Anti dumping regulations:

Common mechanism to protect domestic industries vital

by Bandula Dissanayake

It is important to implement anti-dumping regulations in Sri Lanka. In other words a common mechanism to protect the domestic industry from unfair trade practices has become a necessity.

Most of the emerging economies such as India, Brazil and China are already practicing it to protect local industries. Over the past decade, China and India have rapidly increased their use of anti-dumping laws, the world's most dominant form of trade protectionism, against their trading partners.

Legal studies

The international law on anti-dumping was drafted primarily by Americans and Europeans. They were among the first to take advantage of these rules and remain among the most active users of anti-dumping sanctions. Not surprisingly, legal studies on anti-dumping have tended to focus on American and European practices.

In Sri Lanka, the Anti-Dumping and Countervailing Duties Bill was presented to Parliament by the Minister of Trade, Commerce, Consumer Affairs and Marketing Development and Minister of Highways in February 2006, to give effect to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and the Agreement on Subsidies and Countervailing Measures.

This regulation was meant for the investigation and imposition of anti-dumping duties and countervailing duties with regard to products imported to Sri Lanka. The Director General of Department of Commerce was named as the authority for investigating the regulations under the supervision of an inter-ministerial committee, which assures the process of application to higher level of involvement.

Principles

The Bill was not adopted as an Act at that time. It is vital to take appropriate measures to implement the same to protect local industries.

The General Agreement on Tariffs and Trade (GATT) lays down the principles to be followed by the member countries for imposition of anti-dumping duties, countervailing duties and safeguard measures.

Pursuant to GATT, 1994, detailed guidelines have been prescribed under the specific agreements which have also been incorporated in the national legislation of most of the member countries of the WTO.

Dumping is said to take place when an exporter sells a product to a country at a price less than the price prevailing in its domestic market. It is also recognised that price discrimination in the form of dumping is a common international commercial practice. It is also not uncommon that the export prices are lower than the domestic prices of the exporting country.

Therefore, from the point of view of anti-dumping practices, there is nothing inherently illegal or immoral about the practice of dumping.

Normal value

However, where dumping causes or threatens to cause material injury to the domestic industry of the importing country, the designated authority should investigate and impose of anti-dumping duties.

Dumping occurs when the price of goods imported into a country is less than the Normal Value of 'like articles' sold in the domestic market of the exporter. Imports at cheap or low prices do not per se indicate dumping.

The price at which 'like articles' are sold in the domestic market of the exporter is referred to as the 'Normal Value' of the articles. The normal value is the comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country or territory.

The local industry must show that dumped imports are causing or are threatening to cause material injury to the 'domestic industry'. Material retardation to the setting up of an industry is also regarded as injury. Sufficient evidence must be provided to support the contention of material injury. Injury analysis can broadly be divided into two major areas, 'The Volume Effect' and 'The Price Effect'.

Volume effect

The Designated Authority may examine the volume of the dumped imports, including the extent to which there has been or is likely to be a significant increase in the volume of dumped imports, either in absolute terms or in relation to production or consumption in the domestic market, and its effect on the domestic industry.

Price

The effect of dumped imports on prices in the domestic market for 'like articles', including price undercutting, or the extent to which the dumped imports cause price depression or preventing price increases for the goods which otherwise would have occurred.

The consequent economic and financial impact of the dumped imports on the concerned domestic industry can be demonstrated, inter alia, by: decline in output, loss of sales, loss of market share, reduced profits, decline in productivity, decline in capacity use, reduced return on investments, prices adversely affecting cash flow, inventories, employment, wages, growth, investments and raising capital.

The writer is the Secretary General and CEO of the National Chamber of Commerce of Sri Lanka.