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Trade defence: Anti-dumping duty on Chinese goods

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December 29, 2021

Why in news?

The Central Board of Indirect Taxes and Customs (CBIC) recently imposed anti-dumping duty on five products manufactured in China for 5 years in order to safeguard domestic producers.

What is Anti Dumping Duty?

  • Dumping is a process where a company exports a product at a price that is significantly lower than the price it normally charges in its domestic market.
  • An anti-dumping duty is a protectionist tariff imposed by a country on foreign imports that it believes as being dumped.
  • WTO trade rules include international regulation of anti-dumping measures.

Why did India impose anti-dumping duty now?

  • Companies worldwide are now seeking to de-risk their businesses from an excessive reliance on China in the wake of the COVID-19 pandemic.
  • In such a situation, in a country with huge manufacturing capacity like China, the prospect of dumping the surplus in overseas market increases.
  • Directorate General of Trade Remedies (DGTR) had found five products manufactured in China as being ‘dumped’ in the Indian market.
  • It is found that the domestic industry has suffered material injury due to the dumping and warrants a protective duty.

DGTR functions as an attached office of Department of Commerce, Ministry of Commerce and Industry.

  • The items include
    • Specific flat-rolled aluminium products for solar modules
    • Silicone sealants used in the manufacture of solar photovoltaic modules
    • Some chemicals like sodium hydrosulfite
    • Refrigerant (R-32) hydro fluorocarbon and hydro fluorocarbon blends
  • The anti-dumping duty a remedy that is sanctioned by the WTO has become one of India’s most widely used trade weapons, especially against a flood of cheaper Chinese imports.
  • So far India had imposed anti-dumping measures on 90 Chinese products

What will be the implications?

  • Anti dumping duty was imposed to favour Indian companies.
  • However there is a risk of distortion in market dynamics.
  • Imposing Anti dumping duty protects domestic companies from competition due to low priced foreign goods.
  • While the intention is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
  • Downstream industries, in the case of intermediate goods and consumers are likely to face the consequences of reduced competition on final prices.
  • However in the long-term, prices may come down due to advancement made by domestic industries.
  • They become equally competitive in international markets.

 

Reference

  1. https://www.thehindu.com/opinion/editorial/trade-defence-the-hindu-editorial-on-anti-dumping-duty-on-chinese-goods/article38058485.ece
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