MEANING
Dumping is said to occur when goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. To avoid these unfair practices antidumping evolved. Thus the purpose of antidumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade. And it provide relief to the domestic industry against the injury caused by dumping.
ANTIDUMPING DUTIES
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 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; difficult to restart Intention of dumping is to wipe out the domestic industries and eventually acquire monopoly power in the foreign market
Anti dumping law with reference to wto and anti dumping agreement
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 Rules for the conduct of anti-dumping investigations initiation of cases, calculation of dumping margins, application of remedial measures, injury determinations, enforcement, reviews, duration of the measure and dispute settlement. Dispute settlement : strengthens the ability of national governments to challenge antidumping actions by other member nations Public interest requirement: Gains to the consumers from lower prices more than outweigh the losses suffered by the producers
ANTI-DUMPING LAW IN INDIA
LEGAL FRAMEWORK Based on Article VI of GATT 1994 Customs Tariff Act, 1975 - Sec 9A, 9B (as amended in 1995) Anti-Dumping Rules [Customs Tariff (Identification, Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination of Injury) Rules,1995] Investigations and Recommendations by Designated Authority, Ministry of Commerce Imposition and Collection by Ministry of Finance.
ANTI-DUMPING SCENARIO OF CHINA
Anti-dumping export ratio (ADER), defined as economys share of anti-dumping cases in the world divided by economys share in world exports, If ADER>1, then that economy is targeted more than its share in the exports. Chinas ADER = 4. Also the ADERs of Korea, India and South Africa are more than 1,
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, in the ordinary course of trade, in the domestic market of the exporting country If the normal value cannot be determined by means of domestic sales, 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, selling and general costs and for profits
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, including the extent to which there has been or is likely to be a significant increase in the volume of 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
RELIEF TO THE DOMESTIC INDUSTRY ANTI-DUMPING DUTIES
Non-cooperative exporters are required to pay the residuary duty (highest of the co-operative exporters) Lesser Duty Rule: Government is obliged to restrict the anti-dumping duty to the lower of the two i.e. 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, 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, shall be excluded from duties PRICE UNDERTAKINGS: Exporter concerned must furnish an undertaking to revise his price
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. Antidumping laws as they exist today do not seem to be concerned with the issue of predatory pricing. They attach sanctions to every instance of international price discrimination which can be shown to cause injury to the domestic industry.
Objectives of competitive laws
Objectives of Competition laws are Promotion of competition and prevention of anti-competitive 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
PRICE DISCRIMINATION
Under competition law, only the price discrimination, which adversely affects competition in markets and thus has negative consumer welfare impact, is prohibited. Under anti dumping law, every instance of price discrimination is prohibited.
EFFECT of antidumping ON COMPETITION
From the economics point of view, there is no reason to support any anti-dumping law, since price differentiation across markets is a perfectly rational and legitimate profit-maximization action. Domestic price discrimination normally is not penalized. They do not afford effective assistance to the domestic industry they are intended to protect. They protect producers at the expense of consumers, which results in higher prices, lower quality products, less consumer choice and a general lowering of the standard of living for the vast majority of people.
Domestic producers can enlist the help of government to prevent foreign competition even when there has been no dumping. They provide good for the minority i.e. producers at the expense of the greatest number i.e. consumers. They reduce rather than enhance social cooperation and harmony. They redistribute income in the wrong direction i.e. from the poor and middle classes to the rich. Domestic producers can raise their prices with little fear of being underpriced by foreign suppliers.
Thus existence of antidumping law hurts competition both ways, 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.
SHORTCOMINGS
Anti-dumping rules allow exporters to avoid antidumping actions if exporters agree to raise their prices. Such agreements are a means of suspending ongoing anti-dumping cases and can be used to promote anticompetitive behavior.
Under current anti-dumping rules, national authorities are allowed to exercise enormous discretion. 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. It can lead to the protection of inefficient domestic industry. A firm is likely to be subject to an antidumping 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.
EFFECT OF ANTI-DUMPING DUTIES ON TRADE FLOW
A decline in the aggregate annual import of about 7% in the year 1993 from a growth of 17.4% in imports arising due to trade liberalization in 1992. In general, trade from the subject country is restricted when the anti-dumping duties are levied. Right after the case is filed and during the duration of investigation, imports drop by a large amount (91%) from pre-petition level. by the next year after the case has been filed, imports start going up again (rise by 53%). However, they never again regain their pre-petition high.
anti-dumping investigations have restrictive impact on imports from the subject Countries, other countries benefit by increasing their sales. This diversion of trade from subject to nonsubject countries can offset the restrictive effects of anti-dumping. the existence of trade diversion does not necessarily imply that anti-dumping duties have no effect at all on overall import trade. Overall imports fall in response to antidumping duties, by a small but considerable amount.
CONCLUSION
It can be agreed that overall the anti-dumping policy of India helps to check unwanted imports and hence might qualify as effective. 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
THANK YOU
