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KAUTILYA
Great
Mall of China
Indian
industry is clamouring for protection against dumping by China. Why?
By
Jairam Ramesh
Just
over two years ago, the Atal Bihari Vajpayee Government demonised China
saying our going nuclear was prompted by the threat from across the Himalayas.
Now, it is the turn of Indian industry. We are being told that Chinese
products and goods are being dumped in Indian markets.
Dumping
is said to take place when the export price is lower than the price normally
charged in the home market. Countries impose anti-dumping duties but only
after a prescribed process of investigation is gone through and "material"
injury to domestic producers is proven. In the past three years, of about
70 petitions put forward by Indian companies to the Union Commerce Ministry
for imposition of anti-dumping duty, 32 have been triggered by Chinese
imports.
Figures
with the Union Finance Ministry give some idea of the Chinese penetration.
In a dry cell battery market of about Rs 1,000 crore, imports from China
are about Rs 35 crore; in a writing instruments industry of about Rs 1,200
crore, Chinese imports are around Rs 50 crore; in an umbrella market of
about Rs 100 crore, Chinese imports are about Rs 4 crore; and in a locks
market of around Rs 100 crore, Chinese imports are placed at about Rs
4 crore. Thus, judged from a national market perspective, it is difficult
to support the contention that Chinese imports are swamping the country.
Moreover,
in some cases, Chinese imports do not compete directly with their Indian
counterparts. Take raw silk, for example. India produces around 15,000
tonnes of silk a year but this is of an inferior variety called multivoltine
silk. Our imports from China of about 7,000 tonnes a year are of the vastly
superior bivoltine variety which we do not produce. No wonder silk weavers
are happy with imports-which illustrates a more general point that while
dumping may be bad from a local producer's point of view, it may well
offer benefits to local consumers and users.
Garments,
toys, sports goods, plastic goods and a slew of household appliances are
all areas where Chinese goods have simply swamped world markets. Indian
industry cannot be blamed for lack of competitiveness in such sectors
where small-scale reservation has held us back. If this reservation is
removed, as it must, production will still take place in small units,
but not small as defined by us.
The Chinese
may well be dumping. China is not yet a member of the WTO and therefore
can get away with pretty much what it does specially since its companies
are not subject to the type of financial transparency as companies elsewhere
in the world, including in India, are. In a number of cases, Chinese selling
prices do not even cover raw material costs. Indian industry does deserve
a break on this score.
'Safeguard'
Duty: Anti-dumping duty investigation and imposition procedures are
long and cumbersome and the minimum time taken is around six months. That
is one reason why P. Chidambaram introduced the concept of "safeguard"
duty in his July 1996 budget. This is a duty imposed to deal with a sudden
surge in imports and to give timely but temporary relief to Indian companies
who are facing "serious" injury. But while anti-dumping duty
can be country-specific, safeguard duty is not. In any case, like the
anti-dumping duty, a quasi-judicial procedure has also to be gone through.
This means that even the safeguard duty will take a minimum four to five
months for imposition.
Indian industry
has called for faster completion of anti-dumping investigations and reliefs.
That call is justified but no process can take less than 90 days. But
the real problem is that we can be hurt more by the use of anti-dumping
duties by other countries on our exports than we can benefit by imposing
anti-dumping duties on imports. We, therefore, stand to gain by the abolition
of the very system of anti-dumping duties. India should play a leading
role in the WTO in this regard.
Since anti-dumping
duty takes time and is counter-productive, what can be done immediately
is to insist on goods coming into India conforming to Indian standards
specifications and displaying the maximum retail price in rupees. These
are called "non-tariff" measures to provide relief to local
producers facing unfair competition. And to deal with Chinese goods being
smuggled in from Nepal, we could renegotiate the 1996 bilateral treaty
and insist that India will allow duty-free imports from Nepal only if
there is, say, 30 per cent value-addition in that country itself.
However,
the broader point is that the Chinese manufacturing industry is more efficient
than India's. That is because the government there has engineered a competitive
advantage specially for labour-intensive manufacturing. This is an area
where, unfortunately, the Government's small-scale and fiscal policy and
poor infrastructure have denied and are still denying India the opportunity
of emerging as a world power.
(The
author is with the Congress party. These are his personal views.)
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