By Raja Murthy
A recession-souring relationship between India and China is becoming grumpier, with India filing a record number of anti-dumping cases against China at the World Trade Organization (WTO).
"Dumping" involves an importing foreign company selling at unfair lower prices that lead to domestic suppliers of the same product suffering losses.
With the global economic downturn shrinking US and European markets, dumping complaints are increasing with large manufacturing nations such as China said to be cutting losses by dumping goods in Africa, India and other Asian countries.
Dumping complaints can be used to mask protectionist trade policies. India has to fend off such perceptions, after having filed 42 anti-dumping complaints, the most by any country in the WTO for the second half of 2008.
India's top trade body, the Federation of Indian Chambers of Commerce and Industry (FICCI), denies that the record number of anti-dumping cases the country has filed indicates India is becoming more protectionist.
"China poses the greatest threat to the Indian industry at this juncture," the FICCI said in a statement. "In this time of global recession, dumping can become a serious issue."
The WTO Secretariat, in a May 7 media release, reported a 17% increase in anti-dumping investigations for the last six months of 2008 compared with the corresponding period of 2007.
India appears to be getting mighty sore, particularly with China, having filed 17 WTO cases against its northeastern neighbor since October 2008, for what it terms dumping of Chinese products such as textiles, chemicals and metals.
India has already imposed anti-dumping import duties on yarn, fabric, nylon tire cord and thionyl chloride from China. On May 12, India's Directorate General of Anti-dumping and Allied Duties (DGAD), under the Commerce Ministry, further recommended imposing an additional 15% import duty on tire-making equipment from China.
Acting on a complaint from engineering giant Larsen & Toubro Ltd (L&T), the DGAD had investigated whether China was dumping tire-curing presses - machines that give the final shape and tread pattern to automobile tires.
China can complain to the WTO, contesting India's anti-dumping duties. China itself comes third in the WTO anti-dumping grumblers list for the second half of 2008, with 11 filings, behind Brazil with 16. Indonesia (6), Ukraine (4), Pakistan (3) and South Korea (1) are other Asian countries featuring among the latest anti-dumping complainants. The WTO has to investigate these complaints to verify anti-dumping allegations as well as justifications for imposing anti-dumping duties.
Article VI of the 1994 General Agreement on Tariffs and Trade Countries (GATT), the predecessor to the WTO, provides for anti-dumping investigations to see if domestic manufactures suffer losses from unfairly priced imports. If so, punitive import duties can be slammed on invading goods.
Under WTO rules, countries imposing such duties on imports have to prove that such products come under the anti-dumping bracket.
According to the WTO, a company can be charged with dumping if it exports a product at a price lower than what it normally charges in its own home market or if the import volume grows to an extent that leaves domestic manufacturers at a disadvantage. For instance, India's Directorate General of Anti-dumping and Allied Duties that investigated L&T's complaint against imported Chinese tire presses, declared that it found that they increased to 7% of total volume of India's domestic tire press market in 2007-08, compared with just 0.6% in 2004-5.
Is dumping fair or unfair in trade wars? Geneva-based WTO, the world's premier trade referee, which runs on inter-governmental agreements, declines to answer this question, but says it will stick to regulating how governments can respond to dumping.
The number of dumping complaints may reflect a struggle to cope with trade deficits. India, for instance, reported a US$119 billion trade deficit for the financial year ending March 2009, with exports worth $168 billion lagging $287.75 billion in imports. The deficit for April-December 2008 rose almost 60% from a year earlier.
The rest of the world seems to be supporting India's unhappiness with China. "China was the most frequent subject of the new investigations," according to the latest WTO anti-dumping report.
China had 34 new anti-dumping cases filed against its exporters - in itself a 17% drop from the 40 cases filed against it for the corresponding second half of 2007.
Significantly, China's imports to India have increased around 20% since 2008. Imports from China jumped to $24.2 billion between April to December 2008, up from $19.8 billion in the corresponding period in 2007.
Chinese government subsidies in various forms such as tax rebates are seen as helping the country's exporters, but that does not reflect the core problem facing importing countries, said Rajiv Kumar, director of the Indian Council for Research on International Economic Relations (ICRIER).
"For a great majority of imports from China, we must face the reality that they are cheaper because of the enormous economies of scale that are being achieved by the Chinese manufacturers," Kumar told local media. The ICRIER, an autonomous, non-profit economic policy think-tank, has as its founding members Indian Prime Minister Manmohan Singh and M S Swaminathan, a leading agricultural scientist.
The WTO's refereeing on imports-duties is a thorny, developing issue. Anti-dumping agreements have been evolving since the so-called Kennedy Round anti-dumping code in 1967, and the more detailed Tokyo Round in 1980.
But like much of other long-winded WTO trade processes, the anti-dumping agreement is entangled with too many rules and few specifics on how to implement them.
The WTO committee that meets twice a year to discuss anti-dumping disputes has no specific time frames to settle such issues. Not surprisingly, anti-dumping complaints can take yeras for settlement. An anti-dumping case that Taiwan filed against India in October 2004, numbered DS318 (DS for Dispute Settlement), still awaits final settlement.
Taiwan had demanded consultations with India after New Delhi imposed anti-dumping import duties on seven imported products: acrylic fibres, analgin, potassium permanganate, paracetamol, sodium nitrite, caustic soda and green veneer tape.
In an eight-point accusation that India was violating its WTO obligations, Taiwan essentially claims India did not respond to requests to provide necessary information to back up the anti-dumping penalties.
The case of the green veneer tape - a material used for binding extremely fine wood - reflects the grey area between a country imposing anti-dumping duties on an imported product and protecting a domestic producer. The Directorate General of Anti-dumping and Allied Duties, India's anti-dumping investigative body, probed the same case and supported levying additional duties.
In its final verdict dated December 24, 2003, the DGAD declared that the "Subject goods have been exported to India from subject country below its normal value" and that "The injury has been caused by the imports from the subject country."
Yet the DGAD has accepted that the defendant in the case, M/s Waterproof Corporation Pvt Ltd, is the sole maker of green veneer tape in India. There is always the risk of protecting local monopoly and denying the consumer a cheaper and possibly better imported product.
If case DS318 reflects typical WTO anti-dumping conflict resolution where countries levying import duties ignore demands for transparency, India can nurse little hope of having its cheaper imports problems with China solved in the near future. And if the Taiwan allegations are true, India may have little cause to complain if China gloriously ignores India's anti-dumping complaints.
No comments:
Post a Comment