Why imposing Anti-Dumping duty is not working for Chinese Products? – UPSC GS3

Context: The Central Board of Indirect Taxes and Customs (CBIC) recently notified the imposition of anti-dumping duty on five products manufactured in China, including certain aluminium goods and some chemicals, for five years.
What is the anti-dumping duty?
  • It is a remedy sanctioned by the WTO to protect a member country’s domestic industry from imports that have been priced at levels below those prevailing in the exporting nation’s home market.
  • It has become one of India’s most widely used trade weapons, especially against a flood of cheaper Chinese imports.
  • As of February 2020, India had imposed anti-dumping measures on 90 Chinese products, with another 24 China-specific anti-dumping investigations in progress at the time.
Why imposing Anti-Dumping duty is not a good idea?
  • Imposition of anti-dumping duty, if the domestic applicant is a significantly large and relatively resilient manufacturer of the product, risks tilting the market dynamics in the Indian company’s favour. Both downstream industries, in the case of intermediate goods, and consumers likely face the consequences of reduced competition on final prices.
  • No impact on trade deficit: Also, efforts to narrow the sizeable trade deficit with China by targeted use of the levy have made little progress in addressing the widening gap, as imports have continued to largely outpace India’s exports.
  • Lack of personnel: The effectiveness of the measure in providing timely relief to smaller domestic manufacturers facing an existential crisis on account of suspected dumping has also been undermined in the past by shortage of personnel at DGTR.
Way Forward:
  • In the wake of the COVID pandemic, companies worldwide, are looking to de-risk their businesses from an over-reliance on China. This means there is an increased likelihood of more capacity in that country turning surplus and being used to produce goods for dumping overseas.
  • Hence, Indian policymakers should be ready with their strategy to boost India’s trade defences.