India faces U.S. Anti-Dumping Tax

In News: U.S. Department of Commerce is preparing to tax aluminium sheet exporters from 18 countries after determining on Tuesday that they had benefited from subsidies and dumping.

• The US International Trade Commission (ITC), an independent body, must approve the final decision to impose anti-dumping or countervailing duties.
• On request of nearly a dozen U.S. aluminium alloy manufacturers, including Arconic and Aleris Rolled products, Current US administration investigated and found that
  • Imports from Germany in particular ($287 million in 2019) benefited from dumping ranging from 40% to 242%.
  • Aluminium alloy sheets from Bahrain ($241 million) benefited 83% from pricing below the cost of production or the local market.
  • Imports from India ($123 million in 2019) have benefited from subsidies for 35% to 89%.

Anti Dumping Duties

• Anti-dumping duty is a tariff imposed on imports manufactured in foreign countries that are priced below the fair market value of similar goods in the domestic market.
• Anti-dumping duty is imposed to protect local businesses and markets from unfair competition by foreign imports.
• The duty is priced in an amount that equals the difference between the normal costs of the products in the importing country and the market value of similar goods in the exporting country or other countries that produce similar products.
• The anti-dumping duty can be anywhere from 0% up to 550% of the invoice value of the goods.

WTO Guidelines

• According to the WTO Anti-Dumping Agreement, dumping is legal unless it threatens to cause material injury or material retardation in the importing country’s domestic market.
  • Material Injury: Injury that has been caused to a domestic industry and is not negligible.
  • Material retardation: means that although no material injury is there, yet the establishment of a domestic industry has been seriously retarded.
• In case of dumping, the WTO permits the affected country to take legal action against the dumping country as long as there is substantive evidence.
  • The government must show that dumping took place, the extent of the dumping in terms of costs, and the injury or threat to cause injury to the domestic market.
  • But the governments can not discriminate between trading partners and need to honor the DATT 1994 principal when calculating the duty.
• The GATT 1994 principle requires that imported goods not be subjected to internal taxes in excess of the costs imposed on domestic goods.
  • National Treatment: Imported goods need to be treated the same way as domestic goods under domestic laws and regulations.
• There are several ways of determining extent of Dumping
  • Calculate the anti-dumping duty based on the normal price of the product.
  • Use the price charged on the same product but in a different country.
  • Calculate the duty based on the total product costs, expenses, and the manufacturer’s profit margins.

Criticism

• Narrowed Choices for Domestic Consumers: While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
• Higher Prices and Inflation: While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
• Tool of Protectionism:  Often the anti-dumping Duties have been used to impose subtle protectionism.
• A form of “retaliation”: Many countries have imposed Anti Dumping Duties (ADDs) against products of countries that impose ADDs against the products of the host country.
  • The USA has been consistently alleged to have abused anti-dumping measures with its practice of Zeroing.
  • Similarly, in only around 2% cases the EU has been found to have imposed ADDs to offset dumping.
    • In the remaining 98% cases of anti-dumping have been used for purposes other than offsetting dumping.

Way Ahead

• Developed and Developing Countries need to discuss the issues again.
• The rules like the 5 percent rule which is already under footnote 2 of the Anti-Dumping Agreement should be properly and openly evaluated by a 3rd party agreed by both states.

Source: TH