The Financial Express

Challenging trade partners' remedial actions

| Updated: March 22, 2021 21:42:09

Bangladeshi and Nepali jute goods faced anti-dumping duties in India Bangladeshi and Nepali jute goods faced anti-dumping duties in India

After trying for four years, Bangladesh has failed to make any progress on removal of Indian anti-dumping duties on Bangladeshi jute goods.  The latest attempt also turned fruitless during the second week of this month when a commerce secretary level talk between Bangladesh and India was held in Dhaka. In the meeting, Bangladesh team raised the issue to which India refrained from making any commitment. Representatives of the India government said that they would review the matter.

There is nothing to be surprised at the Indian stance. From the very beginning of bilateral talks, more than a decade back, the country remains consistent in its  attitude not to pay heed to Bangladesh's request. In fact, India imposed anti-dumping duties on Bangladeshi and Nepali jute goods on January 2017. India imposed anti-dumping duty ranging from $19 to $351.72 per tonne on the import of jute products, including jute yarn, twine, hessian fabric and jute sacking bags from Bangladesh for five years. Since then, Bangladesh has made several attempts to resolve the matter bilaterally.  For India, it was a calculated step under the World Trade Organization's (WTO) legal framework which focuses on 'how governments can or cannot react to dumping.' The Anti-dumping Agreement of the WTO also provides guidelines and tools to 'disciplines anti-dumping actions.'

INDIAN ANTI-DUMPING MEASURES: As India imposed anti-dumping duties following the procedures outlined in the WTO agreement, the country is unlikely to withdraw it on request only. The core idea behind the imposition of anti-dumping duty is to give protection to local Indian jute industry for the time being. Indian producers alleged that Bangladeshi producers and exporters exported jute products at prices lower than production cost by using government subsidies. Usually, if a firm exports a product 'at a price lower than the price it normally charges on its own home market,' it is termed as 'dumping' the product.

It is difficult to comprehend why authorities in Bangladesh has been trying to deal with the matter bilaterally for last four years. From the very beginning it was  clear that India would not withdraw the anti-dumping duty. In response to Bangladesh's request, it thus said that being a quasi-judicial measure, there is little room to settle through discussion. 

India has also imposed anti-dumping duties on Bangladeshi hydrogen peroxide and fishing net. Pakistan also imposed similar duty on hydrogen peroxide. As export of jute goods was much higher than these products, and some of the jute exporters showed their interest to fight against the imposition of anti-dumping duty, the authorities in Bangladesh gives more focus on this area.

To fight or challenge any anti-dumping duty imposed by any trade partner, it is important for the exporting country to thoroughly examine the whole procedure, from investigation to imposition. What is more important is to identify the flaws in the procedure followed by India. It is learnt that trade officials in Bangladesh has already pointed out a number of flaws in the procedure.  These were also mentioned in several bilateral talks with India.

As the WTO Agreement on Anti-dumping clearly sets out considerably detailed rules to follow by the investigating authorities of any member country, in the current case Bangladesh needs to check the Indian anti-dumping investigation procedure meticulously. Though India has very strong capacity in investigating dumping measures, it doesn't mean that all its anti-dumping measures are flawless and unchallengeable. Since the inception of the WTO in 1995, India has initiated some 1036 anti-dumping measures until the middle of 2020. Thus the country is the highest number of anti-dumping initiator in the WTO which has so far received notification of 6139 anti-dumping initiations by 65 members. One-fourth of Indian anti-dumping initiation is against China. India, as an exporter, also faced some 247 anti-dumping initiations by its different trading partners.  

Checking and determining the flaw in the imposition of anti-dumping measures is a  crucial step to challenge the measure-- imposition of duty to be precise.

As the anti-dumping measure is a legal issue, it has to be dealt with legally. As bilateral approach failed, the only option open for Bangladesh is to move to the Dispute Settlement Body (DSB) of WTO to seek remedy.

Now, resorting to DSB mechanism requires efficient manpower, time and money. Bangladeshi officials and experts need to identify the flaws in Indian measure and also assure that these are good enough to challenge the measure in international quasi-judicial platform. The next step is policy level decision or clearance to move ahead. This is the most crucial stage. By spending four years in the name of bilateral talks, it appears that policymakers at higher level have some discomfort to provide a green signal in this regard. The discomfort is psychological, probably due to the current relationship with India. Once Bangladesh moves to DSB, the bilateral trade dispute will be formally exposed to an international forum. There is, however, nothing wrong to do this as it is a well-recognised mechanism. Almost two decades ago, Bangladesh moved to DSB  to challenge Indian anti-dumping duty on lead-acid battery. The dispute, however, got settled at consultation stage before the formation of the panel for hearing and India withdrew the duty. So far, it is the only case in WTO where a least developed country (LDC) challenged a developing country.

There is also a matter of financial cost which is not a big deal for Bangladesh now. Even if the affected exporters do not want to bear some of the cost, the government can easily allocate some fund.  

There is little need to establish the argument that Bangladeshi producers and exporters didn't dump the jute products in Indian market. Nevertheless, by not challenging the Indian measure in DSB and killing time for four years, Bangladesh indirectly acknowledged that there was some dumping. It also indicates that the country does not have adequate skill and efficiency to deal with such trade remedial measures. 

INDONESIAN SAFEGUARD MEASURES: Last month, Indonesia imposed safeguard duties on ready-made garment (RMG) products of Bangladesh. The duties ranged from US$0.38 per piece to $11.29 per piece. Indonesian authorities argued that its local industry suffered a threat of serious injury mainly due to significant increase in volume of imports of RMG from Bangladesh.

In brief, safeguard measure is a measure that temporarily restricts import competition in order to give some breathing space to the domestic industry to allow it to adapt to new market conditions.

After issuing the notification of the imposition of the safeguard duties, a bilateral consultation between Dhaka and Jakarta took place on Tuesday last. In the meeting, Bangladesh strongly pointed out several flaws in the procedure and argued that the causal link with increased import from Bangladesh is week. It is to be seen, how Indonesian authorities respond finally as they are yet to make the imposition effective by enacting gazette notification.

Unlike anti-dumping measure, a safeguard measure has to be applied in a non-discriminatory manner. It means, it must be applied to all imports of the products at issue, regardless of origin and must not be applied selectively. Thus, once Indonesia imposes safeguard duties, these will be applicable to all its trading partners and not only to Bangladesh.

Nevertheless, targeting Bangladesh to impose safeguard on Most Favoured Nation (MFN) basis by Indonesia has some deep implications. It indicates that Indonesia has carefully chosen Bangladesh and probably presume that the country is not prepared to fight the move.

When Bangladesh is all set to graduate from LDC category by 2026, after getting two years extension by the United Nations, rising trade disputes expose a new area of challenge for the country. It is also a testing time and Bangladesh needs to put some additional effort to capacity building to fight these kinds of trade remedial measures. 

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