An Analysis of Factors Influencing the Anti-dumping Behaviour in India Nandana Baruah Centre for Development Studies, Kerala, India The use of anti-dumping measures as a trade protection tool, has increased phenomenally during the last decade. One significant aspect of this new trend is the increasing involvement of developing countries. India is one such country which has emerged as a very frequent user of anti-dumping measures, surpassing even the traditional users. It had initiated more than 300 anti-dumping cases by the end of2002–03. Many of these cases are against developing countries. Most of the cases are concentrated in narrow range product groups, like chemicals and petrochemicals, iron and steel, pharmaceuticals and textiles. This study examines India’s experience with anti-dumping measures. The main objective of the study is to identify the factors which might have influenced the anti-dumping behaviour in India. Discussion of these factors shows that imports have increased considerably. This is particularly true for a number of developing countries facing dumping charges in India. At the same time many of the domestic producers of the like products have performed poorly during the last decade. Such trends may instigate the import competing industries to seek anti-dumping protection and may also influence theauthority to provide that. However, the results of our statistical exercise shows that, although imports and performance of the domestic industry, might have influenced the initiation of anti-dumping cases, these factors did not seem to significantly influence the final decision of the authority. The results rather indicated a tendency on the part of the authority to provide anti-dumping protection to industries, which arecharacterised by large number of firms. 1. INTRODUCTION T HE unprecedented rise in the use of anti-dumping measures is an important recent development in the arena of international trade policy. Though theuse of anti-dumping measures is not a new phenomenon in the history of tradepolicies, until the 1980s its use was confined to only a few traditional users suchas the USA, the EU, Australia, Canada and New Zealand. 1 Moreover, the measurewas used sparingly. For instance, during the 1960s all the GATT members togetherfiled only about ten anti-dumping petitions per year (Prusa, 2001). Until the early1970s, less than five per cent of anti-dumping cases resulted in duties (Blonigenand Prusa, 2003). But during the last decade there has been a phenomenal rise inthe use of this measure. The traditional users have been joined by a number of othercountries, the majority of which are developing countries such as Argentina, Mexico,India, Brazil, Turkey and South Africa. 2 These developing countries accounted formore than 60 per cent of the total anti-dumping initiations by the end of 2003. 3 Such an unprecedented rise in the use of anti-dumping measures in the lasttwo decades has led many economists to conclude that this new trend cannot beexplained merely in terms of economic rationale and that anti-dumping measureshave become the newest tool of trade protection. As the conventional barriers oftrade come down, countries are found to be using anti-dumping measures as a‘back door to protection’. In this context a number of studies have been carriedout examining factors which influence the anti-dumping behaviour of nations.These studies have pointed out that such anti-dumping behaviour has becomesubject to pressure from different sources. The WTO made the provision for The author gratefully acknowledges the helpful comments made by Dr. K. N. Harilal, Dr. ChandanMukherjee, Dr. A. Bhattacharjea and the anonymous referees. 1 It was first used by Canada as early as in 1904. 2 For a detailed discussion on the worldwide use of anti-dumping measures, see Prusa (2005). 3 Calculated by the author from the WTO anti-dumping database. ANTI-DUMPING BEHAVIOUR IN INDIA1171 © 2007 The Author Journal compilation © Blackwell Publishing Ltd. 2007 anti-dumping measures to provide relief to domestic producers, if excessiveimports cause injury to them. Therefore, injury to domestic industry should be theguiding principle for seeking as well as providing anti-dumping protection.However, as has been pointed out by these studies, the factors influencing anti-dumping behaviour of nations may go well beyond the economic performance ofthe domestic firms. The demand for anti-dumping measures may come from thedomestic industry, not because they are materially injured by dumping but dueto the ‘rent-seeking behaviour’ on their part. On the supply side, many times,the authority may agree to supply protection to conform to certain national tradeor commercial policy goals. Thus the available studies have tried to bring out theprotectionist nature of the anti-dumping measures. However, most of these studies are carried out in the context of traditional usersof anti-dumping measures. Even though the developing countries have becomemajor users, not many studies have examined the anti-dumping behaviour ofthese countries. India provides an interesting case in this regard. It is one ofthe new members in the club of anti-dumping users, which has initiated a largenumber of anti-dumping cases against many of its trading partners, surpassingeven the traditional users. This paper is an attempt to critically analyse theIndian experience with anti-dumping measures. The major thrust of the paper isto examine the factors which are likely to influence anti-dumping behaviour inIndia. We initially examine the possible factors which may influence the decisionof the stakeholders at various stages of the investigation, from the decision ofdomestic firms to file a petition for initiating the case, to the final decision of theauthority to impose duty. The focus of the analysis, however, is on the factorsthat actually influenced the final decision of the authority, i.e. whether or not toimpose anti-dumping duty. The paper is structured as follows. Section 2 briefly discusses trends and patternsin the use of anti-dumping measures by India. In Section 3 we discuss the likelyfactors that may influence the anti-dumping behaviour in India. In Section 4, weundertake a statistical exercise to examine the factors, which influenced the finaldecision of the authority to impose anti-dumping duty. Section 5 concludes the study. 2. ANTI-DUMPING DUTY AND INDIA: GENERAL TRENDS As Neils and Kate (2004) have noted, in developing countries, ‘the rise of anti-dumping has often gone hand in hand with a fundamental policy shift towardstrade liberalization’. This holds true for India too. India perhaps did not haveto resort to such contingent measures because of the inward-oriented economicregime, which relied heavily on conventional measures of protection. Importswere highly restricted through a number of tariff and non-tariff measures until thelate 1980s. However, since the 1990s there has been a gradual shift in the policy 1172NANDANA BARUAH © 2007 The Author Journal compilation © Blackwell Publishing Ltd. 2007 regime in India, which led to the opening up of the economy to foreign com-petition. Apart from the various unilateral economic reforms undertaken since 1991,the economy also had to reorient itself to the changing multilateral trade disciplineswithin the GATT/WTO framework (Chadha et al., 1998). The government pro-gressively liberalised imports by removing quantitative restrictions maintainedunder the balance of payments cover. Tariff rates also came down significantly. Thesimple average basic duty rate has declined from 128 per cent in 1991–92 to 22.4per cent in 2004–05 (Mathur and Sachdeva, 2005). However, as per the provisionsmade under the WTO agreement, India has maintained some ‘trade defensemeasures’, to protect the domestic consumers and producers from any adverseimpact of the removal of the quantitative restrictions. These include countervailingduty (CVD), anti-dumping duty, protection under safeguard provisions, etc. Likein the case of many other developing countries, the use of such measures hasshown a rising trend in India. Among them, the most frequently used is theanti-dumping measure. They accounted for more than 75 per cent of all contingentmeasures adopted at the end of the year 2002. 4 The first Indian anti-dumping legislation came into existence in 1985 when theCustoms Tariff (Identification, Assessment and Collection of Duty or AdditionalDuty on Dumped Articles and for Determination of Injury) Rules, 1985, werenotified. Sections 9A, 9B and 9C of the Customs Tariff Act, 1975, as amendedin 1995 and the Customs Tariff (Identification, Assessment and Collection ofAnti-dumping Duty on Dumped Articles and for Determination of Injury) Rules,1995, framed thereunder form the legal basis for anti-dumping and anti-subsidyinvestigations and for the levy of the duties. To administer anti-dumping andcountervailing measures in India, the Directorate General of Anti-dumping andAllied Duties was set up on 13 April, 1998, which acts under the department ofcommerce and industry. The Directorate General of Anti-dumping and AlliedDuties functions in the Department of Commerce in the Ministry of Commerceand Industry which is headed by the ‘Designated Authority’, who is also the‘additional secretary’ to the government of India in this ministry. The functionof the Designated Authority is to conduct the anti-dumping and anti-subsidy/countervailing duty investigations, against the exporting firms/companies ofother countries and to make recommendations to the central government forthe imposition of anti-dumping or anti-subsidy measures. Such duty is finallyimposed/levied by a notification of the Ministry of Finance. Thus, while theMinistry of Commerce recommends the anti-dumping/countervailing duty, it isthe Ministry of Finance which levies such duty. An appeal, if any, against theorder of determination or review thereof lies before the CEGAT (Customs,Excise and Gold (Control) Appellate Tribunal) and thereafter to the Supreme
ANTI-DUMPING BEHAVIOUR IN INDIA1175 © 2007 The Author Journal compilation © Blackwell Publishing Ltd. 2007 anti-dumping measures? Or what are the factors influencing such behaviour? Alarge number of empirical studies have been undertaken in this regard to identifythe factors influencing the anti-dumping behaviour of different countries. 8 In oneof the earliest studies, Takacs (1981) made the distinction between ‘protectionism’and the ‘pressure for protectionism’. While the pressure for protectionism comesfrom the domestic industry where dumping is experienced, protectionism isreflected in the ultimate decision of the government. According to her, both maybe subject to a number of pressures from various sources. One other major study,which investigated the influence of such forces on anti-dumping procedure, wasby Finger et al. (1982). They analysed the decision-making process of theInternational Trade Commission (ITC) of the USA, in the case of anti-dumping,CVD cases and the safeguard cases. 9 They considered the economic as well asthe possible domestic and international political influences. The study found thatthe technical economic factors, such as industry’s physical capital output ratio,industry average wage per worker and the extent of economies of scale, are moresignificant in case of anti-dumping and CVD cases, rather than political factors.But Hansen (1990), investigating all anti-dumping, CVD and safeguard cases forthe USA, found various political factors reflecting the importance of industriespetitioning the ITC, in the districts of members of the ‘Ways and MeansCommittee’ to be significant determinants of ITC decisions. 10 She also foundeconomic factors such as percentage change in industry employment, marketshare and the US trade deficit to be significant. Moore (1992) also found that botheconomic and political factors matter in anti-dumping cases. However, the methodologies adopted by these studies were criticised by Baldwinand Steagall (1993). They criticised Hansen (1990) for clubbing together anti-dumping, CVD and safeguard cases, as the injury criteria for safeguard and anti-dumping/CVD cases differ. According to them, even in the case of anti-dumping andCVD, though the statutory criteria are identical, the determinants may significantlydiffer. Therefore, considering these together is also not appropriate, as was doneby Finger et al. (1982). Besides this, both of these studies considered the four-digitSIC sector which covers the product about which the petition has been made,as a proxy for the economic characteristics of that product. But a particularfour-digit sector includes a lot more other products than the one under con-sideration; the economic characteristics of those may not be same as that of theproduct concerned. To overcome the first drawback, Baldwin and Steagall (1993) 8 See Blonigen and Prusa (2003) for a survey of these studies. 9 ITC is responsible for making the injury determination. 10 She ran separate regressions for different commissioners. Moreover, she used a ‘two-step nestedlogit model’, where the industry first decides whether to petition and then the petition is eithersuccessful or not. The advantage of this econometric specification was that she could show that thesecond-stage outcome decision affects the first-stage petition decision in a statistically significantmanner. 1176NANDANA BARUAH © 2007 The Author Journal compilation © Blackwell Publishing Ltd. 2007 run different regressions for anti-dumping, CVD and safeguard measures to findthe economic determinant for these cases. Second, they used industry performancedata from the individual reports of the ITC to ensure that the various economicfactors related to the decisions of the commissioners actually coincide with theparticular tariff line item covered by the petitions. 11 They found a number ofeconomic as well as political variables to be influencing the use of anti-dumpingmeasures. Among the economic variables, the ratio of total imports in the industryto the consumption of the product (the higher the ratio the more likely an affirmativedecision), percentage change in the capacity utilisation over the most recent years(greater decline in capacity utilisation leads to greater likelihood of affirmativedecision), appear as significant variables. However, surprisingly, factors likethe ratio of unfair imports to consumption, a decline in profits and changes inemployment did not show significance in case of either CVD or anti-dumping cases.Studies examining anti-dumping behaviour of the EU such as Tharakan et al. (1998)also bring out a similar tendency. They found that ‘political economy’ variables, suchas industry concentration, value added, capital intensity and average daily wages,significantly influenced the decision of the authority to impose anti-dumping duty.The influence of macroeconomic variables has also been highlighted by a numberof studies. These studies concentrate more on the government’s inclination toprovide protection rather than pressure for protection by domestic industries.This is due to the fact that there is a higher possibility that the government willconsider these factors, rather than individual petitioners. A number of domesticas well as external macroeconomic determinants of anti-dumping and also otherforms of contingent protection have been pointed out by these studies. Forexample, Leidy (1997) found domestic pressure in the form of unemploymentrate, overall capacity utilisation to have a significant bearing on the number ofnewly initiated cases. However, she could not find a significant relation betweenexternal pressure and anti-dumping initiations. On the other hand, Knetter andPrusa (2000) found external pressure, in the form of fluctuation in the exchange ratenot only affects the dumping determination, but it also affects the injury deter-mination – and these two effects move in opposite directions. An appreciation ofthe filing country’s currency will lead to a significant increase in anti-dumpingfilings. Again, a depreciation of the US dollar decreases import penetration, thusmaking an injury determination less likely. In a very recent study Aggarwal (2004),who considered the role of macroeconomic factors for all the anti-dumping usercountries, found trade-related pressures in the form of trade balance, and importgrowth to be a major concern for low and lower middle-income countries in 11 However, according to Blonigen and Prusa (2003), though this helps to get the data at a verydisaggregated level, it reduces the number of observations, because USITC while providing datain public reports does not release any confidential information. So those studies taking data fromUSITC reports could get data for about only 20 per cent of the total cases during the sample period. ANTI-DUMPING BEHAVIOUR IN INDIA1177 。。。。未完
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