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Introduction Anti-Dumping Law with reference to WTO and Anti-Dumping Agreement Anti-Dumping Law in India Competition Law and Anti-Dumping Law – Areas of Overlaps and Conflicts Criticism of Anti-Dumping Law and its effect on Competition Few Instances of Anti –Dumping & Competition with reference to India Effect on trade flow due to imposition of anti-dumping duties Anti-dumping scenario of China Conclusion References
MEANING OF DUMPING Firm charges a lower price for exporting goods than it does for the same goods sold domestically Price Discrimination: share of exports is usually lesser than the domestic demand Capture new market Condition mandatory for dumping to take place: Presence of an imperfect market (firms are price setters) Segmented markets .
ANTIDUMPING Antidumping duties: nullify the effect of market distortions created due to unfair trade practices (dumping) Remedial in nature Levied on the exporting country Antidumping measures: Antidumping duty Price undertaking .
difficult to restart Intention of dumping is to wipe out the domestic industries and eventually acquire monopoly power in the foreign market .JUSTIFICATIONS Material injury to domestic producers Long start up period and high start-up costs Once these firms are forced out of the market as a result of dumping.
ANTI-DUMPING LAW WITH REFERENCE TO WTO AND ANTIDUMPING AGREEMENT .
INTRODUCTION GATT/WTO (1995) : promote free trade Barriers to free trade: tariff barrier or non-tariff barrier (Antidumping. countervailing measures) Article VI of the GATT. 1945 Agreement to give effect to Article VI (1994): provisions strictly followed during anti-dumping investigation .
WTO AND ANTI-DUMPING AGREEMENT The Agreement governs the application of antidumping measures by Members of the WTO The provisions of the Agreement were first negotiated during the Kennedy Round (1967) of GATT negotiations The Agreement lays the “sunset provision” The Agreement applies to trade in goods only .
enforcement. calculation of dumping margins. duration of the measure and dispute settlement. Dispute settlement: strengthens the ability of national governments to challenge anti-dumping actions by other member nations “Public interest” requirement: Gains to the consumers from lower prices more than outweigh the losses suffered by the producers . reviews. application of remedial measures. Rules for the conduct of anti-dumping investigations initiation of cases. injury determinations.
ANTI-DUMPING LAW IN INDIA .
Sec 9A.1995] Investigations and Recommendations by Designated Authority.LEGAL FRAMEWORK Based on Article VI of GATT 1994 Customs Tariff Act. Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination of Injury) Rules. 1975 . Ministry of Commerce Imposition and Collection by Ministry of Finance . 9B (as amended in 1995) Anti-Dumping Rules [Customs Tariff (Identification.
following two alternative methods : Comparable representative export price to an appropriate third country Cost of production in the country of origin with reasonable addition for administrative. in the domestic market of the exporting country If the normal value cannot be determined by means of domestic sales. in the ordinary course of trade. selling and general costs and for profits .DETERMINATION OF DUMPING Difference between Normal Value and Export Price: Margin of dumping (% of export price) Normal Value: comparable price at which the goods under complaint are sold.
Export Price: price paid or payable for the goods by the first independent buyer Like Articles: The article produced in India must either be identical to the dumped goods in all respects or in the absence of such an article. another article that has characteristics closely resembling those goods .
INJURY TO THE DOMESTIC INDUSTRY The Indian industry must be able to show that dumped imports are causing or are threatening to cause material injury to the Indian „domestic industry‟ Injury analysis can broadly be divided in two major areas: The Volume Effect: The Authority examines the volume of the dumped imports. either in absolute terms or in relation to production or consumption in India The Price Effect: Extent to which the dumped imports are causing price depression or preventing price increases for the goods which otherwise would have occurred Causal Link: A „causal link‟ must exist between the material injury being suffered by Indian industry and dumped imports . including the extent to which there has been or is likely to be a significant increase in the volume of dumped imports.
there must be support of those who account for more than 25% of total domestic production. The following are excluded: Importers Those related to importers or exporters . and more than 50% production by those supporting and those opposing the application Domestic Industry: Indian producers of like articles as a whole or those producers whose collective output constitutes a major proportion of total Indian production.WHO CAN FILE AN APPLICATION A dumping investigation can be initiated only upon receipt of a written application by or on behalf of the “Domestic Industry” In order to constitute a valid application.
dumping margin and the injury margin Injury Margin: Difference between the fair selling price due to the domestic industry and the landed cost of the product under consideration De Minimis Margins: Any exporter.e. shall be excluded from duties PRICE UNDERTAKINGS: Exporter concerned must furnish an undertaking to revise his price . whose margin of dumping is less than 2% of the export price and the volume of the dumped imports are below 3% of the total imports.RELIEF TO THE DOMESTIC INDUSTRY ANTI-DUMPING DUTIES: Non-cooperative exporters are required to pay the residuary duty (highest of the cooperative exporters) Lesser Duty Rule: Government is obliged to restrict the antidumping duty to the lower of the two i.
THE APPLICATION PROCEDURE Made by or on behalf of the concerned domestic industry to the Designated Authority in the Ministry of Commerce Period of Investigation: Not less than six months Confidentiality .
Access to Information: The Authority provides access to the non-confidential evidence presented to it Preliminary Findings: Made within 150 days of the date of initiation . Diplomatic representative of the Government of the exporting country notified.INVESTIGATION PROCESS Preliminary Screening: Application scrutinized to ensure that it is adequately documented and provides sufficient evidence for initiation Initiation: Public Notice issued initiating an investigation to determine the existence and effect of the alleged dumping.
Provisional Duty: A provisional duty not exceeding the margin of dumping may be imposed by the Central Government on the basis of the preliminary finding Oral Evidence: Interested parties can request the Designated Authority for an opportunity to present the relevant information orally Final Determination: Made within 150 days of the date of preliminary determination Disclosure of Information: The Designated Authority will inform all interested parties of the essential facts which form the basis for its decision .
COMPETITION LAW AND ANTI-DUMPING LAW – AREAS OF OVERLAPS AND CONFLICTS .
to promote and sustain competition in markets. to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets. keeping in view of the economic development of the country. and for matters connected therewith or incidental thereto. . for the establishment of a Commission to prevent practices having adverse effect on competition.COMPETITION ACT. in India. 2002 An Act to provide.
The provisions relate to anti-competitive agreements. The Act contains provisions which have rather become standard in the competition jurisdictions all across the globe. The Act provides a very wide mandate for the Competition Commission of India to enforce. . abuse of dominant position and regulation of combinations.
Dominance is not frowned upon by the Competition Act. . Anti-competitive agreements and abuse of dominance are to be prohibited by the orders of the Commission whereas the mergers are to be regulated by the orders of the Commission. 2002 but the abuse of dominance is frowned upon by the legislation.
. They attach sanctions to every instance of international price discrimination which can be shown to cause injury to the domestic industry. Antidumping laws as they exist today do not seem to be concerned with the issue of predatory pricing.CONFLICT BETWEEN ANTI DUMPING LAW AND COMPETITION LAW Antidumping laws were initially enacted to address the situation of „international price predation‟ . They were considered as extension of competition laws.
Objectives of Competition laws are • Promotion of competition and prevention of anticompetitive practices • Protection and promotion of consumer interest • Achieving economic efficiency • Geographic/ regional integration • Public interest • Competition advocacy .
Objectives of Anti dumping laws Remedying the injury to the domestic industry due to dumping Public interest Address predatory pricing Consumer welfare .
OVERLAPS Competition laws are primarily aimed at protecting and promoting competition in markets. Antidumping laws are aimed at remedying the injury to the domestic industry which may arise due to dumping. .
every instance of price discrimination is prohibited. is prohibited. which adversely affects competition in markets and thus has negative consumer welfare impact.PRICE DISCRIMINATION Under competition law. only the price discrimination. Under anti dumping law. .
PREDATORY PRICING Under competition law „predatory pricing‟ is understood as a deliberate strategy. adopted by a dominant firm. with an intent to drive competitors out of the market by setting very low prices. Conditions to be met before imposing a sanction The firm should be in a position of dominance The sale of goods should be at a price below a relevant measure of cost The firm should do so with the intent to reduce competition or eliminate competitors. .
. Antidumping law is concerned only about the price at which the product alleged to be dumped is sold in the two markets and not directly about the cost of production of the product or intent behind the discrimination. Antidumping law does not specifically address the issue of predatory pricing.
CRITICISM OF ANTI-DUMPING LAW AND ITS EFFECT ON COMPETITION .
since price differentiation across markets is a perfectly rational and legitimate profit-maximization action. less consumer choice and a general lowering of the standard of living for the vast majority of people. Domestic price discrimination normally is not penalized. They protect producers at the expense of consumers.From the economics point of view. there is no reason to support any anti-dumping law. . which results in higher prices. lower quality products. They do not afford effective assistance to the domestic industry they are intended to protect.
consumers. . producers at the expense of the greatest number i.Domestic producers can enlist the help of government to prevent foreign competition even when there has been no dumping. They reduce rather than enhance social cooperation and harmony. They provide good for the minority i. They redistribute income in the wrong direction i. from the poor and middle classes to the rich.e. Domestic producers can raise their prices with little fear of being underpriced by foreign suppliers.e.e.
by forcing exporters to sell at higher prices and by providing the domestic producers the freedom to charge higher prices than what would be otherwise possible. Thus existence of antidumping law hurts competition both ways. .
Since the criteria for determining the export price and the normal value are neither stringent nor specific. the importing country can determine incidents of dumping at will. A firm is likely to be subject to an anti-dumping investigation if it exports a product at a price lower than the normal value in the home market. regardless of whether there is a predatory intent or not. .SHORTCOMINGS RELATED TO THE ENFORCEMENT OF ANTIDUMPING LAWS Under current anti-dumping rules. national authorities are allowed to exercise enormous discretion. It can lead to the protection of inefficient domestic industry.
Such agreements are a means of suspending ongoing anti-dumping cases and can be used to promote anticompetitive behaviour.SHORTCOMINGS RELATED TO THE ENFORCEMENT OF ANTIDUMPING LAWS Anti-dumping rules allow exporters to avoid antidumping actions if exporters agree to raise their prices. .
FEW INSTANCES OF ANTI – DUMPING & COMPETITION WITH REFERENCE TO INDIA .
org/english/tratop_e/adp_e/adp_e.wto.ANTI-DUMPING CASES INITIATED BY INDIA Country India United states European Union Argentina South Africa Australia Brazil China Canada turkey Korean Republic No of cases initiated in year 1995-2009 596 440 406 270 212 208 179 178 151 144 108 Source: http://www.htm .
in/traderemedies/productprofile/cases_1.SECTORS GETTING AFFECTED Sectors in Anti-dumping investigations 1995-2008 Chemicals Metals Machinery Textiles & Footwear % of total anti-dumping cases initiated by India 33 28 11 9 Paper & Wood Agriculture Other 6 5 8 Source: http://commerce.pdf .nic.
furniture. auto components. fertilizers. water tanks. supported by Haldia Petrochemicals corporation Ltd. woven sacks for cement. . against PP imports from Saudi Arabia. the only two producers of PP in the country. sugar and various consumer items such as house ware. and medical appliances Appeal by Reliance Industries. pipes. Oman and Singapore. (HPCL).ANTI-DUMPING DUTY ON POLYPROPYLENE(PP) EXPORTED INTO INDIA PP – used as a raw material in a variety of industries including packaging.
Reliance industries • • • among the top 8 producers in world. holds a 70 percent share of the domestic market caters to 3 percent of global consumption of PP .
5 per tone of PP imported from Saudi Arabia. . Directorate General of Anti-dumping and Allied Duties (DGAD) has imposed definitive anti-dumping duty of up to USD 323. Oman and Singapore.
while the demand has increased. according to the Indian Plastic Federation (IPF). Oman and Singapore have increased only marginally from 5% in 2005-06 to 6% in 2008-09. Government's justification of the duty • imports from the subject countries have increased in absolute terms as well as in relation to total imports. imports from Saudi Arabia. However. • the market share of the duopolistic domestic industry has come down. the prices of the domestic industry have been suppressed. . • Despite increase in demand. total demand and total production in India.
. in some cases the price may rise to almost double as the amount of duty is almost equivalent to the international market price. It will lead to • • a significant price rise of the raw material (PP). most of the units associated with processing industry are small and medium enterprises (SMEs) and there is a fear of hurting them in case of price rise in the domestic market.
claimed that China is not a fair trading partner and is capturing Indian market at a very fast pace through anticompetitive trade practices such as „predatory pricing‟. because of cheaper Chinese products. majority of small and medium-sized manufacturers (SMEs) had suffered a serious erosion of their market share.CHINA ACCUSED OF „PREDATORY PRICING‟ TACTICS According to a survey conducted by Federation of Indian Chambers of Commerce and Industry (FICCI). . Chinese imports were 10 to 70 percent cheaper than comparable Indian products.
light engineering. when Beijing threatened to take the issue to the World Trade Organization (WTO). chemicals and textiles Due to high rise in imports of Chinese toys. The ban was lifted after two months. it takes 10 to 12 months for investigation which is more than enough for Chinese firms to damage the Indian industry. In India. building materials and heavy engineering. . Range of sectors included processed food. Government announced a six-month ban on the import of Chinese toys.
“green veneer tape” from Taiwan phosphoric acid from Korea acetone from Japan and Thailand CTV picture tubes from Indonesia for five years from March 2009 onwards Definitive duty was imposed on dry battery cells, Sports Shoes, measuring tapes, plastic ophthalmic lens, non- brass metal flashlights from PR China
ANTI-DUMPING DUTIES AGAINST INDIA
Country China Korean Republic United States Taipei, Chinese Indonesia Japan Thailand India Russia Brazil Malaysia No of cases initiated in year 1995-2009 761 264 205 198 156 155 150 145 119 108 97
CASE OF INDIAN SHRIMP EXPORTS TO
US has raised the average anti-dumping duty to 2.67% up from 0.79% – a near 300% increase that follows the Fourth Administrative review by the US authorities. puts seafood exporters of India into trouble There is a provision for these small producers to challenge the duty imposed by the US, if they think they are not dumping Though doing so might prove to be very expensive and time consuming
Since there is not much local market it is difficult to identify the normal price Also. due to lower operational or transportation or labor costs. low cost could be fair .
EFFECT ON TRADE FLOW DUE TO IMPOSITION OF ANTI-DUMPING DUTIES .
trade from the subject country is restricted when the anti-dumping duties are levied. In general. Right after the case is filed and during the duration of investigation. they never again regain their pre-petition high. However. by the next year after the case has been filed.4% in imports arising due to trade liberalization in 1992.A decline in the aggregate annual import of about 7% in the year 1993 from a growth of 17. . imports drop by a large amount (91%) from pre-petition level. imports start going up again (rise by 53%).
other countries benefit by increasing their sales. the existence of trade diversion does not necessarily imply that anti-dumping duties have no effect at all on overall import trade. This diversion of trade from subject to non-subject countries can offset the restrictive effects of antidumping. anti-dumping investigations have restrictive impact on imports from the subject Countries. . Overall imports fall in response to anti-dumping duties. by a small but considerable amount.
ANTI-DUMPING SCENARIO OF CHINA .
Anti-dumping export ratio (ADER). If ADER>1. then that economy is targeted more than its share in the exports. defined as economy‟s share of anti-dumping cases in the world divided by economy‟s share in world exports. China‟s ADER = 4. India and South Africa are more than 1. . Also the ADERs of Korea.
As the labor and transportation costs in China were relatively very low Exporting the produce from these firms was seemed to be economical There were instances of anti-dumping duties on these companies which seem to have Chinese origin. . many companies have invested heavily in China Started exporting from China rather than from the home country.WHY DOES CHINA TOP THE LIST? 1) After 1992. when Foreign Direct Investments (FDI) into China was allowed.
. China is considered as a non-market economy liberty to the investigating economy to calculate cost incurred by referring to costs of some neighboring countries like India where labor. transportation and other factors determining price of a commodity is comparatively high unfair calculation of normal prices and the injury calculation in domestic market. reduced cases against other countries as opposed to increased cases against China. 2) Also. might result in more number of antidumping measures against China.
3) In first decade of facing anti-dumping investigations Chinese enterprises have not coordinated well in dealing with anti-dumping cases in an effective manner. especially with the small and medium size enterprises (SMEs) as in the shrimp exporters case. This applies to Indian context in some instances as well. We are not effective in defending the anti-dumping duties being imposed against our domestic exporters. This reflects the weakness in the Chinese enterprises in terms of backward corporate governance practice and also the overall weakness of nationwide legal infrastructure. .
Do little when it comes to the trade diversion that takes place during the initiation of an anti-dumping case against a certain country Re-initiation and re-investigation on the potential similar imports from a different country is time consuming .It can be agreed that overall the anti-dumping policy of India helps to check unwanted imports and hence might qualify as “effective”.
in/traderemedies/ The Reasons for and the Impact of Antidumping Protection: The case of People's Republic of China – Prusa Article VI.wto. GATT (General Agreement on Tariffs and Trade)1994 Global Trade Protection Report 2009 antidumpingpublishing.html http://www.Bodhisattva Ganguli http://commerce.atimes.blonnet.nic.org/english/tratop_e/adp_e/adp_e.com .REFERENCES http://www.com/atimes/South_Asia/KE15Df01.htm Anti-Dumping and competition law: An Indian perspective – by Naveen Chugh http://www.com/ The Trade Effects of Indian Antidumping Actions .
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