If you open the pages of a business newspaper nowadays, you’ll find that they are infected with the following headlines:
The Trade Wars Begin
China’s dumping policy rattles India!
China and India clash over cheap steel imports
India, China spar over steel dumping
India files Anti-Dumping Case against China- “Get in Line!”
Dumping has become a major issue in India in the post liberalization (after 1991) period.Developing nations like India, that had erected high tariff and nontariff barriers to protect the domestic industries, have been forced to reduce the tariff and nontariff barriers under WTO agreements.
A number of Indian industries is feeling the heat of the competition from rising imports and there are also charges of dumping by foreigners. India initiated the first anti-dumping action in 1992.
According to a WTO report, India, US, and Brazil were the leading initiators of anti-dumping investigations in 2015. With the domestic steel sector being in crisis, India is already investigating several dumping cases on different hot and cold rolled steel products.
The government has initiated a probe into dumping of certain radial tires from China that are used in buses, lorries and trucks and may end up imposing the duty on them to protect the domestic industry. TheDirectorate General of Anti-Dumping and Allied Duties (DGAD) has found “sufficient prima facie evidence” of dumping of these tyres from China.
A war over steel imports has broken out yet again between the world’s two largest producer nations: China & India.
China is the world’s biggest steel producer, accounting for around 822 million tons a year. Driven largely by a fast track economy in the past quarter century, China’s steel output has grown by more than 12 times it’s size in the ’80s. In comparison, the EU’s output fell by 12% while U.S. output has remained flat. Of late, China has found itself in the midst of dumping controversies involving many countries it sends exports to, including the U.S., the European Union, and Australia.
Trade between China and India has been growing but individually, the two are polar opposites so far as global exports are concerned. India’s exports account for just 1.7% of world trade, compared with nearly 12% for China’s. China exported 112 million metric tons of steel in 2015, which were 25% more than India’s total production of steel. India produced 92 mmt of steel in its 2014-15 fiscal year, while it imported over 9.32 mmt of steel, of which, an estimated 30% came from China.
Anti-dumping duties are used to tackle “dumping,” a legal definition for imports whose price is lower than their production cost (predatory pricing model). An exporter sets steel prices lower than production costs and floods other markets with such steel products.
Despite China signaling moves to cut its excess steel production capacity, industry chiefs say the country has declared metal “war” that has had a “devastating” impact for the rest of the world’s industry.
Overcapacity in the steel industry has been a thorn in the side of the sector in recent years, pushing prices down and making it harder for some steel companies to survive.
China’s low-cost metal producers have been widely cited as the main culprit for the glut. In particular, the world’s second-largest economy has been accused of “dumping” cheap steel on to global markets, due to a slowdown in domestic demand, in a bid to gain market share. However, Beijing has denied any wrongdoing and has said that its costs are lower than other producers.
Ron Wyden, an American politician, has rightly said- “ Trade wars aren’t started by countries appealing to respected, independent trade authorities rather, trade wars begin when one country decides to violate international trade rules to undercut another country’s industries.”