Policy Watch: The Tough Get Going

POLICY WATCH
The Tough Get Going

India is wielding the anti-dumping duty weapon aggressively to protect domestic industry. But is that wise in the long run?

By Seetha

It's almost like David taking on Goliath. On October 4, India dragged the US to the Dispute Settlement Board (DSB) of the World Trade Organisation (WTO) over the stiff anti-dumping duties on Indian steel exports. The two countries have in hand 60 days to come to a settlement, failing which the DSB will be asked to adjudicate.

But India isn't just battling for its share in the global market pie. Back home, it is also wielding the anti-dumping sword to keep out cheap imports and protect domestic manufacturers. Between 1997 and April, 2000, 77 complaints of dumping were filed with the Directorate-General of Anti-Dumping and Allied Duties. Commerce and Industry Minister Murasoli Maran remarks gleefully: "We are number two in the world after the US."

But the industry is less than happy with the way the anti-dumping machinery works. The directorate is understaffed (it has just seven persons) and action is often extremely delayed. Newly-appointed Director-General L.V. Saptarishi assures that the "machinery will be energised and geared up", something that should gladden Corporate India. But these are mere irritants compared to the problems of having to establish dumping and proving that this is hurting the domestic industry.

In contrast to the US and the EU, where the onus of proving that dumping is not taking place is on the exporter, in India it is the complainant who shoulders the burden of establishing a 'causal link' between dumping and injury to industry. That's easier said than done.

Problems Galore

The anti-dumping directorate goes only by import figures supplied by the Directorate General of Commercial Intelligence and Statistics (DGCIS). These figures are often outdated. In the case of steel, the latest data the DGCIS has are provisional figures for August, 1999!

It's even more difficult to prove that these imports are being sold at prices lower than the normal value-or price in the country of origin-and that this is harming the domestic industry. Now, domestic prices in countries with high tariff barriers will always be higher than the export price.

It is also easy to find loopholes in the 'causal link' between dumping and injury to domestic industry. Points out Senior Advisor, Confederation of Indian Industry, T. K. Bhaumik: "The anti-dumping agreement does not lay down the parameters for determining injury. Is it decline in growth of production or sales or profitability?" So, though bottomlines may be affected by several factors, the injury due to dumping is often exaggerated and stiff duties levied. That's the line India's steel industry is using in its battle for the US market, but it could well apply to Indian anti-dumping actions as well. Admits the executive of a company which was successful in getting anti-dumping duty imposed: "The process is arbitrary and discriminatory."

Harassed Consumers

Nobody would agree more than end-users whose costs get pushed up by dumping duty on raw materials and intermediates. Though they are invited to hearings of cases, user-industries complain that their arguments are not considered carefully. Confirms an official from the Finance Ministry's Revenue Department which actually levies the duty: "We get representations from user-industries asking us not to levy the duty recommended by the directorate." The department often does its own investigations and is known to modify the directorate's recommendations.

One such case relates to imports of polyester staple fibre (PSF) from South Korea, Taiwan, Thailand, and Indonesia. The Anti-Dumping Directorate had, in March, 2000, recommended a duty of between Rs 46,215 per million tonnes (MT) and Rs 46,607 per MT on PSF imports. However, the Revenue Department did not levy the duty, because the Textile Ministry threw its weight behind textile manufacturers who are users of psf.

Ironically, PSF manufacturers, while blocking cheap imports of the commodity, themselves protest about anti-dumping duties on imported purified terephthalic acid (PTA), which they use as feedstock. Take the case of Indo Rama Synthetics, a complainant in the PSF dumping case and a large importer of PTA. Dumping duty of between Rs 1,100 per MT and Rs 3,375 per mt was imposed on PTA imports from South Korea, Thailand, and Indonesia in March, 1998, following complaints by Reliance Industries, Bombay Dyeing, Indian Petro-chems, and svc Superchem. Indo Rama Synthetics and other user industries protested, but to no avail.

India could take a leaf out of the EU book. There, even if injury to domestic industry is established, anti-dumping duty is not imposed if it affects the consumers.

A Double-Edged Sword

Clearly, the anti-dumping sword can cut both ways. So if India has filed 15 cases against imports from the European Union (EU), the EU is investigating an equal number of complaints against Indian exports. Several initiators of anti-dumping cases in India themselves face dumping charges abroad. Steel is probably the best example, with the industry fighting for greater access to the US market even as it tries to block imports into India. Similarly, Indo Rama Synthetics and Reliance Industries, both of whom have filed dumping complaints in India, face similar charges in the EU. Nobody, of course, accepts the charge of double standards. Steel Authority of India officials take pains to explain that while India has excess capacity of around 3 million tonnes, the US has a demand-supply gap of 10 MT. Besides, while imported hot-rolled coils are being sold for $190-205 per tonne against the international price of $250-260 a tonne, Indian exports of cut-to-length plates are sold far above domestic US prices.

Lost among all these charges and counter-charges is a basic question: what price does the country pay for anti-dumping duties? Says Bhaumik: "Anti-dumping as a strategy is dangerous for countries like India which have a high degree of import dependence." Since it affects the competitiveness of user-industries, he argues, it must be used judiciously. Now that's a suggestion that doesn't deserve to be dumped.

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