Dumping and anti-dumping duty in world trade
- Dumping is where the price of a product when sold in an importing-country is less than the price of that product in the market of the exporting-country.
- This may result in domestic goods being more expensive to buy than the imported and dumped goods, undermining the local economy and production sectors.
- To prevent this, a non-tariff barrier may be implemented, called an anti-dumping duty.
Anti-dumping duty under GATT (WTO framework)
Article VI of GATT (General Agreement on Tariffs and Trade) authorizes the imposition of a specific anti-dumping duty on imports from a particular source, in excess of bound rates, in cases where dumping causes or threatens injury to a domestic industry, or materially retards the establishment of a domestic industry.
Anti-dumping duty on steel
- Definitive anti-dumping duty, for a period of five years, was imposed on the import of cold rolled flat stainless steel products in April 2009.
- But before its expiry, Jindal Stainless filed an application in January 2014 before Directorate General of Anti-Dumping (DGAD), alleging likelihood of continuation or recurrence of dumping and consequent injury to the industry if duty is removed, and requested its continuation.
DGAD recommends continuation of anti-dumping duty
- The Directorate General of Anti-Dumping (DGAD), after 'Sun Set Review' on anti-dumping duty on 'Cold Rolled Flat Products of Stainless Steel', recommended that the duty should continue for another five years.
- DGAD in its findings said that domestic prices were being affected by continued dumped imports.
- The Revenue Department in the Finance Ministry is the final authority to impose anti-dumping duty.
5-57% anti-dumping duty on cold-rolled steel
- Government imposed an anti-dumping duty ranging from 5-57% on cold-rolled steel for a five year period.
- The duty was imposed on China, US, South Africa, Thailand and Taiwan. Among these, a highest duty of 57.39% has been levied on steel from China.
- While 9.47% was levied on cold-rolled flat stainless steel products from the US; EU and Thailand were levied 29.41-52.56% and 5.39% respectively.
Anti-dumping duty a welcome step, says JSW steel
Firms including SAIL, JSW Steel and Essar Steel have in recent months complained that surging imports are squeezing profitability. Referring to the anti-dumping duty, Seshagiri Rao, joint managing director at JSW Steel said that it was a welcome step because dumping is hurting Indian manufacturing sector.
Reasons for slapping anti-dumping duty
- The slapping of anti-dumping duty on stainless steel imports follows the government's introduction of a 20% import tax on some steel products in September, which failed to contain losses for Indian steel companies.
- The government observed that the performance of domestic industry has deteriorated due to the impact of dumped imports.
- The move thus could help local companies suffering from cheaper imports.
Minimum import prices to save domestic steel producers
- India has imposed Minimum Import Prices (MIP) on certain steel products to shield the domestic steel industry from cheaper imports.
- The move may help companies such as JSW steel, SAIL, Tata Steel, etc to revive their earnings.
- However, MIP will be not be applicable on stainless steel, American Petroleum Institute(API)-grade steel and will be applicable for 6 months initially which may be further extended.
Protectionism may not help?
- While the steel producers are happy, the steel consuming industries are not.
- The MIP will increase steel prices in the range of ₹3000-5000 per tonne in the coming 3-5 months.
- The rise in steel price will increase the downstream industries' input costs significantly.
- This may even force many steel consuming industry to the brink of shutdown, ultimately rising the stressed assets of banks.