Trade remedy must be user industry sensitive

Susanta Sekhar Das | Updated on March 12, 2021

Objective analysis is paramount   -  greenleaf123

Besides technical determinations, imposition of anti-dumping duties must also pass the public interest test

In recent months, the Department of Revenue (DoR) has rejected as many as 20 recommendations of the Directorate-General of Trade Remedies (DGTR) to impose provisional or definitive anti-dumping duties, or to extend such duties, without giving any reason. Previously, too, a number of measures have been withdrawn or suspended suo motu, through Budget announcements of 2020 and 2021, without the recommendation of the DGTR, apparently to protect the interests of the downstream industry.

These unusual actions by the DoR brings into sharp focus the concept of ‘user/public interest’ debates in trade remedy investigations. Indian industry has been raising the issue, saying that a section of large and medium industries has been the perpetual beneficiaries at the cost of a large number of user units.

WTO Agreements on Trade Remedy Measures do not have any express provision for examination of user industry interests before such actions, though the latter have the right to participate in investigations as interested parties. But the Agreements encourage members to make the imposition of duties voluntary, rather than mandatory, once dumping/subsidisation and consequent injury are established.

However, several countries, such as the European Union, Brazil, Canada, Argentina, China, Thailand, and Malaysia require a mandatory public interest analysis before the duties are imposed. The concept of ‘community/public interest’ allows evaluation of various competing interests in the application of trade remedial measures. A domestic industry, showing injury caused by dumping or subsidisation, is not automatically entitled to relief. Relief is denied if it is not considered to be in the ‘community/public interest.'

Limited salience

In India, the Designated Authority, constituted under the Customs Tariff Act, has the task of determining the degree and extent of dumping or subsidisation and recommending the extent of duty to offset the injury caused to domestic producers. Though the user industry participates as interested parties, the information it submits is hardly considered. In the absence of any legal provision, the Designated Authority is not mandated to evaluate the impact of the proposed duties on downstream industries or consider the public interest, in general.

Though the Designated Authority proceedings are quasi-judicial, its findings are submitted to the Department of Revenue, as recommendations only. The DoR takes the call on imposing, or not, the duties. This is because the trade remedy provisions are under the Customs Act and not the trade laws. This DoR’s decision of is loosely construed as addressing public interest, without any express legal provision or institutional mechanism for it.

Except in a few cases, the Government has usually implemented the recommendations of the Designated Authority. Therefore, this sudden change in the stance has perplexed the industry and trade policy observers and raised questions about the proceedings themselves. It raises such questions as whether the Authority is failing to evaluate various parameters objectively before giving its recommendations, leading to demands for intervention by the DoR as a grievance redress forum.

That a number of investigations have been initiated and decided in the recent past, with less-than-adequate analysis might have activated the DoR. However, question also arises as to what material facts are available with the DoR to decide upon the issues, and how objectively and transparently such issues are examined. Law does not provide any procedure for making representations to the DoR or how they are to be dealt with.

Beyond lobby groups

Evaluation of ‘public/user interest’ should not be judged simply by representations or lobbying by interest groups. Rather, it needs econometric analysis and evaluation of the impact — on producers if the measure is not imposed or varied, and on downstream industry if imposed. A decision without an objective analysis of issues can harm both.

To ensure objectivity, the European Commission conducts a separate in-depth study of community interest in each investigation to decide if the negative effects of imposing an anti-dumping duty on the community outweigh the positive effects such a levy would have on a particular ailing industry. A similar approach is needed in India to avoid perverse incentives or adverse effects of these decisions.

For this, proper legal and institutional mechanisms need to be built in. A number of amendments have been made to all the three Trade Remedy Laws and Rules in the last Budget, but this aspect remains unaddressed.

Firstly, the trade remedy laws should recognise ‘public interest’ as a factor for imposition of the duty. Unless the government entrusts the task to a separate body, the Designated Authority itself may be strengthened and asked to carry out a separate public interest examination after making its technical determinations and predicate its recommendations based on this test. This will save time and other resources as the DGTR has access to a variety of information to evaluate ‘public interest’ and can call for additional information that may be required. It must be understood that it is not a revenue or taxation issue and the Department of Revenue is certainly not the appropriate forum to address it.

The writer is a former Indian Trade Service Officer. Views are personal

Published on March 12, 2021

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