'Protectionist' India resorts to other tools to bypass WTO bilateral rules

trade Trade experts say this is not a development to be decried as these measures are legitimate and mostly WTO-compliant. (Reuters)

With little flexibility under the World Trade Organisation (WTO) and bilateral trade agreements to raise tariffs, India is increasingly resorting to other tools — anti-dumping duties, safeguard levies and minimum import prices (MIPs) — to provide the requisite protection to domestic industries from inexpensive imports and meet contingencies like a sudden influx in imports. Data reviewed by FE show that incidence of anti-dumping actions more than doubled in the four years to 2016 — as many as 75 products came under anti-dumping levies in 2016 against 37 in 2013 (see chart).

Trade experts say this is not a development to be decried as these measures are legitimate and mostly WTO-compliant. While India’s MIPs on steel products have recently come under attack from countries like Japan for being protectionist and against WTO rules, New Delhi is seeking to address Tokyo’s concerns by citing the fact that the number of items under MIPs has already been cut down to just 19 from 176 earlier. However, anti-dumping duties are much easier to defend multilaterally.

Even while a designated agency is probing an allegation of dumping and is yet to verify if such exports undertaken below cost have caused material injury to the domestic industries concerned, the WTO allows imposition of provisional duties. In many instances, the provisional duties are not converted to definitive duties (which indicate that investigations have proved dumping harmful to the local players) but the purpose of checking cheap imports are served with the provisional imposts. Of the 75 anti-dumping measures taken by India in 2016, 48 were provisional duties while 27 such pre-existing levies were graduated to definitive ones. The items that have been subjected to anti-dumping duties in recent years include steel products, inorganic and organic chemicals, machinery, engineering goods, textiles, etc.

On the steep rise in the number of anti-dumping measures, TS Vishwanath, principal advisor, APJ SLG Law Offices, Delhi, noted that it does not necessarily imply that India has adopted a protectionist trade policy. He said reports of steel imports priced at less than the cost of production of exporters making their way into the Indian market testifies this fact. “AD (anti-dumping) is a WTO-compatible trade defence measure available to member nations against imported goods sold at a price less than the cost of their production.” India, a WTO member country, has the legitimate right to protect its domestic industry from unfairly priced imports, he added.

Noted trade expert Biswajit Dhar also feels it is quite natural that when the global economy is not doing well, countries resort to dumping their goods in foreign markets. However, he added that though ant-dumping measures are consistent with WTO norms, there are often questions about the method in which the injury margins and dumping duties are computed.

Sources said 18 organic chemical items were slapped with definitive AD duty in 2016. Also, four items related to nuclear reactors, boilers, machinery and mechanical appliances and four items related optical, photographic, cinematographic, measuring, precision, checking, medical or surgical instruments and parts and accessories thereof attracted definitive AD duty in the year. Curiously, Malaysian exports to India attracted highest number definitive AD duties, on four products. Besides, definitive AD duties on three products each from China, European Union, Taiwan and the US were imposed in 2016.

A total of 14 cases of AD inquiries (read provisional duties) were initiated against China in 2016, including five iron and steel products. These apart, five fresh cases of AD inquiry were initiated each against the EU and South Korea last year. Four AD inquiry against imports from Thailand were also started in 2016. Interestingly, not a single case of AD inquiry was initiated against the US in 2016.

Overall, 12 cases of AD inquiry were initiated against iron and steel products and a similar number of AD inquiries were initiated against both organic and inorganic chemical products. So half of the fresh AD inquiries in 2016 were against chemicals and steel imports into India.

India’s peak customs duty (the highest of the normal rates) on non-agriculture products had come down steeply from a prohibitive 150% in 1991-92 to 40% in 1997-98 and further, to 20% in 2004-05 and 10% in 2007-08. Broadly, the basic customs duty corresponds to the tariff on imports as other duties on imports like countervailing duty are in lieu of taxes that domestic goods suffer. There is little scope for India to raise the peak customs duty without running to a problem with the WTO. On the other hand, it still has some room for raising duties on farm items to meet objectives like pepping up domestic prices as in many cases there are still gaps between the committed floor tariffs (bound tariffs) and applied tariffs.

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