Insights

Why India is a late starter?

In trade defence laws, Anti- Dumping was the first to be adopted by WTO members in their national laws. The history of anti-dumping law is quite old, and dates back to nineteenth century. Canada ratified the first national Anti- Dumping Law in 1904, before United States in 1916. While GATT was being contemplated, during the Canadian round of negotiations from 1963 to 1967, Anti- Dumping laws attracted attention. Thereafter, the Anti- Dumping Code was evolved in the year 1967 and the same was adopted in Europe with an Anti- Dumping legislation of 1968. During negotiations from 1974 to 1979 held in Tokyo, various parties agreed to a new Anti- Dumping code which introduced amendments. Then came the updated version of GATT known as GATT 1994, by which WTO was created with 75 then existing members, and of which the European communities became the founding members.

India introduced Section 9A for the first time in the year 1991 by amending Customs Tariff Act, 1975. Section 9A was further amended to take effect from 1st Jan 1995, in order to synchronize with creation of the WTO.

It would thus appear that India has been quite a late starter in using anti-dumping law. A question that bags consideration and evaluation is: why India has been such a late starter of trade defence laws and what are the circumstances which have made India an aggressive user of these trade defence laws only now?

India maintained very strict trade policies and regulations for about 15 years after independence. Country’s focus remained industrialization upto 1965- 66 droughts when it was realized that too much industrialization left little resources for agriculture. Then with oil crisis country was forced to consider trade liberalization. However, the intensity of requirement for globalization (and therefore trade liberalization) was perceived in early 90s only.

Average customs duties in India were high during the periods before 90s owing to country’s ideology after independence. The same however had to be gradually reduced with change in stance of India towards trade liberalization and integration with global economy. By contrast, the customs duties in countries such as US, Canada, Europe, etc. were at quite lower levels during the period upto 90s.

As a result of these steep reductions in customs duties by the country, the Indian manufacturing sector faced a roller coaster situation. The prices trembled. No doubt that the customs duties on raw materials reduced proportionately and there were reductions in cost of production as well, as a result of decline in customs duties on raw materials. However, these roller coaster declines in customs duty did not result in decline in costs to the extent the industry was forced to reduce prices.

Such price reduction indeed was quite significant in then competitive era and led to either significant increase in imports or disproportionate decline in prices of the manufactured products.

The reductions were obviously too steep for the manufacturing sector to absorb and led to a significant dent on its performance. Under these circumstances, faced with significant price competitiveness, the industry resorted to use of trade defence measures. In fact, analysis of manufacturing in India would show that there are large a number of industries where the manufacturing sector was either wiped off or a large number of players became incompetitive, sick and eventually closed down.