Three Trade Defence Measures Distinguished

By Hansa Sinha

We now know that Anti Dumping measures, Safeguard Measures and Anti-subsidies and Countervailing measures are the three principal trade defence agreements under WTO. Simply put, using these three duties can be levied on the foreign countries whose products come into India. Now under which circumstances the duty may be imposed are different for all three.

Let’s start with Anti Dumping. If a company let’s say A sells (exports) its product let’s say Milk chocolates to India at Rs. 100 per piece. However, for the same chocolates it charges Rs. 500 in its home country. Then A is ‘dumping’ the milk chocolates in India. Now all the companies which are making comparable milk chocolates at the price of 500 in India are getting affected (material injury) by this pricing. To correct this, a case maybe formed and the Government of India may levy an anti dumping duty on the all milk chocolates from company A into India. Company A will be forced to sell at Rs. 500 in India and thereby maintaining the competitive prices.

Now, let’s see where Subsidies and Countervailing measures would apply. The aim of countervailing measures is to neutralize the negative effect of subsidies. Now the company A producing the same yummy milk chocolates is getting interest free loan (subsidy) to expand business or production or some nice thing which gives it an edge as compared to the companies selling milk chocolates in India. In such a case India can use the WTO’s dispute settlement procedure and can ask the home country of A to withdraw the subsidy. But, as you might have guessed subsidies at times have noble purposes. They may help the environmental or poverty situation of that country. In such a case the home country of company A will not be in a position to withdraw the subsidy. This is where the countervailing duties come into the picture. India can then charge countervailing duties on the subsidized milk chocolates coming into India.   However, the application of a countervailing duty is not as simple as just that.

Safeguard measures imply greater volumes of imports in India. Fathom a scenario where there is a sudden and sharp and a very significant increase in the imports of milk chocolates into India. Then the government after concluding that ‘serious injury’ is being caused to Indian companies, may levy Safeguard duties on those chocolates coming into India. It is different from anti dumping as this is not levied to correct an unfair situation. It simply allows the tariffs to be imposed to protect the milk chocolate industry of India (in this case). Sometimes it is said to provide a ‘breathing space’ to policy makers before they try to restore the situation further. Remember that the threshold of quantity of imports and injury from those imports is very high.

Thus, there they are, the three trade defence instruments distinguished.

Thank you for reading.

To read more : http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm

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