Trade defence: Anti-dumping duty on Chinese goods

Why in news?

The Central Board of Indirect Taxes and Customs (CBIC) recently imposed anti-dumping duty on five products manufactured in China for 5 years in order to safeguard domestic producers.

What is Anti Dumping Duty?

• Dumping is a process where a company exports a product at a price that is significantly lower than the price it normally charges in its domestic market.
• An anti-dumping duty is a protectionist tariff imposed by a country on foreign imports that it believes as being dumped.
• WTO trade rules include international regulation of anti-dumping measures.

Why did India impose anti-dumping duty now?

• Companies worldwide are now seeking to de-risk their businesses from an excessive reliance on China in the wake of the COVID-19 pandemic.
• In such a situation, in a country with huge manufacturing capacity like China, the prospect of dumping the surplus in overseas market increases.
• Directorate General of Trade Remedies (DGTR) had found five products manufactured in China as being ‘dumped’ in the Indian market.
• It is found that the domestic industry has suffered material injury due to the dumping and warrants a protective duty.

DGTR functions as an attached office of Department of Commerce, Ministry of Commerce and Industry.

• The items include
  • Specific flat-rolled aluminium products for solar modules
  • Silicone sealants used in the manufacture of solar photovoltaic modules
  • Some chemicals like sodium hydrosulfite
  • Refrigerant (R-32) hydro fluorocarbon and hydro fluorocarbon blends
• The anti-dumping duty a remedy that is sanctioned by the WTO has become one of India’s most widely used trade weapons, especially against a flood of cheaper Chinese imports.
• So far India had imposed anti-dumping measures on 90 Chinese products

What will be the implications?

• Anti dumping duty was imposed to favour Indian companies.
• However there is a risk of distortion in market dynamics.
• Imposing Anti dumping duty protects domestic companies from competition due to low priced foreign goods.
• While the intention is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
• Downstream industries, in the case of intermediate goods and consumers are likely to face the consequences of reduced competition on final prices.
• However in the long-term, prices may come down due to advancement made by domestic industries.
• They become equally competitive in international markets.

Reference

1. https://www.thehindu.com/opinion/editorial/trade-defence-the-hindu-editorial-on-anti-dumping-duty-on-chinese-goods/article38058485.ece