Trade defence: On anti-dumping duty on Chinese goods

News: The Central Board of Indirect Taxes and Customs (CBIC) recently notified the imposition of anti-dumping duty on five products manufactured in China, including certain aluminium goods and some chemicals, for five years.

What is the rationale behind this move?

The step was taken in order to safeguard domestic producers from certain lower-priced imports.

The move is based on the Directorate General of Trade Remedies (DGTR)’s findings that import of these items constituted ‘dumping’, and it was causing injury to local producers, thereby warranting a protective duty.

What is the anti-dumping duty?

It is 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.

It 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.

What are some related concerns?

Imposition of anti-dumping duty, if the domestic applicant is a significantly large and relatively resilient manufacturer of the product, risks tilting the market dynamics in the Indian company’s favour. Both downstream industries, in the case of intermediate goods, and consumers likely face the consequences of reduced competition on final prices.

No impact on trade deficit: Also, efforts to narrow the sizeable trade deficit with China by targeted use of the levy have made little progress in addressing the widening gap, as imports have continued to largely outpace India’s exports.

Lack of personnel: 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 shortage of personnel at DGTR.

What is the way forward?

In the wake of the COVID pandemic, companies worldwide, are looking to de-risk their businesses from an over-reliance on China. This means there is an increased likelihood of more capacity in that country turning surplus and being used to produce goods for dumping overseas.

Hence, Indian policymakers should be ready with their strategy to boost India’s trade defences.

Source: This post is based on the article “Trade defence: On anti-dumping duty on Chinese goods” published in The Hindu on 29^th Dec 2021.