South Asia Economic Journal

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Ashwani Mahajan1, Phool Chand2 and Harsha Vardhan Pasumarthi

Abstract

India has imposed anti-dumping duties (ADDs) on a total of 155 commodities against China across many sectors to protect the domestic industry since 2001. The dumping of Chinese goods into Indian markets has led to the downfall and closure of many domestic industries. Under such circumstances, ADDs had been necessitated for protecting the domestic industry. As per the World Trade Organization (WTO) rules, imposition of ADDs on imports is permitted, provided that the affected country establishes that the domestic industry has suffered material injury by such imports. An elaborate discussion explaining the investigation pertaining to ADD and imposition of ADD in relation with WTO rules is presented in the present article. During the period between 2014 and 2018, ADD has been imposed on a total of 121 commodities. The study finds that ADDs have been partially effective in reducing the imports of the commodities.

JEL: F13

Keywords

WTO, anti-dumping duties, trade deficit

 

1 Pannalal Girdharlal Dayanand Anglo-Vedic College, New Delhi, Delhi, India.

2 PGDAV College, University of Delhi, New Delhi, Delhi, India.

3 Research Assistant, ICSSR Major Project, University of Delhi, New Delhi, Delhi, India.

Corresponding author:

Ashwani Mahajan, Pannalal Girdharlal Dayanand Anglo-Vedic College, Nehru Nagar, New Delhi, Delhi 110065, India.

E-mail: ashwani.mahajan@pgdav.du.ac.in

Introduction

India had a huge trade deficit with China to the tune of US$63 billion (2017– 2018). China has been dumping their goods in India. Due to this dumping, Indian producers have been badly affected as they could not compete with cheaper Chinese products. China is known to have been indulging in unfair trade practices, such as under-invoicing, granting of excessive export subsidies, handing special concessions to state-owned enterprises, non-transparent trade practices, round tripping from Honk Kong and other countries and theft of Intellectual Property Rights (IPRs). Such unfair trade practices give Chinese exporters an unfair advantage, thereby causing injury to India’s domestic industry.

Dumping is said to have occurred when one country exports goods to another country at a price lower than the normal value. This trade practice is treated as unfair internationally by all the countries. Therefore, to rectify the trade distortive effects of dumping, ‘anti-dumping’ duties are used. According to the rules of WTO, ADDs will generally be imposed only after developing an elaborate set of procedures starting from initial investigation, then establishing the injury to the domestic industry and finally deciding the extent to which the ADDs can be imposed. The domestic industry initiates the ADD investigation which forms the basis of imposing the duty. The injury done to industry is basically assessed by looking at the trends of various parameters such as volume of imports, market share of imports as well as production of domestic industry, price underselling, etc. Once the injury to the domestic industry is assessed, it is important to establish the causal link between material injury suffered by the Indian industry and dumped imports from China. After concluding the investigation, the authority then provides relief to the industry in the form of ADDs. However, as China is a non- market economy, we need not follow the same procedure stringently. ADDs should be seen as a remedial measure against the unfair trade practices rather than a protective measure for domestic industry.

The present article aims to understand the impact of ADDs imposed by India on Chinese imports. We look at the various ADDs imposed from 2014 and analyse the import trends of commodities for which ADDs have been imposed. The second section of the article handles the following concepts: ADDs, understanding how to assess the injury caused to the domestic industry in concordance with the WTO rules and understanding how relief to the domestic industry is given. The third section focusses on the relevant literature with an emphasis on the impact of ADDs on imports. The fourth section contains data sources and the fifth section contains methodology used in understanding the impact of ADDs. The sixth section explains the analysis and main findings. The seventh section provides the summary and recommendations to the government followed by the references.

Anti-dumping Duty: Concepts, Injury and Relief

To prevent injury to the said domestic industry of the importing country, WTO allows its member countries to impose anti-dumping, anti-subsidy and safeguard

measures against the imports of products. As India is a signatory to WTO, we are bound by Article VI of the General Agreement on Tariffs and Trade (GATT), ‘Anti-dumping duties and countervailing duties’. Article VI of GATT recognizes dumping ‘to be when products of one country are introduced into the commerce of another country at less than the normal value of products’. The signatories of GATT condemn such dumping which ‘causes or threatens material injury to an established industry in the territory of contracting party or materially retards the establishment of domestic industry’. Therefore, the contracting party imposes ADD to prevent injury to the domestic industry.

The legal framework for ADDs in India is provided by Section 9 of the Customs Tariff Act of 1975 (as amended in 1995) and also the Custom Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995. The previously mentioned laws are in accordance with the WTO framework.

Anti-dumping Duties: Concepts and Definitions

The procedure to impose ADDs involves many steps which are needed to be followed. The concepts and definitions have been taken from the document published by Ministry of Commerce, Government of India, called ‘Anti- Dumping—A Guide’.

Dumping: According to Article 2(b) of Article VI of GATT, ‘Dumping means export of goods by one country/territory to the market of another country/ territory at a price lower than the normal value’. In other words, if export price of commodity is lower than the normal value, then it is known as dumping.

Normal value: According to Article 2(b) of Article VI of GATT, ‘The price at which like products1are sold in the domestic market of the exporter is referred to as normal value. Normal value is the comparable price at which the goods under complaint, are sold in the ordinary course of trade, in the domestic market for exporting country’.

Also, in cases where we cannot determine normal value by means of domestic sales, two alternative methods are used to determine normal value:

• Comparable representative export price to an appropriate third country and
• constructed normal, that is, the cost of production in the country of origin with reasonable addition for administrative, selling and general costs.

Export price: Export price of the goods dumped into domestic markets refers to the price at which the goods are exported to India. The price is generally determined by ‘CIF (Cost, Insurance and Freight) value minus adjustments on account of ocean freight, insurance, commission etc. to arrive at the value at ex-factory level’.

Dumping margin: According to Article 2(b) of Article VI of GATT, ‘The dumping margin is the difference between the normal value and export price of the goods under complaint. Generally, it is expressed as percentage of the export price’.

Illustration: If the normal value is `1,100 per kg and export price is `1,000 per kg, the export price is clearly less than normal value; in such cases, there is a chance for dumping. In this particular case, dumping margin is `100 per kg, that is, 10% of export price.

Injury to the Domestic Industry

There are many possible ways in which injury can occur to the domestic industry. It could occur in the form of decline in sales, selling price, profits, market share, production, utilization of capacity, price underselling, price undercutting, price depression, etc. The above injury can be distinctly divided in two forms—volume effect and price effect.

Volume Effect

According to Article 3 of Article VI of GATT, volume effect occurs when the volume of dumped imports including the extent to which there has been or is likely to be a significant increase in the volume of dumped imports, either in absolute or in relation to the production or consumption, and its effect on domestic industry. ‘The volume effect relates to the market share of domestic industry vis- à-vis dumped imports from other country’.

In this context, we take the example of the famous ADD investigations by Directorate General of Anti-Dumping and Allied Duties (DGAD) for Universal Serial Bus (USB) flash drives, allegedly dumped by Chinese.

Demand: The authority generally agrees that demand is an aggregate of domestic sales of Indian producers and import from all sources. In this case, demand is the apparent consumption of USB flash drives.

Market share in demand: Market share of demand is segregation of demand into various sources such as domestic production and imports from subject countries as well as other countries (Anti-Dumping Agreement – Article 3, n.d., p. 3). In the example of USB flash drives, one could see that share of import from China was as high as 84%.

Share of imports in relation to production: In establishing the link between the imports affecting production, it is important to compare imports and production. As observed in Table 1, the imports of USB flash drive, as percentage of production, have been increasing and stand at 701%.

Capacity and capacity utilization: Capacity utilization is the extent to which the domestic industry is using its installed productive capacity. In the example of USB flash drives, it could be observed that production units are running at 50% of production capacity.

The data from Table 1 have been collated from the investigation conducted by DGAD. DGAD has conducted an investigation on various parameters of volume effect on the USB flash drives (DGAD, 2014).

Table 1. Volume Effects of Dumping.

 

Particulars              Units		2009–2010	2010–2011	2011–2012	Period of Investigation
Demand
Demand                in 1000 Nos		8,289	10,237	17,890	23,539
Import from sub-    in 1000 ject countries (i.e.,         Nos China and Taiwan)		6,961	7,437	15,235	21,480
Import from other  in 1000 countries                Nos		667	1,251	708	338
Sale of domestic     in 1000 industry                             Nos		662	1,550	1,947	260
Market share in demand
Import from sub-        % ject countries (i.e., China and Taiwan)		83.98	72.64	85.16	91.25
Import from other      % countries		8.04	12.22	3.96	1.44
Sale of domestic        % industry		7.98	15.14	10.88	7.31
Share of imports in relation to production
Import from sub- ject countries (i.e., China and Taiwan)	in 1000 Nos	6,961	7,437	15,325	21,480
Production of do- mestic industry	in 1000 Nos	1,068	2,020	2,523	3,064
Dumped imports in relation to the production of do- mestic industry	%	652	368	604	701
Capacity utilization
Capacity MT	in 1000 Nos	4,058	7,183	7,203	7,203
Production	in 1000 Nos	1,068	2,020	2,523	3,604
Capacity utilization	%	26.31	28.21	35.03	42.54
Production
Production of do- mestic industry in relation to demand	%	13	20	14	15

Source: Anti-dumping Investigation Summary Report for USB devices.

Price Effect of Dumped Imports

According to Article 2(b) of Article VI of GATT, ‘The price effect is investigated, when the designated authority considers, whether there has been a significant price undercutting. The effect of dumped import prices in the Indian market for like articles is discussed, including the existence of price undercutting or extent to which the dumped imports are causing price depression or preventing price increases for the goods which otherwise would have occurred, as follows’.

Price undercutting: Accordingly, ‘Price undercutting is assessed by comparing the export price with domestic selling price in India of the subject goods during the period of investigation. If the landed price of imports is lower than selling price of domestic industry, then price undercutting is said to have occurred’. Price underselling: According to Article 2(b), ‘If the landed value of the imports is less than non-injurious price, then price underselling is said to have occurred. Landed value is the value of cargo at the arrival point on the buyer’s side.; i.e., cost of goods, packing, forwarding fees, pre-carriage, main carriage and insurance’. According to the FAQs released by the Directorate General of Trade Remedies Trade (DGTR), ‘Non-injurious price (NIP) is ‘that level of price, which the industry is, expected to have charged under normal circumstances in the Indian market during the Period defined’ (FAQ- Directorate General of Trade Remedies (DGTR), n.d.).

Price suppression/depression: When the dumped imports are said to depress the price of domestic market, then price depression is said to have occurred.

The data from Table 2 have been similarly collated from the investigation conducted by DGAD to investigate the parameters of price effect.

It is important to understand that a causal link between dumped imports and material injury suffered by the Indian industry is required to be established. According to the Directorate General of Trade Remedies (DGTR), for an anti-dumping investigation to be valid, there are two prerequisites that need to be fulfilled.

1. There has been evidence that ‘There is dumping
   1. There is injury to the domestic industry; and
   2. There is a causal link between the dumping and injury, meaning that dumped goods have caused alleged injury’
2. ‘Domestic producers expressly supporting the anti-dumping application must represent greater than 25% of the total production of article by the domestic industry’.

Once an application is made by the domestic industry, the dumping investigation can be initiated. It is important to distinguish between customs duty and ADD.

Table 2. Price Effect of Dumped Imports.

 

Particulars	Units	2009–2010	2010–2011	2011–2012	POI
Price suppression/depression
Cost of sales	Index	100	98	81	72
Selling price	Index	100	86	74	63
Landed price	`/No.	358.4	317.2	255.17	231.24

Source: Anti-dumping Investigation Summary Report for USB devices.

Economic Parameters of Domestic Industry

There are several economic indicators used for injury evaluation such as : sales, profits, return on investment, output, capacity utilization, employment, productivity, inventory, market share, ability to raise capital or investment etc.

Profits/loss: Profitability of domestic industry is considered an important parameter to understand the economic effect of dumping. In the example of USB flash drive, the domestic industry has incurred losses throughout the injury period.

Return on investment: The return on investment is measured by the gain or loss from an investment relative to the amount of money invested. Under the injury period, it was found that industries catering to the USB flash drives had a negative return on investment.

Cash flow: The authority looks into the trend in the cash profits to examine the effect of dumping on cash flows.

Inventories: A decline in inventories could mean price underselling of dumped imports, leading to domestic companies offloading the stock at lesser than normal value.

Productivity: Productivity per day has been measured to check whether the productivity has increased or decreased.

Employment and wages: Employment and wages are the ones which are hugely affected by the dumping of imports.

Relief to the Domestic Industry

Imposition of ADDs provides relief to domestic industry. Duties can be expressed either on ad-valorem or on per unit basis. The GATT provisions mandate ‘national authorities to impose duties higher than the margin of dumping. The provisions suggests that the government uses the lesser duty rule according to which the amount of duty which is sufficient to remove the injury is used’.

Guidelines of Ministry of Commerce, Government of India state that the Indian rules mandate the anti-dumping to be lower of the two, that is, dumping margin and injury margin. Injury margin is the difference between fair selling price and landed value. Furthermore, landed value is the sum of assessable value under the Customs Act and basic customs duty. If margin of dumping is less than 2% of the export price for any exporter, it shall be excluded from the purview of ADDs, even if there is existence of dumping injury as well as the causal link.

China as a Non-market Economy

According to WTO, non-market economies are where the market principles of competition are overshadowed by monopoly of state-controlled units. Article VI of WTO GATT noted that non-market economies are those which have high state

control. Also, it refers to non-market economy as countries ‘where all domestic prices are fixed by the state’ and ‘country which has complete or substantially complete monopoly of its trader’. In an interim ruling during April 2019, WTO has made it clear that China did not qualify for the status of market economy. The defendant in the case was European Union which was using an alternative methodology to calculate export price.

In 2001, at the timing of joining WTO, China agreed to allow WTO members to continue using alternative methodology (third country or surrogate country) methodology for assessing price and cost of commodities subjected under Anti- Dumping (AD) measures. In other words, while calculating export price in determining the dumping margin in case of a non-market economy, one could use export price of third country citing the non-market economy. (Bryce, 2019; Morrison, 2019)

Literature Review

On the impact of ADDs on imports of India from China, there is very little literature available.

Singh (2005) has investigated the impact of ADD policy on India. The analysis revealed that there has been a substantial impact on the quantity and unit value of the investigated products after the imposition of ADDs. The article reiterates the 2001–2002 DGAD findings that suggest anti-dumping policy has ‘no negative impact on the domestic economy and seems to do positive things for the domestic industry’. Finally, the article finds that magnitude of protection is substantially higher in India than USA and EU.

Choi (2017) examined the ‘effects of anti-dumping measures on the imports to find out how dominant the trade restriction effect of an anti-dumping duty is on US, the EU, China and India from 1996-2015’. The impact of the ADDs on imports has been evaluated with basic estimation equation to examine the trade impacts of ADDs. The article has found that import of a targeted product is reduced by about 0.43%–0.51% as a result of 1% increase in the ADDs. However, the article also finds that while anti-dumping was in force, targeted products’ total import increased by about 30%.

Aggarwal (2010) analyses the trade effects of ADDs levied on 177 (8 digit) products by India during the period 1994–2001. The article uses panel regression for quantifying the effects of ADD’s actions on import volumes, values and prices. The article concludes that ‘the imposition of ADD duties restrains trade (both volume and value and raises import prices’. The article concludes that a rise in import prices benefits the domestic industry. The article also noted that a ‘anti- dumping duty is an expensive form of protection and only dominant producers in concentrated industries become beneficiaries of this protection’.

Data

The study extracted data from multiple sources. The variables include ADD notifications and import according to the classification HS-2, HS-4 HS-6 and HS-8 digit.

The data relating to anti-dumping have been taken from the WTO Non-Tariff Measures databases. Also, data relating to imports have been collected from Trade Statistics of Ministry of Commerce website. The anti-dumping notification further consisted of relevant details like harmonized system (HS) Code and force year. To understand the impact of ADDs, we had to merge HS Code at 2-4-6-8 to imports from the Ministry of Commerce. Also, the sector classification has been taken from Trade Competitiveness Diagnostics published by the World Bank.

Methodology

Graphical Analysis

‘The graphical analysis gives us a crude picture of the movements in the relevant variables under consideration. Graphical analysis, which is preliminary test in nature, is always useful to estimate the general behavioural pattern of a variable. The rationale behind the graphical analysis is to go for selection of appropriate methodology for taking out the maximum information out of the set of variables

There are four purposes or advantages of doing so.

1. It gives the visual picture of the overall
2. It depicts the structural
3. It gives the picture of growth and instability contained in the
4. The graphical analysis also gives us a preliminary picture of the non- stationarity of the series’ (Chand, 2014).

Since each commodity has an ADD at different years, it is difficult to perform a trends analysis. Hence, we use the percentage method to observe the degree of change in imports.

Percentage Difference

We use a simple mathematical concept, namely percentage change, that represents the degree of change over time.

% Difference = new value – old value ´100

old value

Import difference (%) = Mit – Mit 0 ´100

Mit 0

where M_it represents the current year’s imports and M_it0 represents the imports in the year when the duty has been imposed.

Results and Analysis: Impact of Anti-dumping Duties

Figure 1 depicts that the largest number of ADDs has been initiated against China. Globally, of all the countries included, a total of 1,269 ADDs have been initiated against China, which proves the fact that China dumps its goods across the world.

Impact of Anti-dumping Duties

Are ADDs providing relief to the domestic industry in an effective manner? It is important to study the import trends of commodities on which ADDs have been imposed to understand whether they have been effective or not.

 

Figure 1. Anti-dumping Measures on Exports from WTO Members (initiated and measures).

Source: Ministry of Commerce Report, Annual Report 2018–2019, WTO, Non-Tariff Measures.

Table 3. Sector-wise Anti-dumping Duties Imopsed.

Sector Names                                                  Number of Duties

• Agriculture, dairy and meat 1
• Food, Beverages, tobacco and food 2
• Extractive industries, mineral products and articles 19

of stone

• Chemicals, plastics and rubber 47
• Textile, apparel, footwear and other wear 6
• Iron and steel 40
• Machinery, electronics and transportation 6
• Other industries

Source: Authors’ calculations, WTO, Non-Tariff Measures.

121

Figure 2. Sector-wise Pie Chart of Anti-dumping Duties.

Source: Authors’ calculations, WTO, Non-Tariff Measures.

 

Table 4. Analysis at t + 2.

 

Particulars      Increased  Decreased

 

Total Com-

modities    % Increased  % Decreased

 

Commodities       42             49               91             46.15           53.85

Source: Authors’ calculations, Trade Statistics, Ministry of Commerce.

 

Figure 2 and Table 3 show that most ADDs have been imposed on chemicals, plastics and rubber followed by iron and steel. Also, exports from extractive industries of China, like mineral products and articles of stone, also have faced ADDs.

We carry out our analysis for the period between 2014 and 2018. In doing this analysis, we look at the imports that occurred 2 years before the force year and after 2 years of the imposition of ADD for each commodity. We first calculate the year-on-year percentages for each of the commodities on which the ADD has been imposed. We then align them based on the force years; for example, if 2014 is the force year Mt, then 2013 is Mt – 1 and 2015 is Mt + 1. Similarly, for 2017, Mt

represents the imports during the period in which ADD was in force, Mt – 1

represents the imports in 2016 and Mt + 1 represents the imports in 2018. We align all the Mt for the years we are considering and count the number of commodities in the respective bins of the growth rates. The results are outlined in Table 4.

For comparing the values, we have checked the impact at t + 2 for different levels of digit, and we have found that 54% of commodities have registered a decreasing import, while 46% of commodities have increased imports at t + 2. The results give an indication of mixed results for ADDs, which means ADDs are proved to be effective in more than half of the cases.

We also looked at the cumulative figures of ADDs. The cumulative figures do not seem to indicate any vast differences in the total figures. While the cumulative figures of all the ADDs were US$5.2 billion in the year t, at t + 1, it was US$5.5 billion and US$5.36 billion dollars indicating anti-dumping could not affect cumulative figures of the considered imports as shown in Table 5. Table 6 and

Table 5. Cumulative of Imports Before and After Force Year t.

 

Force Year	Imports (in US$million)
Imports at t − 2	6,015.02
Imports at t − 1	5,239.97
Imports at t	5,232.38
Imports at t + 1	5,512.38
Imports at t + 2	5,362.10

Source: Authors’ calculations, Trade Statistics, Ministry of Commerce.

 

 

Table 6. Top 10 Commodities Which Had an Increasing Rate at t + 2.

 

HS Code	Force Year	Product	t – 2	t – 1	t	t + 1	t + 2
294200	2015	294200—gliclazide	14.87	–15.83	–13.94	12.4	–47.93
7219	2015	7219—cold-rolled flat products of stainless steel	–8.83	–34.06	101.5	–21.74	–32.99
7219	2015	7219—hot-rolled flat products of stainless steel; 304 series	–8.83	–34.06	101.5	–21.74	–32.99
29215990	2014	29215990—4, 4-aiaminostilbene-2, 2′-disulphonic acid (DASDA)	25.24	38.75	2.46	–2.06	–31.87
292151	2014	292151—meta phen- ylene diamine	16.01	25.61	55.59	–7.48	–22.63
29214290	2014	29214290—4, 4-diaminostilbene-2, 2′-disulphonic acid (DASDA)	20.96	67.65	7.03	6.62	–10.92
291815	2015	291815—sodium citrate	5.49	38.08	–4.56	–58.84	–7.58
320411	2015	320411—Diketopyr- rolo Pyrrole Pigment Red 254 (DPP Red 254)	8.91	–2.89	–30.68	3.8	-6.74
7220	2015	7220—hot-rolled flat products of stainless steel; 304 series	–32.43	127.59	107.19	9.3	–2.41

Source: Authors’ calculations, Trade Statistics, Ministry of Commerce.

Table 7. Top 10 Commodities Which Had a Decreasing Rate at t + 2.

 

HS Code	Force Year	Product	t – 2	t – 1	t	t + 1	t + 2
31025000	2015	31025000—sodium nitrate	–26.32	1100.0	–79.17	–74.29	233.33
39241010	2015	39241010—melamine tableware and kitch- enware products	104.0	–37.25	18.75	244.74	54.96
27040090	2016	27040090—low ash metallurgical coke	1144.4	–26.51	–16.67	16.84	48.84
270740	2016	270740—crude naph- thalene		16.52	74.33	–85.05	41.18
290290	2016	290290—refined naphthalene	–34.14	112.79	4.88	–27.23	27.96
320416	2015	320416—Diketopyr- rolo Pyrrole Pigment Red 254 (DPP Red 254)	61.95	44.83	16.42	–21.74	27.07
320611	2015	320611—Diketopyr- rolo Pyrrole Pigment Red 254 (DPP Red 254)	–16.78	16.64	31.13	5.94	25.43
39269099	2015	39269099—melamine tableware and kitch- enware products	–12.56	–5.9	22.3	29.66	23.32
8546	2015	8546—electrical insulators	–0.89	–46.01	11.84	–1.06	3.24
320417	2015	320417—Diketopyr- rolo Pyrrole Pigment Red 254 (DPP Red 254)	–1.72	–9.09	22.18	–9.21	0.74

Source: Authors’ calculations, Trade Statistics, Ministry of Commerce.

 

Table 7 show the top 10 commodities which had an increasing rate and decreasing rate respectively at t+2 after the imposition of ADDs.

Classification of the imports for those commodities which were affected by ADDs shows that they also belong to iron and steel, chemicals, plastics and rubber as shown in Table 8.

Classification of the imports for those commodities which were not affected by ADDs shows that they too belong to iron and steel, chemicals, plastics and rubber indicating no particular pattern as to on which ADDs were effective as shown in Table 9.

There could be two predominant reasons for ADDs not being effective: first, the Chinese are very robust in countering any trade restriction imposed on them. In case of India, they resort to either under-invoicing or roundtripping the goods through either the ASEAN countries or countries like Bangladesh and Nepal. According to Global Financial Integrity Report, India lost US$13 billion to trade

Table 8. Sector-wise Classification of Goods Which Saw a Decline in Imports.

Sector Names                                                   Number of Commodities

Agriculture, dairy and meat                                                    1

Chemicals, plastics and rubber                                                17

Extractive industries, mineral products, articles                             6

of stone

Food, beverages, tobacco and food                                            1

Iron and steel                                                                  21

Machinery, electronics and transportation                                    4

Other industries                                                              1

Textile, apparel, footwear and other wear                                   1

Source: Authors’ calculations, WTO, Non-Tariff Measures Trade Statistics, Ministry of Commerce.

Table 9. Sector-wise Classification of Goods Not Affected by Anti-dumping Duty.

Sector Names                                                   Number of Commodities

Agriculture, dairy and meat                                                    1

Chemicals, plastics and rubber                                                11

Extractive industries, mineral products, articles of                          6

stone

Food, beverages, tobacco and food                                            1

Iron and steel                                                                  20

Machinery, electronics and transportation                                    3

Other industries                                                              1

Textile, apparel, footwear and other wear                                   2

Source: Authors’ calculations, WTO, Non-Tariff Measures Trade Statistics, Ministry of Commerce.

misinvoicing. Furthermore, two-thirds of the value, that is, US$8.6 billion of the lost value, is attributed to the loss due to the misinvoicing by the Chinese. Second, the Chinese start shipping the closest form of the commodity for which ADDs have been imposed; for example, instead of shipping a finished commodity, the Chinese export the commodity which is just short of the consumption good. In doing so, they ship the closest form of the consumption good and avoid ADDs.

Anti-dumping: Example of Organic Chemical Industry

Organic chemicals constitute a huge import from China. According to UN-COMTRADE, organic chemicals comprise of US$8.3 billion from China, only after electronics, and machinery. A total of 47 out of 121 anti-dumping

measures were initiated against China on chemicals, plastics and rubber, which conveys the dumping of chemical, plastics and rubber imports into India. We take a classic case of melamine, which is a chemical used in manufacturing utensils and plastics.

Melamine

In 2003, M/S Gujarat State Fertilizers & Chemicals Ltd. filed a petition and alleged dumping of melamine originating in or exported from China. A strict investigation was followed, and it was found that the subject good in all forms had been exported to India less than its normal value. Material injury has also been suffered by the domestic industry due to suppressed net sales realizations caused by low landing prices of the subject goods as a result of price undercutting/ underselling,

The authority recommended to impose ADD equal to the margin of dumping or lesser. ADD imposed was in the range of US$1,248.38–US$1,456.78 per metric ton for different producers and exporters for a period of 5 years.

In order to determine whether dumping and injury to the domestic industry may continue or recur after the expiry of the duty, three sunset reviews have been initiated after imposing ADD. The authority noted that there was continued injury to the domestic industry due to continuous dumping of subject goods by China. Hence, as per the notification of the Central Board of Indirect Taxes and Customs (CBIC), the government has extended ADD on melamine originating in or exported from China, up to 31 March 2021.

Similarly, on behalf of domestic industry, a petition was filed by M/S Abhilasha Tex-Chem Pvt. Ltd., Mumbai and M/S Amarjyot Chemicals Pvt. Ltd., Mumbai in 2010, which alleged dumping of para-nitroaniline originating in or exported from China. The authority imposed ADD of amount US$0.19–US$0.26 per kilogram, for a period of 5 years, as it concluded that the domestic industry had suffered material injury. This ADD was further extended following a sunset review investigation.

Challenges in Analysing Anti-dumping

We need to understand the following, while reading the results of the ADDs:

• Time of imposition—ADDs are investigated throughout the Hence, the impact of ADD is likely to be shown in the current year if ADD is imposed at the initial part of the fiscal year, that is, April or May, whereas if it is imposed in the later part of the year, the impact is likely to be shown in the following year.
• Magnitude—ADD for each commodity is imposed after an extensive investigation where the lesser duty is dependent on injury margin. Therefore, the lesser duty is likely to be different for each commodity and is beyond the scope of this study.

Conclusion and Recommendations

The trade deficit of India with China is very huge and stood at US$63 billion in 2017–2018. The primary reason for such huge trade deficit has been the dumping of goods by China into India. China uses a host of illegal trade practices and state monopoly power to enable the dumping of Chinese goods. Under such circumstances, India has no other option than to use ADDs. ADDs can be imposed in concordance with GATT IV rule of WTO which permits the use of ADDs when sustained injury is known to have been caused to the domestic industry due to dumping of imports. ADDs need an elaborate investigation which is a three-step procedure. First, the dumping investigation is to be initiated upon request of the domestic industry. The investigation can be valid only if domestic producers complaining against dumping, account for 25% and there exists sufficient evidence established to prove that their injury exists. Then, the competent authority, DGAD in case of India, conducts investigation and establishes that injury has actually taken place considering all the economic parameters. A causal link is needed to be established between the imports and the injury. Finally, the competent authority imposes ADD.

Our empirical analysis has revealed that the imposition of ADDs has been found to be imposed primarily in the ‘Chemicals, rubber and plastics’ industries, which is followed by ‘Iron and Steel’. We have used the percentage difference method to estimate the import trends of these commodities. The analysis has led to the conclusion that ADDs were effective in reducing the imports for about 54% of the commodities, while they were not effective in 46% of the cases. A robust trade policy would include a judicious mix of anti-dumping policy and tariff policy.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

This paper is a part of the ICSSR funded major project ‘India-China Trade Deficit: Causes, Effects and Solutions.

Note

1. ‘The words “like products” are almost defined in the same manner everywhere, it means the product which is identical i.e., alike in all respects to the product under consideration, or in absence of such product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.’ Article 2(b) of the 1967 code.

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