippers review may be initiated when a new exporter starts exporting from a country subject to ADD.

The petitioner or an importer may also call for a mid term review under changing conditions. Any party who is not satisfied may appeal to the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) 23. The matter has been also taken to High Court and Supreme Court in India when the concerned party is not satisfied with the decisions of CEGAT. Similarly an appeal can be also made to the WTO appellate body. Though DGAD has given final decision and levied duties in more than 100 cases, WTO appellate body has not ruled against any decision. But certain decisions have been modified by the local appellate authorities like Customs, Excise and Gold (Control) Appellate Tribunal high court and supreme court on appeal but the decisions of the designated authority Directorate General of Anti dumping and Allied duties (DGAD) have been confirmed in most of the cases. DGAD has been maintaining the time frame for investigations and they are reported in Government Gazettes and DGAD has been also bringing out annual reports. India initiated the first anti dumping action in 1992-93. It has been already discussed in the above section how the number of initiations has been increasing over the year. Though India has initiated anti dumping actions against 49 countries 70% of the actions have been initiated against 10 countries.

Recent statistics clearly reveals that nearly one fifth of the total 379 actions have been initiated against China24. In this respect India’s record is similar to the world statistics reported by WTO. A quick comparison reveals that India accounts for nearly 20% of the anti dumping cases initiated against China. Statistics shows that India has initiated more anti dumping actions against developing countries rather than developed countries. This is also in line with the international trend. An analysis of the sectors reveal that five sectors have contributed to more than three fourth of the anti dumping initiations at the international level and the same sectors are important to India also both as initiator and also as an affected country. However the Indian ranking is closer world pattern in the case of cases against India compared to cases initiated by India. Statistics also reveals that the anti dumping cases have been initiated in sectors that contribute a huge share to the total exports and these sectors are also witnessing higher growth rates.

Chemicals including plastic and rubbers accounted for 14.8% of Indian exports25 in 2003-04, and textiles accounted for 19%. Engineering goods which includes some base metal articles and machinery and appliances accounted for 19.4% of the total exports. They also represent some sectors in which India is increasing the market share at the international level in the post liberalization period. As per the statistics the items of Indian exports which rank within the top 15 among all the nations and also affected by anti dumping initiations. International Trade Statistics 2004 specially mentions India as one of the six countries with rising chemical exports.

If we a look at the present situation number of new initiations, temporary imposition of duty, the final duty being notified, the duty being extended for a year or five years and the number of cases going to the judiciary, has increased. Out of 109 Customs Tariff Notifications issued so far in 2008, about 46 per cent of them are related to anti-dumping26. In coming months, more of it is likely to be notified to protect the sectors which can afford organized and structured lobbying. In some of the cases it has been seen that although the domestic sector seeking enforcement of such an NTB does not require any protection as it is financially healthy and quite competitive from global point of view but they do lobby to continue with their market control mechanism.

Anti-dumping and Consumers Interest:
An extremely wide variety of product types are affected by anti-dumping cases. Whilst a number of them are industrial goods (e.g. chemicals or steel products) there are also a lot of consumer goods. The anti-dumping measures currently in force against consumer products (and the exporting countries affected) include: Cotton bed linen (Egypt, India, Pakistan); Bicycles (China, Indonesia, Malaysia, Thailand, Taiwan); Footwear (China, Indonesia, Thailand); Leather handbags (China); Lighters (Japan, China, Mexico, Philippines, Thailand, Taiwan); Microwave Ovens (China, Malaysia, Korea, Thailand); Sin micro disks (9 countries); Personal Fax Machines (China, Japan, Korea, Malaysia, Singapore, Taiwan, Thailand); Salmon (Norway); Colour Televisions (Malaysia, Singapore, Thailand, Korea, China). Obviously, many, indeed most, of the other anti-dumping measures in force against industrial products will also affect consumers, albeit perhaps more indirectly. An anti-dumping investigation can often result in quite high levels of duty which in turn should have a significant impact on price levels. In practice, it can also restrict the choice available to consumers where the duty is sufficiently high to effectively exclude the imports concerned from the Community market. To give just two examples, the duty on leather handbags from China, for example, is 38%, whilst that on fax machines ranges from 6% to 89.8 % depending to the specific exporter (with an average for the specifically named exporters of 14.2%)27.

Public Interest Clause
The public interest Clause allows the authorities to refuse to impose duties, even when dumping and injury have been found, on the ground that anti-dumping duty measures in a particular case would be contrary to the broad public interest. A public interest test, if properly devised and implemented, can help to reconcile a country’s anti-dumping policy with its larger national interests28. Furthermore, given the contradiction between the trade restrictive effects of anti-dumping measures and the broad objective market opening followed by WTO, due restraint in application of the anti-dumping measure is in keeping with the basic concepts, principles, and objectives of the ADA. The ADA however does not require a public interest test for imposing anti-dumping duty29. It merely allows the consumer organizations to provide relevant information to the investigating authorities. Brazil, Mexico and USA have no provision for community interest; EU, Canada30, Australia and Argentina on the other hand require Community interest to be one of the conditions for imposing the duty. There is no guidance on how to weigh the injury to producers against the injury to consumers and users. Though in principle public interest clause could lead to more balanced approach to anti-dumping measures, in practice this gives greater discretionary powers to the authority. The anti-dumping law in most countries does not define or elaborate on ‘public interest’ and leaves the matter at the discretion of the authority31.

In India, the provision of community interest is not mandatory. While the national law has to follow the ADA in both letter and spirit, except for few minor omissions, certain progressive elements of other country’s law are worth emulating32. One such element is the ‘public interest clause’ of the EU. The other progressive element could be Japanese practice of pre-initiation consultative mechanism with the domestic industry to try and improve competitiveness without recourse to AD action. The Rules should also recognize the consumer groups and the industrial users of the product under investigation as major stakeholders in the investigation process and include their responses in every phase of investigation33.

Indian anti-dumping duty notifications are supposed to be issued after due consideration of the Government based on the recommendation of the DGAD and there is an implicit element of public interest consideration in this arrangement. It is therefore, imperative to institutionalize it within the legal framework to make anti-dumping duty consumer friendly.

Conclusion:
The analysis presented in the paper, based on data from WTO and the DGAD, Ministry of Commerce and the Reserve Bank of India, reveals that the imports of a number of goods are increasing in the post reform period. The increasing imports and lower prices have affected a number of industries. Though both the big and the small firms face the foreign competition, the big firms resort to anti dumping action to fight the imports. Small industries do not resort to this tactics on account of huge legal cost and other procedures involved. The anti dumping actions, therefore, tend to protect inefficient firms. In most of the cases the injury is proved only on the basis of price effect. Many foreign producers are not willing to reveal all the details due to trade secrecy or because of small market size of India. As a result, the government relies on the best available information and constructs cost that is provided by the firms seeking anti dumping actions. Wherever the importers were active and provided necessary information the injury claims of the domestic producers have been greatly reduced. Moreover, the anti dumping law does not take cognizance of technological and quality differences, but considers only the substitutability between goods. Continuous use of anti dumping action may adversely affect the small scale and export industries by raising the cost. It may negate the very advantages of the low tariff regime. It may also invite retaliatory action from other countries as is evidenced by the growing anti dumping actions against India.

There is a strong need for the inclusion of public interest clause to prevent the misuse of anti dumping legislation. India should learn from the mistakes of other countries [like the US, against whom such concerns have been raised in the past] rather than repeating such errors. But at the same time the government has to have a strong monitoring mechanism for studying the effect of dumping on small industries that are not in a position to seek protection in the form of anti dumping action. The analysis identifies a clear strategic role for the Government in shaping the pattern and rate of growth of foreign trade from the Indian perspective. After analyzing the above situation it is concluded that anti-dumping duty is like an anti-biotic, it should be used to protect domestic industry where there is a disease it works well, if used in the absence of disease it will have dangerous side affects. These side-effects can be seen in terms of high input costs for the finished product industry. Generally, anti-dumping duty is levied on intermediate goods which go into the manufacture of final products. Thus this pushes up the cost of final products of many an industry, and by character, anti-consumer or call it, anti-common man. It is hoped that in future that Indian anti-dumping actions are made consumers friendly.

End Notes:
1. Miranda, Jorge, Raul A. Torres and Mario Ruiz (1998), “The International Use of Antidumping: 1987-1997,” Journal of World Trade 32 at p. 5-71.
2. Bown, Chad P. (2008), “The WTO and Anti-dumping in Developing Countries,” Economics and Politics, 20(2), pp. 255-88.
3. Aggarwal, A. (2003) “The WTO Antidumping Code: Issues for Review in Post Doha Negotiations”, ICRIER Working Paper No.99 at p. 3.
4. Jacob Viner, (1923) “Dumping: A problem in International trade “(Chicago, III: University of Chicago Press,), at p.86.
5. The Agreement on Anti-dumping (ADA) is available online at: www.wto.org/english/docs_e/legal_e19-adp.pdf Last visited 5th January 2009.
6. Aggarwal Aradhana (2002). “Anti-dumping Law and Practice: An Indian Perspective”, ICRIER Working Paper No.85 New Delhi. Accessed from the web site: www.icrier.org Last visited 22nd December, 2008
7. Koulen (1995), ‘The New Anti-Dumping Code Through its Negotiating History’ in Bourgeois, Berrod and Gippini Fournier (eds), The Uruguay Round Results at p151- 208.
8. Singh, SK (2004): “An Analysis of Anti-dumping Cases in India”, Delhi School of Economics, Delhi University, at p.5.
9. Directorate General of Anti-dumping and Allied Duties Annual Report 2003-2004, at p3.Web site: http://commerce.nic.in/ad_cases/html. Last visited 13th May, 2008.
10. See for details http://www.org/english/tratop,uscore.e/dispu,uscore.statua,uscore.e.htm. Last visited: 13th Dec 2008
11. The Anti-dumping semi-annual reports by Members for the period July-31st to December 2008 can be found under document series (G/ADP/N/126).Source : http://www.wto.org. Last visited 23rd December, 2008.
12. R.K. Gupta: (1998) “Safeguards, Countervailing and Anti-dumping Measures against Imports and Exports” Academy of Business Studies. At p.299
13. See Rule 23(1) of Customs Tariff Act 1975.(Amended in the year 1995)
14. See Rule 6(4) of Customs Tariff Act 1975.
15. See Rule 19 of Customs Tariff Act 1975.
16. See Rule 20 of Customs Tariff Act 1975.
17. See Rule 18(2) of Customs Tariff Act 1975.
18. See Rule 23 of Customs Tariff Act 1975.
19. Nandana Baruah (2005) on “Anti-dumping Duty as a Measure of Contingent Protection: An Analysis of Indian Experience” Working Paper No.356, October. Accessed from the web sitehttp://www.cds.edu/download_files/377.pdf. Last visited 12th Dec, 2008.
20. Rule 3 of Customs Tariff Act 1975.
21. Rule 18(2) of Customs Tariff Act 1975.
22. Aggarwal, A (2002), Antidumping Law and Practice: An Indian Perspective, Working Paper No 85, ICRIER, New Delhi.p23, Accessed from the web site: www.icrier.org, Last visited 20th December, 2008
23. Section 9C of Customs Tariff Act 1975(Amended 1995)
24. Directorate General of Anti-dumping and Allied Duties Annual Report 2003-2004, at p3.Web site: http://commerce.nic.in/ad_cases/html. last visited 13th May, 2008.
25. Directorate General of Anti-dumping and Allied Duties Annual Report 2007-2008, at p3.Web site: http://commerce.nic.in/ad_cases/html. last visited 13th May, 2008.
26. Ibid.,
27. Hylke Vandenbussche and Maurizio Zanardi (2008) “What Explains the Proliferation of Anti-dumping Laws?” Tilburg University Law Journal. Accessed from the web site: http://ideas.repec.org/e/pza18.html Last visited 22nd December, 2008.
28. Warner P L, (1999),’ Canada-United States Free-Trade: The case for replacing Antidumping with anti-trusts’, No. 23 Law and Policy International Business at p 791.
29. Bhattacharjea A. (2000): “Predation, protection and the public interest” Economic and Political Weekly, Dec 2, 2000, at p.4327-4336.
30. Agarwal Aradhana “The Inclusion of Public Interest Clause In India, ICRIER Working Paper No: at pp1-21, Accessed from the web site: www.icrier.org, last visited 20th Dec, 2008.
31. Hylke Vandenbussche and Maurizio Zanardi (2008) “What Explains the Proliferation of Anti-dumping Laws?” Tilburg University Law Journal. Accessed from the web site: http://ideas.repec.org/e/pza18.html Last visited 22nd December, 2008.
32. Kempaton (2000) “Anti-dumping Policy and the Consumer Interest”, Consumer Policy Review, at p1-17. Accessed from the web site: http://www.allbusiness.com Last visited 2nd January, 2009.
33. G. Srinivasan (2004) “Domestic industry structure must be factored in for anti-dumping duty”, Hindu Business Line, New Delhi, May 2nd. Online Paper Accessed from the Web site: www.hindubusinessonline.com Last visited 22nd Dec, 2008.

The  author can be reached at: sudha1975@legalserviceindia.com