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Uttar Pradesh Academy of Administration & Management

Lucknow

Anti Dumping,
Counter-veiling Measures
&
Dispute Settlement in WTO

Dr. Yohesh Bandhu


Giri Institute of Development Studies
What is Dumping
Selling goods abroad at a price below
that charged in the domestic market
In economics, "dumping" can refer to any kind of
predatory pricing. However, the word is now
generally used only in the context of international
trade law, where dumping is defined as the act of a
manufacturer in one country exporting a product to
another country at a price which is either below ...
What is its purpose in International
Trade?
Dumping is said to occur when the goods are
exported by a country to another country at a price
lower than its normal value. This is an unfair trade
practice which can have a distortive effect on
international trade. Anti dumping is a measure to
rectify the situation arising out of the dumping of
goods and its trade distortive effect.
The use of anti dumping measure as an instrument
of fair competition is permitted by the WTO. It
provides relief to the domestic industry against the
injury caused by dumping.
Does dumping mean cheap or
low priced imports ?
Dumping, in its legal sense, means export of goods
by a country to another country at a price lower
than its normal value. Thus, dumping implies low
priced imports only in the relative sense (relative
to the normal value), and not in absolute sense.
Import of cheap products through illegal trade
channels like smuggling do not fall within the
purview of anti-dumping measures.
Is anti dumping a measure of protection for
domestic industry?
Anti dumping, in common parlance, is understood as a
measure of protection for domestic industry. However, anti
dumping measures do not provide protection per se to the
domestic industry. It only serves the purpose of providing
remedy to the domestic industry against the injury caused
by the unfair trade practice of dumping.
In fact, anti dumping is a trade remedial measure to
counteract the trade distortion caused by dumping and the
consequential injury to the domestic industry. It can never
be regarded as a protectionist measure.
What are the parameters used to assess
dumping of goods from a country?
Dumping means export of goods by one country / territory
to the market of another country / territory at a price lower
than the normal value. If the export price is lower than the
normal value, it constitutes dumping.
Thus, there are two fundamental parameters used for
determination of dumping, namely, the normal value and
the export price. Both these elements have to be compared
at the same level of trade, generally at ex-factory level, for
assessment of dumping.
How do you define Dumping

Normal
Value

Export
Price
Dumping
Margin
What is Anti-Dumping?
Article VI of GATT 1994

A product is said to be dumped


when its export price is less than
its normal value, that is less than
the sale of a like product in the
domestic market in the exporting
country.
Anti-Dumping Agreement
If a country exports a product at a price lower than the
price it normally charges on its own home market, it is said
to be “dumping” the product. Is this unfair competition?
Opinions differ, but many governments take action against
dumping in order to defend their domestic industries. The
WTO agreement does not pass judgement.

Its focus is on how governments can or cannot react to


dumping — it disciplines anti-dumping actions, and it is
often called the “Anti-Dumping Agreement”. (This focus
only on the reaction to dumping contrasts with the
approach of the Subsidies and Countervailing Measures
Agreement.)
What are the parameters of injury to the
domestic industry?

• SIGNIFICANT INCREASE
VOLUME EFFECT • In absolute term
• In relative term

• DEPRESSION
PRICE EFFECT • UNDER CUTTING
• SUPRESSION
Injury-Evaluation of Economic Indicators
Decline in output
Loss of sales
Lossreduced profits
of market share
Decline in productivity
Decline in capacity
Utilization
Injury-Evaluation of Economic Indicators

price effects

. reduced return on investments

l adverse effects on cash flow,


inventories, employment, …….
wages, growth, investments,
ability to raise capital, etc
CAUSAL RELATIONSHIP
Causal relationship to be demonstrated
in terms of Other factors to be considered

Volume and
price of Demand
other contraction
imports

Productivity Technology
Anti-Dumping Litigation

World Trade Organization:


Countries are responsible for bringing a case
to the WTO Dispute Resolution System.
India’s Ministry of Commerce determines if
anti-dumping occurred.
International Trade Commission (ITC)
determines if material injury occurs.
What are the essential requisites for
initiating an anti dumping investigation?
The following are essential for initiating an anti dumping
investigation: -
Sufficient evidence to the effect that ;
there is dumping
there is injury to the domestic industry; and
there is a causal link between the dumping and the injury,
that is to say, that the dumped imports have caused the
alleged injury.
The domestic producers expressly supporting the anti
dumping application must account for not less than 25% of
the total production of the like article by the domestic
industry.
Impact of Anti-Dumping Laws

Pros Cons
Prevents
Against Free Trade Concept
Monopolies
Trade Barrier – Lowers
Preserves Jobs
Economic Growth

Allows Firms Time to


Distorts the Market
Compete

Protects Vulnerable Protects Firms from


Industries Competition
What are other remedial measures?
How do they come into operation?
Apart from dumping, some of the countries also resort to
subsidisation of their exports to other countries. Export
subsidies, under the WTO agreement, are treated as unfair
trade practice and such subsidies are actionable by way of
levy of anti-subsidy countervailing duty.
There is one more trade remedial measure called
"safeguards" which are applied as an emergency measure in
response to surge in imports of a particular item.
Anti subsidy countervailing measure is in the form of
countervailing duty which is to be imposed only after the
determination
What are other remedial measures?
How do they come into operation?
A subsidy is said to exist;
if there is a financial contribution by the Government or any public
body within the territory of the exporting country, i.e. where-
there is a direct transfer of funds (including grants, loans and equity) by
the Government;
government revenue i.e. otherwise due is foregone and not collected
(including fiscal incentives, I.T. exemption
a government provides goods or services other than general
infrastructure;
a government grants or maintains any form of income or price support
which operates directly or indirectly to increase export of any article
from its territory.
What is not a subsidy?
However the subsidy which is for research activities conducted by the
persons engaged in manufacture or export or the subsidy which is for
assistance to disadvantaged regions with the territory of the exporting
country is not actionable.
In anti subsidy countervailing investigation, the Government of the
exporting country/ies is a party to the investigation in addition to the
exporters from these countries. The countervailing duty imposed on the
subsidised exports from a country shall not exceed the amount of such
subsidy/ies.
In India the Designated Authority for anti dumping is also the Authority
for administering anti subsidy countervailing measures.
What it Safeguards?
Safeguards, on the other hand, are applied when :
there is a surge in imports of a particular product irrespective
of a particular country/ies and,
it causes serious injury to the domestic industry.

Safeguards are applied in the form of either safeguard duty


or in the form of safeguard QRs (import licenses). These
measures are administered in India by an Authority called
Director General (Safeguards) who functions in the
jurisdiction of the Department of Revenue, Ministry of
Finance.
What is the legal framework ?
Sections 9, 9 A, 9 B and 9 C of the Customs Tariff Act, 1975
as amended in 1995 and the Customs Tariff (Identification,
Assessment and Collection of Anti-dumping Duty on
Dumped Articles and for Determination of Injury) Rules,
1995 and Customs Tariff (Identification, Assessment and
Collection of Countervailing Duty on Subsidised Articles and
for Determination of Injury) Rules, 1995 framed there under
form the legal basis for anti-dumping and anti subsidy
investigations and for the levy of anti-dumping and
countervailing duties.
Who are the interested parties ?

The interested parties to an anti dumping investigation include:


the domestic industry on whose complaint the proceedings are
initiated;
The exporters or the foreign producers of the like articles subject to
investigation;
The importers of the same article allegedly dumped into India;
The Government of the exporting country/ countries.
The trade or business associations of the domestic
producers/importers/user industries of the dumped product.
Conditions for initiation of Anti
Dumping investigation?
The Designated Authority shall not initiate an anti-dumping
investigation unless it receives a well-documented application/petition,
which should help it determine:
that the domestic producers/petitioners filing the petition and/or
expressly supporting the petition account for at least 25% of total
domestic production of the like article in question.
The application is deemed to have been made by or on behalf of the
domestic industry, and that there is sufficient evidence furnished by the
petitioner/s
regarding;
Dumping of goods in question;
Injury to the domestic industry; and
A causal link between the dumped imports and alleged injury to the
domestic industry.
Part-II
Countervailing Measures
Countervailing measures are measures that can be undertaken whenever an
investigation, by the investigating authority of the importing country, has led to
the determination that the imported goods are benefiting from subsidies, and
that they result in an injury.

Countervailing measures may take the form of countervailing duties or


undertakings by the exporting firms or by the authorities of the subsidising
country.
Subsidies and countervailing measures
The World Trade Organization (WTO) Agreement on
Subsidies and Countervailing Measures (the SCM Agreement)
deals with government subsidization.
Subsidization occurs when a government provides its
producer(s) with financial contributions that give the
producer(s) an advantage in the market place. This support
may, in turn, negatively affect other countries’ industries and
trade. The objective of the Agreement is to curb the use of
such government assistance.
The SCM Agreement does two things:
It defines those types of subsidies that distort trade:
generally, the most ‘trade-distorting’ subsidies are those
aimed at promoting exports or displacing imports, or those
given to specific industries; and
It sets out rules for trade actions that countries may take to
counter such subsidization by other countries. Trade actions
may be pursued multilaterally through the WTO Dispute
Settlement Body, or unilaterally through countervail action.
Description of the SCM Agreement:
Subsidies that are prohibited by the Agreement (‘red light’
subsidies) are those that are considered the most trade-
distorting.
There are two types of prohibited subsidies: subsidies that
are contingent on export performance and those that are
contingent on the use of domestic over imported goods.
There are other subsidies, i.e. specific subsidies, that, while
not prohibited, are subject to trade action under the
Agreement (actionable or ‘amber light’ subsidies).
Non-specific (i.e. generally available) subsidies fall in the non-
actionable category (‘green light’ subsidies) under the
Agreement. They are considered the least trade-distorting
type of subsidies, and are not subject to trade action.
Treatment of developing countries:

The SCM Agreement currently provides


for special and differential treatment of
developing economies, including
exemptions and transition periods
related to prohibited subsidies, and
differential treatment in the conduct of
countervailing duty investigations.
Countervailing duty action and linkages
with other agreements:
Changes to the SCM Agreement will not be
negotiated in a vacuum. We will have to consider
developments on other fronts. In particular,
Canada’s negotiating position with respect to
subsidies may reflect developments in the ongoing
agriculture and services negotiations, as well as the
outcome of WTO disputes, such as ongoing WTO
cases that deal with countervailing duty rules.
Subsidies and Countervailing Measures
1. Enterprise-specificity: A government targets a particular company or
companies for subsidization;

2. Industry-specificity: A government targets a particular sector or sectors for


subsidization.

3. Regional specificity: A government targets producers in specified parts of it's


the territory under its jurisdiction for subsidization.

4. Prohibited subsidies: A government targets export goods or goods using


domestic inputs for subsidization. As product specific subsidies directly affect
trade and are most likely to have adverse effects on the interests of other
Members, the SCM agreement deals more stringently with these subsidies and
these are termed as ‘Prohibited Subsidies' by the WTO SCM agreement.
Continued……….

Two categories of subsidies are defined as prohibited


subsidies by the Article 3 of the SCM Agreement. The first
category consists of subsidies which are contingent on export
performance and the second category consists of subsidies
for use of domestic goods over imported goods ("local
content subsidies").

All specific subsidies are actionable under the SCM


agreement. But depending upon the trade distorting nature
of specific subsidies, the SCM agreement deals differently
with prohibited subsidies and other types of specific
subsidies.
Prohibited, Actionable and Non-actionable Subsidies
Type of Non-Countervailable Countervaila
Remedies
Subsidy Subsidies ble Subsidies
Non - a) For general infrastructure
Actionable
Subsidies b) Non-specific subsidies
Specific but non-prohibited
subsidies, if they do not -Consultations
cause adverse effects, i.e.: Specific but
non-prohibited -Dispute
Actionable - No injury subsidies, if Settlement
Subsidies they do cause through WTO
- Benefits not nullified or adverse -Countervailing
impaired effects measures
- No serious prejudice
caused
Export Dispute
subsidies Settlement
Prohibited
through WTO or
Subsidies Local content
Countervailing
subsidies
measures
Source: Adapted from UNCTAD (2000)
Part-III
Dispute Settlement

In the GATT, the adjudication of disputes among


parties. In the WTO this is done by the dispute
settlement mechanism.

procedure used to settle disputes. State-to-state


disputes propose a process that evolves from
consultations to mediation or conciliation,
arbitration, formation of a tribunal, a decision and
procedures for non-compliance with a tribunal
decision. ...
Dispute settlement is the central pillar of the multilateral
trading system, and the WTO’s unique contribution to the
stability of the global economy. Without a means of settling
disputes, the rules-based system would be less effective
because the rules could not be enforced. The WTO’s
procedure underscores the rule of law, and it makes the
trading system more secure and predictable. The system is
based on clearly-defined rules, with timetables for
completing a case. First rulings are made by a panel and
endorsed (or rejected) by the WTO’s full membership.
Appeals based on points of law are possible.
Significance of WTO’s Dispute Settlement
Understanding
DSU: Termed as WTO’s ‘Most Individual
Contribution’
DSU procedure underscores the Rule of Law, makes
the trading system more secure
Nature of Dispute: (a) Adoption of trade policy
measure that violates a WTO Agreement; or (b)
Not living up to obligation under a WTO
Agreement
The DSM
60 days Consultations, mediation, etc
45 days Panel set up and panellists appointed
6 months Final panel report to parties
3 weeks Final panel report to WTO members
Dispute Settlement Body adopts report (if no
60 days appeal)
Total = 1
year (without appeal)
60-90 days Appeals report
Dispute Settlement Body adopts appeals
30 days report
Total = 1y
3m (with appeal)
First stage: consultation (up to 60 days). Before taking any
other actions the countries in dispute have to talk to each
other to see if they can settle their differences by
themselves. If that fails, they can also ask the WTO director-
general to mediate or try to help in any other way.

Second stage: the panel (up to 45 days for a panel to be


appointed, plus 6 months for the panel to conclude). If
consultations fail, the complaining country can ask for a
panel to be appointed. The country “in the dock” can block
the creation of a panel once, but when the Dispute
Settlement Body meets for a second time, the appointment
can no longer be blocked (unless there is a consensus against
appointing the panel).
Before the first hearing: each side in the dispute
presents its case in writing to the panel.
First hearing: the case for the complaining country
and defence: the complaining country (or
countries), the responding country, and those that
have announced they have an interest in the
dispute, make their case at the panel’s first hearing.
Rebuttals: the countries involved submit written
rebuttals and present oral arguments at the panel’s
second meeting.
Experts: if one side raises scientific or other technical
matters, the panel may consult experts or appoint an expert
review group to prepare an advisory report.
First draft: the panel submits the descriptive (factual and
argument) sections of its report to the two sides, giving them
two weeks to comment. This report does not include findings
and conclusions.
Interim report: The panel then submits an interim report,
including its findings and conclusions, to the two sides, giving
them one week to ask for a review.
Review: The period of review must not exceed two
weeks. During that time, the panel may hold
additional meetings with the two sides.
Final report: A final report is submitted to the two
sides and three weeks later, it is circulated to all
WTO members. If the panel decides that the
disputed trade measure does break a WTO
agreement or an obligation, it recommends that the
measure be made to conform with WTO rules. The
panel may suggest how this could be done.
The report becomes a ruling: The
report becomes the Dispute
Settlement Body’s ruling or
recommendation within 60 days
unless a consensus rejects it. Both
sides can appeal the report (and in
some cases both sides do).
Thank You
yogeshacademic@gmail.com
www.yogeshacademic.webs.com
(+91) 94151 18971
A worldwide survey was conducted
by the UN
the only question asked was
Would you please give your honest
opinion about solution to the food
shortage in the rest of the world?
The survey was a great failure
In the Africa they don’t know what
“food” meant
In India and SA they don’t know about
the “honest” meant
In Europe they don’t know about what
“shortage” meant
In China they don’t know about
“Opinion” meant
In the Middle East they don’t about
what “solution” meant
In South America they don’t know
about what “please” meant
And in the US they didn’t know what
the “rest of the world” meant !!!!