Word: Dumping

Subject: Economy

(Relevance: The term static economy is still in the news because of the problems in India and the WTO. Aspirants should also note this term to use it wisely in Mains GS III. Solve the MCQ after reading the article carefully.)

Why in the news?

Aruna Sharma, Former Indian Government Secretary written for The Indian Express that 5G technology will very soon enter the country. Major smartphone makers in India have already launched phones with 5G capability. However, the Indian fiber optic industry has suffered unfair competition from cheap imports from China, Indonesia and South Korea. These countries have been dumping their products in India at prices below the market price.

What is dumping?

“The World Trade Organization defines dumping as “a situation of international price discrimination in which the price of a product offered in the importing country is lower than the price of this product in the market of the exporting country”.

“Therefore, dumping is, in general, a situation of international price discrimination, that unfair trade practice which has a negative impact on international trade.

— In simple terms, when goods are exported by a country to a foreign country at a lower price than the price it charges in its own domestic market, it is called dumping.

To note: Dumping is legal under World Trade Organization (WTO) rules if the foreign country can reliably demonstrate the negative effects the exporting company has caused to its domestic producers. In order to protect domestic producers from dumping, countries use tariffs and quotas.

What do we mean by the term “antidumping” as a concept?

“The WTO Agreement does not regulate the actions of companies that practice ‘dumping’. It focuses on how governments may or may not respond to dumping — it disciplines anti-dumping actions, and is often referred to as the “Anti-Dumping Agreement”.

— Anti-dumping is a protectionist tariff imposed by a national government on foreign imports that are priced below the price it normally charges in its own domestic market.

— An anti-dumping duty is imposed to remedy the trade distortion caused by the dumping of goods. This fair competition tool is authorized by the WTO.

“From a long-term perspective, anti-dumping duties can reduce international competition from domestic firms producing similar goods.

To note: There is a difference between anti-dumping duty and countervailing duty.

— A countervailing duty is a customs duty on goods that have received some kind of government subsidy, either in the country of origin or in the exporting country.

“Anti-dumping duty is a form of customs duty on imports. It actually provides protection against the dumping of goods at prices substantially below normal value.

What is the WTO sunset review provision for anti-dumping duty?

— Unless revoked earlier, the validity of the anti-dumping duty is five years from the date of imposition. It can be extended for another five years through a sunset investigation or an expiry review.

“In simple terms, it is an assessment of the need for the continued existence of a program or agency.

Which authority in India administers trade remedies such as anti-dumping?

—Directorate of Trade Remedies, the supreme national authority under the Ministry of Trade and Industry which administers all trade remedy measures.

—Trade remedies include anti-dumping duties, countervailing duties and safeguard measures.

“His job is to provide trade defense support to domestic industry.

“In addition, it provides safeguards for exporters in the face of increasing cases of trade remedy investigations brought against them by other countries.

MCQ:

Consider the following options and select the incorrect option with respect to the concept of “dumping” –

(a) Directorate General of Trade Remedies, the supreme national authority under the Ministry of Commerce and Industry which administers all trade remedy measures, including dumping.

b) Dumping is the ability to flood a market with prices of products that are often considered unfair.

c) The WTO Agreement regulates the actions of companies that practice “dumping”.

(d) Anti-dumping duties may reduce international competition for domestic firms producing like goods.

Answer for previous MCQs-

UPSC Essentials: Reports, Policies and Data on Your Boards – NITI Aayog Gig Economy Report – (d)

UPSC Essentials: One Word A Day – VPN