ANTI DUMPING DUTY

ANTI DUMPING DUTY

1. Context

India has imposed anti-dumping duty on five Chinese goods to protect domestic players from cheap imports from the neighbouring country.

2.What is anti dumping duty?

An anti-dumping duty (ADD) is a protectionist tariff imposed by a government on imported goods that are sold below their fair market value, a practice known as "dumping." Dumping occurs when a foreign company exports a product at a price lower than what it charges in its domestic market or below its production cost, potentially harming the importing country’s domestic industries. The duty aims to level the playing field by offsetting this price difference, protecting local businesses from unfair competition.

Legal Basis: Governed internationally by the World Trade Organization (WTO) under the Agreement on Implementation of Article VI of GATT 1994 (Anti-Dumping Agreement). It allows countries to impose ADD if dumping causes or threatens "material injury" to domestic industries.
Process:
1. A domestic industry files a complaint.
2. An investigation assesses dumping margins (export price vs. normal value), injury, and causality.
3. If confirmed, the government imposes a duty, typically calculated as the difference between the export price and the "normal value" (domestic price or cost-plus-profit in the exporting country)

3. Countervailing duties

Countervailing duties (CVDs) are tariffs imposed by a government on imported goods to counteract subsidies provided by the exporting country’s government to its producers or exporters. These subsidies—such as tax breaks, grants, or low-interest loans—can artificially lower the price of exported goods, giving them an unfair advantage in the importing country’s market. CVDs aim to neutralize this advantage, protecting domestic industries from subsidized foreign competition.

Legal Basis: Governed by the World Trade Organization (WTO) under the Agreement on Subsidies and Countervailing Measures (SCM Agreement), part of GATT 1994. Countries can impose CVDs if subsidies cause or threaten "material injury" to their domestic industries.
Process:
1. A domestic industry files a complaint with evidence of subsidies and injury.
2. An investigation confirms the subsidy’s existence, calculates its value (subsidy margin), and assesses harm.
3. If proven, a duty is levied, typically equal to the subsidy amount, to raise the import price to a fair level.

4. Differences between Anti Dumping and Countervailing duties

Aspect	Countervailing Duties (CVDs)	Anti-Dumping Duties (ADDs)
Purpose	Counteract foreign government subsidies	Counteract dumping by foreign companies
Target	Government subsidies	Private companies selling below fair value
Legal Basis	WTO SCM Agreement	WTO Anti-Dumping Agreement
Investigation Focus	Subsidies and their impact	Dumping and its impact
Calculation	Based on subsidy amount	Based on price difference
Example	Solar panels subsidized by a foreign government	Steel sold below home market price

5.Which Act in India governs the imposition of anti-dumping duties on foreign imports?

In April, the government temporarily waived import duties on 40 petrochemical products until June 30. At the same time, it initiated new stockpiling measures to maintain adequate domestic supplies of essential chemicals. Such requests often originate from downstream industries, including textiles and footwear, and are routed through the Ministry of Commerce and Industry.
According to an official, the Ministry of Textiles has also sought a temporary halt to certain anti-dumping investigations involving chemical intermediates and has requested a postponement of investigations on inputs such as elastomeric fibre yarn and viscose rayon filament yarn in view of disruptions caused by the ongoing conflict.
Among all sectors in India, the chemical industry enjoys one of the highest levels of trade protection. A review of India’s trade policy conducted by the WTO Secretariat over the past five years indicates that more than half (51%) of the anti-dumping measures currently in force pertain to chemical and allied industries. Products imported from China have been the primary focus of these investigations.
The issue of anti-dumping investigations has long generated disagreement between major manufacturers and downstream industries.
While anti-dumping duties are intended to shield domestic producers from unfair foreign competition, they often increase the cost of raw materials for MSMEs operating further down the value chain.
In the chemical sector, these effects are particularly significant because chemicals serve as critical inputs for approximately 80,000 downstream products manufactured in India, according to NITI Aayog.

6. World Trade Organisation (WTO)

The World Trade Organization (WTO) is an international body that regulates and facilitates global trade among its member nations. Established on January 1, 1995, under the Marrakesh Agreement, it succeeded the General Agreement on Tariffs and Trade (GATT), which began in 1948. Headquartered in Geneva, Switzerland, the WTO provides a framework for negotiating trade agreements, resolving disputes, and promoting free and fair trade. As of March 2025, it has 164 member countries, representing over 98% of global trade, with India as a founding member since 1995.

Key Functions of the WTO

The WTO oversees the implementation and operation of multilateral trade agreements negotiated by its member countries. These agreements cover goods, services, and intellectual property
The WTO serves as a platform for member countries to negotiate trade liberalization and resolve trade-related issues. Notable negotiations include the Doha Round, which focuses on development and reducing trade barriers
The WTO provides a structured process for resolving trade disputes between member countries. Its dispute settlement mechanism is binding and aims to ensure that trade rules are followed
The WTO conducts regular reviews of member countries' trade policies and practices to ensure transparency and adherence to global trade rules
The WTO provides support to developing and least-developed countries to help them integrate into the global trading system and comply with WTO rules
The WTO collaborates with organizations like the International Monetary Fund (IMF) and the World Bank to ensure coherence in global economic policy-making

For Prelims: World Trade Organisation (WTO), Anti Dumping duty

For Mains: GS III - Economy

Source: The Hindu

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ANTI DUMPING DUTY

Key Functions of the WTO

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