Trade defence: On anti-dumping duty on Chinese goods

A reflexive resort to the anti-dumping duty risks skewing market dynamics

December 29, 2021 12:02 am | Updated 12:47 am IST

The Central Board of Indirect Taxes and Customs (CBIC) recently notified the imposition of anti-dumping duty on five products manufactured in China in order to safeguard domestic producers from lower-priced imports that the Directorate General of Trade Remedies (DGTR) had found as being ‘dumped’ in the Indian market. The items range from specific flat-rolled aluminium products for solar modules, and silicone sealants used in the manufacture of solar photovoltaic modules to some chemicals, including a component of the refrigerant hydrofluorocarbon. In almost all the five products, the Commerce Ministry agency initiated its anti-dumping investigations in September 2020 and reached its final findings about 12 months later. CBIC’s imposition of the anti-dumping levy for five years on these Chinese products is based on the DGTR’s findings that their import constituted ‘dumping’, which was causing injury to local producers, and an ensuing recommendation that a protective duty was warranted. A remedy sanctioned by the WTO to protect a member country’s domestic industry from imports that have been priced at levels below those prevailing in the exporting nation’s home market, the anti-dumping duty has become one of India’s most widely used trade weapons, especially against a flood of cheaper Chinese imports. As of February 2020, India had imposed anti-dumping measures on 90 Chinese products, with another 24 China-specific anti-dumping investigations in progress at the time, according to a reply made in Parliament by Commerce Minister Piyush Goyal.

The use of the specific trade remedy, howsoever warranted, does, however, raise questions. A reflexive resort to the anti-dumping duty, especially if the domestic applicant is a significantly large and relatively resilient manufacturer of the product, risks skewing the market dynamics in the Indian company’s favour, with both downstream industries, in the case of intermediate goods, and consumers likely to face the consequences of reduced competition on final prices. Also, efforts to narrow the sizeable trade deficit with China by targeted recourse to the levy have made little headway in addressing the widening gap as imports have continued to largely outpace India’s exports. The effectiveness of the measure in providing timely relief to smaller domestic manufacturers facing an existential crisis on account of suspected dumping has also been undermined in the past by a less than ‘swift’ process with the DGTR hamstrung by a personnel crunch. With companies worldwide now seeking to de-risk their businesses from an excessive reliance on China in the wake of the COVID-19 pandemic, the prospect of more capacity in that country turning surplus and being used to produce goods for dumping overseas increases. Indian policymakers have their task cut out to bolster trade defences in time.

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