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RCEP pact: Govt decision to pullback caused by failure of existing dumping duties on China

RCEP, RCEP members, ASEAN Summit, FTA, Chinese imports, RCEP consumer markets, Indian industry, American milk imports, 
  • By- Prabha Raghavan

Apart from political considerations, India's decision to pull out of the Regional Comprehensive Economic Partnership (RCEP) earlier this week was precipitated by the realisation that existing safeguards against a flood of imports from countries, such as China, had largely failed. Prime Minister Narendra Modi on Monday walked out of the mega trade deal, citing unresolved "significant outstanding issues". Commerce and Industry Minister Piyush Goyal said the decision is "absolutely final" unless "all" of India's demands are met and its national interests are safeguarded "without allowing India to become the dumping ground for other countries".

The decision assumes significance in the wake of complaints filed by the domestic industry on dumping of products. For instance, despite anti-dumping duties covering 75-80 per cent of Chinese steel products, India was unable to prevent the neighbouring country from pumping them into the country. Steel imports from China recorded an 8 per cent increase in the 12 months ended March 31, 2018, states a Parliamentary committee report submitted in February.

"This clearly shows that anti-dumping measures have become completely ineffective," stated the committee in its report. The Department of Commerce's view was that an increase in basic customs duty "will not be able to check the imports arriving from countries with which we have FTAs ... Hence, it is suggested that the current trade remedial measures (i.e. anti dumping on various products) may be converted to fix duty rates in USD per tonne in lieu of existing reference prices".

The reasons behind the decision

Despite anti-dumping duties covering nearly 75-80 per cent of Chinese steel products, steel imports from China recorded an 8 per cent increase in the 12 months ended March 31, 2018. Combined with this, the Department of Commerce's view that a rise in basic customs duty "will not be able to check" the imports arriving from countries with which preferential trade pacts are in place, led to India's decision to pull out of RCEP.

The Finance Ministry in October took action on dumping of flat rolled steel products from RCEP countries like China, Korea and Vietnam, imposing anti-dumping duties between $28 and $200 per metric tonne for six months.

The Parliamentary committee also found trade remedial measures like anti-dumping or countervailing duties to be ineffective in certain cases of imports as Chinese suppliers were "apparently re-routing the products from markets of other countries with which India has Free Trade Agreements". Such evasions of duties were depriving the government of "huge revenue." "One estimate suggests that due to the dumping of Chinese solar panel there is a loss of nearlytwo lakh jobs as nearly half of our domestic industry capacity remains idle," it said.

RCEP, touted to be the "largest" regional trade pact, will be signed in 2020 by ASEAN nations, China, Korea, Japan, New Zealand and Australia.

Various stakeholders had raised concerns that joining RCEP would leave India vulnerable to a "flood" of cheaper, mass-manufactured products, especially from China. The Commerce Ministry's Directorate General of Trade Remedies (DGTR) had initiated 888 investigations against imports from various countries till early this year. Between April 1, 2014 and November 6, 2019, DGTR had overseen 87 anti-dumping cases, of which nearly 68 per cent were against China.

The cost of initiating trade defence measures is high and, by the time duties are notified after "protracted" investigations by the Directorate General of Anti-Dumping and Allied Duties, "the injury caused to the domestic industry leaves it weak and bleeding forever," it stated.

Some trade experts had also flagged issues with implementation of the proposed "auto-trigger" mechanism that India had been pushing for during RCEP negotiations.

"Implementating safeguard mechanisms can prove difficult ... It is complicated to establish the causality between the increased imports and injury to the industry ... Chinese firms often escape via the net in anti-dumping cases. Even if Indian firms make valid arguments, establishing dumping by China becomes a tricky issue," said JNU Professor Biswajit Dhar.

In order to address the "poor implementation" of DGTR findings, quarterly coordination meetings have been conducted since August 2018 with Department of Revenue and Customs officials, wherein various issues are discussed.