Revisiting the antidumping laws
There is also a growing feeling in business circles for changing the Antidumping Duty Ordinance, 2000 by inserting in it a public or community interest clause, as it is called in the European Union (EU) to block application of punitive duty, if it is found hurting exports.
Generally, countries invoke antidumping laws to restrict the inflow of low priced finished goods to protect their domestic industries--- and not raw material. “But our law is being used to restrict imports of low-priced industrial raw material in the name of preventing injury to its local manufacturers rather than stopping the flooding of the domestic market with finished imported goods,” says Akber Sheikh, a yarn producer from Lahore and an expert on WTO laws.
Save in one case when ceramic tiles from China were brought under punitive duty, in all other cases, antidumping investigations were launched to restrict import of raw material for the local industries.
“Majority of the NTC rulings have been given against the foreign suppliers of raw materials for different value added industries. That makes a huge case for undertaking a comprehensive review of the working of the NTC as well as the antidumping law that was promulgated without consulting the stakeholders,” argues Sheikh.
The industry is of the view that punitive duties should be imposed only under the oversight of a ministerial committee with powers to decide if the action is actually in the country’s economic interest..
The WTO Agreement leaves it for the member states to decide the quantum of antidumping duty.. “It could be in the full measure of the dumping margin or at a lesser level sufficient enough to eliminate injury to the domestic industry or it may not be imposed at all in the public interest. The WTO Agreement stipulates only minimum standards for the use of antidumping measures in case they are resorted to,” Sheikh says.
He insists that a cost benefit analysis is necessary before antidumping duty is imposed in order to introduce a balance between the benefit that would be derived by local companies that are in effect a domestic intermediate industry and the cost that would accrue to the domestic value adding and re-exporting industry as well as to the economy and all others affected, including domestic consumers. “A cost benefit analysis would also take into account the consequent loss of revenue by way of lost import duties,” he says.
The domestic antidumping laws of at least 50 countries contain provision for public or community interest. Pakistan itself has twice been a beneficiary of the EU Community Interest. In some cases, including those of import into the EU of grey fabric, antidumping duty on Pakistani exports was not imposed. It was because grey fabric is the raw material for its value-added industry. But when the issue of dumping bed linen was raised, the EU didn’t take long to penalise Pakistan.
Sheikh argues that the insertion of public interest clause in the domestic law becomes all the more important because foreign suppliers don’t bother to contest allegations of dumping in Pakistan as “our imports constitute negligibly small part of their total sale volumes”.
For example, only two Chinese polyester suppliers out 29 took pains to defend themselves and that too when their buyers promised to pay larger chunk of the expense. Pakistan imports only around 55000 tonnes of polyester a year as its local manufacturers still enjoy a 4.5 per cent tariff protection and eight per cent freight and other expense advantage.
“Those who defended their position before the commission were let off without any penalty while 10 per cent punitive duty was imposed on the rest of them. A similar situation arose when the NTC had proceeded against polyester suppliers from the Far East -- Thailand, Malaysia, Indonesia and Korea -- and a similar decision was taken,” Sheikh says.
The threat of import is basically used by the textile exporters as a tool to force domestic producers from raising their prices at their whims. But imposition of antidumping duties defeats this objective. Sheikh says, the antidumping duties usually results in the prices of the raw material imports shooting up. Now the two Chinese suppliers, who were let off the hook, have jacked up their prices by five per cent because of lack of competition from their rivals after imposition of antidumping duty on them, he contends. “Though no dumping was proved but we are still forced to bear additional cost.”
Antidumping duties also help to push profits for local polyester staple fibre producers, who jack up their rates by a margin equal to antidumping duty.
“Polyester producers have admitted to the fact that they set their prices relevant to the price of imported fibre. Thus, a cost benefit analysis of antidumping duty imposition becomes all the more relevant. The advantage that polyester companies have begun to derive as a result of the misuse of the antidumping regime explains their opposition to a cost benefit analysis in consideration of public interest,” insists Sheikh.
Apart from serving as a protectionist tool, in certain cases antidumping duties and even the initiation of an antidumping investigation results in the elimination of competition by bringing import volumes virtually to zero rather than ensuring fair competition.
“In case of polyester staple fibre industry, the antidumping duties afford a protected market to polyester companies by insulating them from imports and restricting procurement options for the textile industry,” underscores Sheikh. “If a local company or companies need protection, the government is welcome to do it from its own pocket. But it is unfair to hurt the value-added industry and exports, particularly at a time when the manufacturing is reeling under the burden of high cost of doing business, energy crunch and global slowdown in demand.”