International Trade & Finance Assignment Anti-Dumping Agreement

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INTERNATIONAL

TRADE &
FINANCE
ASSIGNMENT
ON

ANTI-DUMPING
AGREEMENT

Submitted by:
Shimran Zaman
B.A LL.B(Hons.) S/F
5th Sem
Roll No.-54
INDEX

1. INTRODUCTION

2. HISTORICAL BACKGROUND

3. UNDERSTANDING DUMPING

4. WTO & ANTI-DUMPING

5. INDIA & ANTI-DUMPING

6. CONCLUSION

7. BIBLIOGRAPHY
INTRODUCTION
“In a world where tariff and non-tariff barriers decrease rapidly, antidumping
measures are becoming increasingly important in protecting domestic
manufacturers.”

Anti-dumping measures, along with safeguards and countervailing measures


are tools used for protecting domestic industries from surges of cheap foreign
imports. Although the WTO strives to eliminate all trade barriers, it
recognizes that nations require flexibility to adjust to economic shocks as
multilateral agreements increasingly liberalize trade. Thus, these measures
allow nations to temporarily protect their economies against fluctuations in
trading patterns. Although anti-dumping, safeguards, and countervailing
measures share an often-uneasy relationship with the WTO’s core principles,
many member nations consider them essential to fostering fair and free trade.
Almost all WTO member countries have adopted/amended their anti-dumping
legislations largely in accordance with the GAIT provisions to deal with
dumped imports. Some of the countries that are not members of WTO have
also acquired their anti-dumping legislations. Almost 90% of total world
imports are now entering countries in which dumping laws are in place. There
has been a spectacular growth of anti-dumping investigations in recent times.
The number of such investigations launched was 156 in 1995, which doubled
to 358 in 1999. Moreover, the use of anti-dumping measures is no longer
confined to a limited number of industrialized countries and a large number of
developing countries are now launching anti-dumping investigations. The
share of developing countries in total cases was 10% at the beginning of
1990s which has increased to almost 50%.
India has emerged as one of the most frequent users of anti-dumping
measures in recent years. Between 1995 and 2000 India initiated 176 cases
which is 12% of the total cases initiated over the world. The anti-dumping
cases per billion of goods’ import are 0.69 in India as compared with 0.06 for
the world.
Such large scale use of anti-dumping measures has raised genuine concern
among scholars, economists and corporate world of its misuse as a
protectionist measure. This apprehension is caused due to the ambiguities in
anti-dumping regulations and procedures, deficiency in the economic
rationale behind it and harm to the consumer interests etc.
This paper tries to present a case against the use of anti-dumping measures in
international trade. This article will first examine why the anti-dumping law
has become the weapon of choice for import protection in the new
millennium. It then will provide an overview of the anti-dumping regulatory
regime, and the controversy it has engendered. Finally, this paper puts forth
arguments against using anti-dumping law as a protectionist measure and
concludes that anti-dumping laws are detrimental, serve no useful purpose
and should be repealed, the sooner the better. Though anti-dumping,
countervailing and anti-subsidy measures are related concepts, the article is
limits itself to the study of the concept of antidumping.

HISTORICAL BACKGROUND
Anti-dumping rules started to develop in the early part of this century with the
adoption of legislations firstly by Canada in 1904, New Zealand in 1905,
Australia in 1906 and United States in 1916, which were later subjected to
quite a few amendments. In 1921 the United Kingdom also enacted its first
anti-dumping legislation.
Notwithstanding these developments anti-dumping remained a relatively
infrequent instrument until well after the advent of the GATT, despite the fact
that Article VI of the 1947 GATT provided the basic conditions for adopting
anti-dumping measures. In the immediate post-war period only South Africa,
Canada and Australia were the only countries using anti-dumping as an
important trade instrument. During the Kennedy Round of trade negotiations,
discussions took place for the, first time on Article VI of the GATT in order
to secure more standardized approach to anti-dumping. This in turn led to the
“Agreement on Implementation of Article VI of the GATT” which, in turn
formed the basis for the first European Community anti-dumping legislation
adopted in 1968. Subsequent trade rounds have more precisely dealt with the
rules and procedures that WTO members are expected to adhere to in
implementing their anti-dumping legislations although even now the WTO
members are allowed certain leeway in their behaviour.
UNDERSTANDING DUMPING

Dumping is said to occur when the goods are exported by a country to another
country at a price lower than its normal value. A product is being considered
as being dumped if the export price of the product from one country to
another is less than the comparable price, in the ordinary course of trade, for
the like product when destined for consumption in the exporting
country. Opinions may differ as to whether or not this practice, per
se, constitutes unfair price competition. Anti-dumping is a measure to rectify
the situation arising out of the dumping of goods and its trade distortive
effect. Thus, the purpose of anti-dumping duty is to rectify the trade distortive
effect of dumping and re-establish fair trade. The use of antidumping measure
as an instrument of fair competition is permitted by the WTO.
Anti-dumping, in common parlance is understood as a measure of protection
for domestic industry. However, anti-dumping measures do not provide
protection per se to the domestic industry. It only serves the purpose of
providing remedy to the domestic industry against the injury caused by the
unfair trade practice of dumping. Often, dumping is mistaken and simplified
to mean cheap or low priced imports. However, it is a misunderstanding of
the term. Dumping implies low priced imports only in the relative sense
(relative to the normal value), and not in absolute sense. Import of cheap
products through illegal trade channels like smuggling does not fall within the
purview of anti-dumping measures.
Ironically, the use and importance of anti-dumping law is inversely related to
the prevalence and efficacy of free trade agreements. As free trade agreements
have reduced tariffs and outlawed most import quotas, anti-dumping cases
have increased dramatically. Over the last fifty years, the average tariff level
has fallen from 40 percent to 3.9 percent, and 43 percent of goods are now
exempt from all tariffs. Over the same period of time, the number of
successful anti-dumping cases filed in the United States alone has increased a
staggering 2500 percent. This powerful inverse relationship between free
trade agreements and antidumping actions is easy to explain. As domestic
market participants around the world lose access to their traditional
protectionist weapons — tariffs and import quotas — they find that they have
only one protectionist weapon left — an anti-dumping action. That weapon is
at least as potent as the traditional weapons. As a result, market participants
use it liberally and with great success.

WTO & ANTI-DUMPING

The Agreement on Implementation of Article VI of the General Agreement


on Tariffs and Trade 1994 (hereinafter referred to as “the Agreement”)
governs the application of antidumping measures by Members of the WTO.
The provisions of the Agreement were first negotiated during the Kennedy
Round (1967) and later substantially revised during the Tokyo Round (1979)
of GATT negotiations. Anti-dumping measures are unilateral remedies which
may be applied by a Member after an investigation and determination by that
Member; in accordance with the provisions of the Agreement, that an
imported product is dumped and that the dumped imports are causing material
injury to a domestic industry producing the like product.
The Agreement sets out rules for the conduct of anti-dumping investigations,
including initiation of cases, calculation of dumping margins, the application
of remedial measures, injury determinations, enforcement, reviews, duration
of the measure and dispute settlement. The Agreement applies to trade in
goods only. Trade in services is not covered by this agreement.
The Agreement provides for the right of contracting parties to apply anti-
dumping measures, i.e. measures against imports of a product at an export
price below its “normal value” (usually the price of the product in the
domestic market of the exporting country) if such dumped imports cause
injury to a domestic industry in the territory of the importing contracting
party.
In particular, the Agreement provides for greater clarity and more detailed
rules in relation to the method of determining that a product is dumped, the
criteria to be taken into account in a determination that dumped imports cause
injury to a domestic industry, the procedures to be followed in initiating and
conducting anti-dumping investigations, and the implementation and duration
of anti-dumping measures. In addition, the Agreement clarifies the role of
dispute settlement panels in disputes relating to anti-dumping actions taken by
domestic authorities.
On the methodology for determining that a product is exported at a dumped
price, the Agreement adds specific provisions on such issues as criteria for
allocating costs when the export price is compared with a “constructed
normal value” and rules to ensure that a fair comparison is made between the
export price and the normal value of a product so as not to arbitrarily create or
inflate margins of dumping.
The Agreement strengthens the requirement for the importing country to
establish a clear causal relationship between dumped imports and injury to the
“domestic industry.” The examination of the dumped imports on the industry
concerned must include an evaluation of all relevant economic factors bearing
on the state of the industry concerned. The Agreement confirms the existing
interpretation of the term “domestic industry”. Subject to a few exceptions,
“domestic industry” refers to the domestic producers as a whole of the like
products or to those of them whose collective output of the products
constitutes a major proportion of the total domestic production of those
products.
The Agreement establishes procedures on how anti-dumping cases are to be
initiated and how such investigations are to be conducted. Conditions for
ensuring that all interested parties are given an opportunity to present
evidence are set out. Provisions on the application of provisional measures,
the use of price undertakings in anti-dumping cases, and on the duration of
anti-dumping measures have been strengthened. The Agreement lays the
“sunset provision” under which anti-dumping measures shall expire five years
after the date of imposition (or the most recent review), unless a
determination is made by the authorities that, in the event of termination of
the measures, dumping and injury would be likely to continue or recur.
A new provision requires the immediate termination of an anti-dumping
investigation in cases where the authorities determine that the margin of
dumping is de minimis (which is defined as less than 2 per cent, expressed as
a percentage of the export price of the product) or that the volume of dumped
imports is negligible (generally when the volume of dumped imports from an
individual country accounts for less than 3 per cent of the imports of the
product in question into the importing country).
The Agreement calls for prompt and detailed notification of all preliminary or
final antidumping actions to a Committee on Anti-dumping Practices. The
Agreement will afford parties the opportunity of consulting on any matter
relating to the operation of the agreement or the furtherance of its objectives,
and to request the establishment of panels to examine disputes.
From many perspectives, the most significant feature of the WTO anti-
dumping framework is its dispute settlement procedure, which greatly
strengthens the ability of national governments to challenge anti-dumping
actions by other member nations.
One controversial omission in the Agreement is the “public interest”
requirement. There can be a situation where dumping and injury have been
proved, but the gains to the consumers from lower prices more than outweigh
the losses suffered by the producers. The public interest standard stipulates
that the imposition of duties should be made only if it is in the interest of the
community. For a public interest clause to be effective the term public interest
should be given a clear operational definition and the factors that might form
a test for public interest should be clearly stated. Further, it is important that
this clause is looked into at the same time when injury to producers is
established. Incidentally, In the EU Basic Regulation on Anti-dumping,
“community interest clause” has been given a mandatory status, while there is
no such requirement under the Indian law.

INDIA & ANTI-DUMPING


Section 9A of the Customs Tariff Act, 1975 (hereinafter referred to as “the
Act”) as amended in 1995 and the Customs Tariff (Identification, Assessment
and Collection of Anti-dumping Duty on Dumped Articles and for
Determination of Injury) Rules, 1995 (hereinafter referred to as “the Rules”)
framed thereunder form the legal basis for anti-dumping investigations and
for the levy of anti-dumping duties. These are in consonance with the WTO
Agreement on anti-dumping measures. These rules form the legislative
framework for all matters relating to dumping of products, which include the
substantive rules, rules relating to practice, procedure, regulatory mechanism
and administration.
CONCLUSION
The controversy surrounding anti-dumping measures is certain to grow. On
the one hand, anti-dumping measures have strong political support in WTO
Member countries as the most effective import protection for struggling
domestic industries. On the other hand, there is established opposition to anti-
dumping measures, which is gaining gradual’ support from exporting interests
concerned about global proliferation of anti-dumping measures. This
controversy, and the expected increase in anti-dumping actions, will lead to
calls for reform of the anti-dumping regime in the future.
Though, the best option would be to abolish anti-dumping laws altogether and
merge the anti-dumping mechanism with the competition laws, it might not
be possible to pursue this course unilaterally. If consensus is not reached at
the international level, then the use of antidumping laws could be minimized
through mutual bilateral or plurilateral agreements on reciprocal “cease-fire”
arrangements. Simultaneously, it would do good to follow a strict predation
standard in investigating anti-dumping cases and limit the scope of anti-
dumping to predatory cases alone.
Regardless of how the anti-dumping issue is raised and addressed in future
rounds of multinational negotiations, it is clear that it will be with us for the
foreseeable future, posing a risk and challenge to exporting industries. In the
era of the ascendancy of anti-dumping laws, exporting companies must
familiarize themselves with the WTO Anti-dumping Agreement and
applicable national anti-dumping laws, so that they may assess their
vulnerability to anti-dumping action and decide upon a strategy to survive and
prosper. Within the country there have been views that India should push for
tightening up of the anti-dumping provisions in the WTO. It is in our own
domestic interest to be proactive in the coming negotiations and break away
from the protectionist mould.

BIBLIOGRAPHY

1. Christopher F. Cork, Trade Protection in the New Millennium:


The Ascendancy of Antidumping Measure, 49, 53, 18 NW. J.
Int’l L. and Bus.

2.  Raj Bhala, Rethinking anti-dumping Law, l, 29 Geo. Wash. J.


Int’l L. and Econ.

3. Richard J. Pierce, Jr., Anti-dumping as a Means of Facilitating


Cartelization, 725, 67 Antitrust L.J.

4. Joseph E. Pattison, Antidumping and Countervailing Duty


Law, 1-30 Vol. 3 (West Group 1999)

5. P.K. Vasudeva, Dumping the US Anti-Dumping Law


http://www.iedifi.coni/maoney/2003/feb/13spec.htni

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