The Hindu Business Line : `Domestic industry structure must be factored in for anti-dumping duty'

THE Designated Authority in the Commerce Ministry should take into account the structure of the domestic industry that petitions for imposition of anti-dumping duty, while initiating an anti-dumping probe and recommending imposition of the duty, according to a new study.

In a study on anti-dumping, countervailing and safeguard measures in a multilateral trade regime, a senior official of the Directorate General Anti-Dumping and Allied Duties (DGAD), Dr Ved Prakash, contends that in an industry comprising only one or few producers, the monopolistic element might lead to domestic manufacturers benefiting at the cost of users, in case anti-dumping duties are imposed.

Moreover, Mr Prakash said, domestic industries characterised by a high cost of production need not be the beneficiaries of trade remedial measures, as such industries cannot face the competition and survive in the long run. "A public interest clause can be incorporated in the Anti-Dumping Rules to enable the Designated Authority to take into account these factors before recommending imposition of anti-dumping duty," he said.

A macro empirical survey, perception analysis and case studies of the anti-dumping duties imposed by the authority show that there is a positive economic impact of anti-dumping measures on the domestic industry. The positive impact is in terms of the increased volume and value of sales of the domestic industry, realisation of fair price and improved profitability of the domestic industry, he said, adding that the impact on employment and accumulation of inventories is not very clear.

On the impact on competition, he said that on the basis of the results of the study, the view about anti-dumping measures leading to excessive protection and reduction in competition is not validated empirically. Although the share of targeted countries in the total volume of imports has gone down, imports from these countries in absolute terms as well as total imports of the products facing anti-dumping measures have increased. The increase in production and sale of the domestic industry, despite the increase in imports, implies increased competitiveness of the domestic industry, Mr Prakash said.

The study argues that circumvention practices adopted by importers have been responsible for reduced efficacy of anti-dumping measures, leading to multiple cases of anti-dumping investigation. "Various circumvention practices that reduce effectiveness of anti-dumping measures are false declaration of country of origin and false declaration of product description and product differentiation," he said.

As circumvention remains the single most factor eroding the efficacy of the anti-dumping system, he said the legislative changes required in the Customs Tariff Act and the Anti-Dumping Rules should be introduced without any delay.

Mr Prakash states that there is a negative relationship between the level of anti-dumping duty and price realisation of the domestic industry, implying that high rates of anti-dumping duty are counterproductive. Moderate rates of duty are more effective, he said, adding that case studies on six products show that by far, the domestic industry has benefited from the anti-dumping measures, as they have given the industry a level playing field by checking unfair trade. The measures helped the industry to restructure and have given it time to adopt cost-cutting measures to face competition.

Finally, Mr Prakash said that there is a need to streamline export promotion schemes such as advance licence and 100 per cent export-oriented unit schemes, which allow the duty-free import of inputs so that the schemes are not misused to evade anti-dumping duty.

The schemes are being misused, as some of the inputs imported duty-free are diverted to the domestic market rather than being used for export production, he said.

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