The recent imposition of anti-dumping duty on certain varieties of steel products imported from China, Vietnam, and South Korea by India has grabbed the news spotlight. Key elements of this decision involve the concepts of dumping in the context of international trade, the imposition process for anti-dumping duties, the role of the Directorate General of Trade Remedies, and the differentiation between anti-dumping and countervailing duties.
Understanding Dumping in International Trade
Dumping refers to a scenario where a country or a firm exports a product at a price lower than its domestic market price. The effect of dumping is significant as it drops the product’s price in the importing country, adversely impacting the profits and margins of local manufacturing firms. To rectify the distortive effects of dumping on trade, an anti-dumping duty is enforced.
Imposition of Anti-Dumping Duty
The action of imposing the anti-dumping duty emerged from the findings of the Directorate General of Trade Remedies (DGTR). Upon investigating, DGTR discovered that the steel products brought into India from China, Vietnam, and South Korea were priced below their normal value, indicating a clear instance of dumping. The Indian government imposed the duty for a term of five years to protect domestic manufacturers from the undesirable effects of such low-cost imports.
The first enforcement of a provisional duty on these products commenced in October 2019 and ended in April 2020. As per global trade regulations, including the World Trade Organization norms, a nation has the right to levy tariffs on dumped goods to facilitate an even playing field for domestic manufacturers. Such a duty, however, only comes into effect after a comprehensive investigation by a quasi-judicial body like the DGTR in India.
Anti-Dumping Duty vs Countervailing Duty
It’s crucial to distinguish between anti-dumping and countervailing duties. While both seek to safeguard domestic producers, their contexts differ. Countervailing duty is imposed to counterbalance the adverse impact of import subsidies, whereas anti-dumping duty combats the consequences of dumping.
Countervailing Duties (CVDs) are essentially tariffs levied on imported goods to neutralize subsidies extended to producers of these goods in the exporting country. These duties aim to balance competition between domestic and foreign producers of a product, where the latter can afford to offer lower prices due to government subsidies.
Role of Directorate General of Trade Remedies
The Directorate General of Trade Remedies operates as the apex national authority under the Ministry of Commerce and Industry. It is responsible for administering all trade remedial measures, including anti-dumping, countervailing duties, and safeguard measures. The primary role of DGTR is to provide trade defence support to the domestic industry and exporters, especially when faced with increasing instances of trade remedy investigations initiated against them by other countries.