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:
- A domestic industry files a complaint.
- An investigation assesses dumping margins (export price vs. normal value), injury, and causality.
- 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)
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:
- A domestic industry files a complaint with evidence of subsidies and injury.
- An investigation confirms the subsidy’s existence, calculates its value (subsidy margin), and assesses harm.
- If proven, a duty is levied, typically equal to the subsidy amount, to raise the import price to a fair level.
| 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 |
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
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For Prelims: World Trade Organisation (WTO), Anti Dumping duty
For Mains: GS III - Economy
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