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Practical constrains with anti-dumping duties

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December 18, 2017

What is the issue?

  • In the global trade scenario, dumping activity is seen as a potential threat, to address which WTO has a provision of Anti-dumping duties.
  • However, practical constrains with anti-dumping duties diminish the global trade growth.

What is dumping?

  • An export sale of a commodity at a price lower than the normal value (the price at which goods is ordinarily sold) prevailing in the exporting country is construed as dumping.
  • A country can exercise trade remedial action against dumping only if dumping causes or has a threat of causing any adverse impact its domestic industry.

What is anti-dumping agreement?

  • Anti-dumping Agreement (AD Agreement) provides for the right of contracting members to apply anti-dumping measures.
  • This is to safeguard their domestic industry against the dumping and its injurious effect.
  • By this, no country shall export a commodity to another WTO member country at a price that is lower than the price at which a similar commodity is traded in the exportingcountry.
  • The purpose of the trade remedy action against dumping is to provide a level playing field to the domestic industry by imposing additional duty.

How does an Anti-dumping duty work?

  • A country impacted by unfair anti-dumping duties can get it resolved either through mutual consultation or through the mechanism of the dispute settlement body of the WTO.
  • Anti-dumping investigation conducted by affected countries involves the process of “non-injurious price”.
  • To do this the authorities call for costing information from the complainant.
  • And undertakes detailed analysis of relevant factors of the costs involved.
  • This allows the authority to compute the anti-dumping duty based on the cost data and in the manner it thinks appropriate.

What are the practical constrains with this?

  • In order to disprove the assertion that dumping has harmed the importing economy, producers/exporters have an uphill task of convincing the customs authorities.
  • They need to demonstrate that the export price is higher than the price at which they themselves sell the same products in their own domestic market.
  • Due to this, many of the producers/exporters are unable to satisfy the investigating officials of the importing economy about levying either a nil or lower anti-dumping rate.
  • Genuine competitive disadvantages should not be masked by the cloak of anti-dumping duties.
  • Member countries of the WTO have the responsibility to exercise restraint in invoking the unfair anti-dumping provisions.

 

Source: Business Standard

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