The Hindu Business Line : EU anti-dumping measures

ALONG WITH the jump in the trade between India and the European Union, there has been a surge in the resort to trade defence mechanisms between the two.

In what increasingly looks like a trade war, the chief weapons are the trade defence mechanisms prescribed in the WTO (World Trade Organisation) regime — the anti-dumping duty and the countervailing measures.

In a low-tariff regime, it is the rampant use of the non-tariff barriers that is causing concern the world over. This article looks at ways of handling some of these issues in the context of such measures being used by the EU against Indian exporters.

A reading of some of the petitions filed by the domestic industry in the EU seeking redress from the repeated resort to these trade defence measures reveals that they fail to meet the conditions set by the Anti-Dumping Agreements (ADA) as well the Subsidy and Countervailing Measure Agreements (SCM). Not only are these measures an abuse of the due process of the law but appear motivated to harass the Indian producers.

A study of the measures initiated by the EU over the past few years reveals a definite pattern in initiating defence mechanisms against the Indian exporters.

The modus operandi is that a European industry would open a series of investigations against Indian producers, both on anti-dumping and on subsidy. After levying a high rate of anti-dumping and countervailing duty, a fresh round of investigation is initiated.

But many of these investigations are not completed, even a year from the date of initiation. At this point, the EU initiates a fresh set of investigations against Indian exporters. The aim of these probes seems to be to somehow stall exports from India. The Table lists the various cases vis-à-vis the polyester industry. Investigations initiated in June 2002 and November 2003 are still open.

From the Table it is obvious that the European Commission has not reached any definitive findings in at least two cases. Indian producers feel that the industry in the EU is getting these measures initiated more to harass the Indian producers than as a meaningful review exercise. Indeed in the case of the polyester films, the European industry used all defence measures available under the ADA and the SCM Agreement to stall exports from India.

To compound matters, in this case, the EU industry has been seeking the shelter of blatant protectionist policies and non-tariff barriers, even after levying huge anti-dumping-countervailing duties for nearly five years; it also claims that the injury it has sustained has not yet been counteracted.

Disregard for fair competition

A favourite route pursued, of late, by the European industry has been to call for a "partial review" of the measures imposed. This is strategically done to ensure that the dumping or the countervailing margins are re-calculated without any recourse to the computation of injury to the domestic industry.

The objective of the EU producers in getting anti-dumping/countervailing duty imposed is to reduce or eliminate imports. In the process, the concept of fair price and fair competition is given the go by.

Similarly, the main issue in invoking the countervailing measures is centred around DEPB (Duty Entitlement Passbook) scheme. It is well documented that the DEPB rates have fallen over the years.

Though the DEPB benefits have been reduced by the government, measures have been initiated under the SCM citing "an increase in the DEPB rates."

What should Indian exporters do?

It is well known in the international market that the mere threat of initiating such defence measures affects buyers and leads to a dramatic fall in market opportunities. While some Indian exporters such as those of cotton bed linen, have taken the EU head on, many have suffered silently. More important, they have ceded the EU markets to European players without a fight. The reason is not far to seek — the legal costs of fighting domestic players in the EU can be prohibitive for small exporters.

This calls for better coordination between Indian exporters and the Commerce Ministry. Indian exporters need to re-look their strategy. New Delhi may take recourse to the WTO through the Trade Policy Review Mechanism (TPRM), which looks into such issues and provides remedies.

The purpose of the TPRM is to contribute to improved adherence by all members to WTO rules, disciplines and commitments. Further, the Agreement on the TPRM provides an in-built mechanism for dealing with errant members whose policies adversely impact those of their trading partner(s).

Unfortunately, till date, Indian exporters have not given too much importance to this evaluation mechanism available within the WTO.

To implement this strategy it is important that trade, industry and government first collate all facts relating to such non-tariff barriers. It is time the Commerce Ministry educated the industry on the TPRM and collected every detail pertaining to each export activity.

It is important that exporters' associations exchange information. For this exporters need to resort to collective action through the government and create a useful database accessible to all the stakeholders.

(The author is a Chennai-based chartered accountant specialising in trade dispute and WTO issues.)

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