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In News
- Recently, the Ministry of Commerce and Industry recommended the imposition of anti-dumping duty on a pharma raw material—Ceftriaxone Sodium Sterile— from China to guard domestic players from cheap imports.
Ceftriaxone Sodium Sterile
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About
- Directorate General of Trade Remedies (DGTR) recommended the duty after concluding in its probe that the API from China has been exported at dumped prices into India, which impacted the domestic industry.
- The recommended duty is $ 12.91 per kg. The Finance Ministry takes the final decision to impose a duty.
- The imposition of anti-dumping duty is permissible under the World Trade Organisation (WTO) regime.
- The duty is aimed at ensuring fair trading practices and creating a level-playing field for domestic producers vis-a-vis foreign producers and exporters.
Anti Dumping Duties
- It 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.
- It 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 domestic industry and is not negligible.
- Material retardation: means that although no material injury is there, yet the establishment of the 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 honour the DATT 1994 principle 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 the 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% of cases, the EU has been found to have imposed ADDs to offset dumping.
- The remaining 98% of 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 per cent 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.
Facts of India China trade relations
Issues in economic relations
Conclusion
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Source: TH
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