ABSTRACT
The end effect of anti-dumping duty results in making the goods costlier for the consumers which may also include essential commodities such as medicines and other health care products. Consumer interest rarely finds a place in anti-dumping investigations. The regime under competition law also focuses on the issue of unfair trade practices by companies that affect fair competition in the market as well as injure the consumer interest but the goal of anti-dumping and Competition law diverge at the place also. This paper will be focusing the issues of divergence between anti- and competition law as well as consumer interest in anti-dumping investigation
In a place like India where medicine is a luxury to be afforded by the relatively affluent section of society in spite of several efforts by the government, it is the opinion of some that duties such as anti-dumping and countervailing duties may deny the poor Indian consumers the availability of life-saving drugs and other health care products. The Impact of trade liberalization is said to be neutralized by the imposition of anti-dumping duties therefore any anti-dumping investigation without consideration of consumer welfare may appear to be unfair and unreasonable.
The practice of dumping basically means selling commodities at below-cost prices in the foreign market which has an adverse effect on the domestic producers who may find it difficult to sustain the cheap foreign product. Therefore, each member state of the World Trade Organization is permitted within the purview of the General Agreement on Trade and Tariffs to impose after conducting the anti-dumping investigation a duty that will have the effect of raising the prices of the imported commodities in the local market and enable the local goods to compete with it. The practice is considered anti-competitive and unfair market practice as well. This paper basically focuses on the consumer interest in the anti-dumping investigation because ultimately it is the consumer who is the end-user of the commodity produced locally as well as imported goods. There is already a difference of opinion as to whether consumer welfare and interest should be considered in the anti-dumping investigation at all. But this disagreement is qualifying when access to essential commodities such as medicines and other health care products are subjected to anti-dumping duties.
Thus, Dumping occurs if a country sells at a lower price in an export market than in its domestic market. If such dumping injures the domestic producers in the importing country, under certain circumstances the importing country authorities may impose anti-dumping duties to offset the effects of the dumping. To brand normal business practice with the label “dumping” and to countervail it with an anti-dumping duty, is to provide domestic firms with an arbitrary and unwarranted degree of protection from competition that can only be costly in terms of national and consumer welfare.
The Economic Validation of consumer Interest
The Neoclassical Approach with the presumption of constant return to scale declares that “that anti-dumping policy protects domestic industries from competition but damage downstream industries and consumers[1]”. On the other hand, with the change in presumption to increasing return to scale the loss to consumer welfare can be avoided. As Webb said “that proceeding anti-dumping policy could benefit domestic producers and consumers. He found that the increase in domestic supply could compensate for the decrease in foreign supply under the assumption of an incomplete market and decreasing production cost[2]”. The aim here is not to eliminate the imposing of anti-dumping duty completely but rather suggest that a balanced approach would require reform of the current anti-dumping rules to include consideration of consumer welfare in the process of determination of anti-dumping duty in order to arrive at the actual injury.
Viner long back had argued that “From the point of view of the importing country as a whole, there is the sound economic case against dumping only when it is reasonable to suppose that it will result in injury to domestic industry greater than the gain to consumers.[3]” Consumers tend to largely benefit from dumping as it will allow them to have cheaper goods in the market as a result of dumping and thus antidumping duty prima facie appears to be against consumer welfare. As the antidumping duty will have the effect of raising the prices to protect the domestic industries from the alleged unfair competition. The only form of dumping ie predatory dumping is supposed to be injuring the consumers which aim to drive out the domestic industries and after it, the monopoly price will be charged to the consumer[4]. The clash of interest of producer and consumer has also been highlighted by Howse & Trebilcock, they observe that “With antidumping duties on the imported products, the domestic products will be more attractive to the consumers. Domestic producers will avoid direct competition with the producers in the foreign country. Therefore, if the anti-dumping duties were removed the consumers will benefit from the lower price level, but on the other hand, the producers might be seriously affected by losses from the low-priced imports”[5].
There is another branch of law i.e. Competition law, which is concerned with the broader aim of protection of competition and consumers in the market whereas the anti-dumping regime seeks to be focused on protecting the domestic industries. The Competition policy of India is aimed at promoting consumer welfare and improving economic efficiency in the market. The Competition Authority is having the jurisdiction to regulate the conduct of producers whose acts have an anti-competitive impact on the market as well as consumers. There have been several such cases where the Competition Commission had levied penalties on pharmaceutical companies for anti-competitive practices. The divergences may arise to decide whether the act should be subjected to anti-dumping investigation or inquiry by Competition Commission.
India is characterized by the second-highest population in the world with the highest consumer base and has appeared as the biggest user as well as the target of anti-dumping duty. But the lack of Infrastructure and liberalized policies to favor consumers have actually hurt the indigenous industries. The Policy inclined toward consumer welfare facilitated by competition law has affected the implementation of anti-dumping. We cannot deny the fact that the Indian market is flooded with cheap foreign goods, especially from China which has marginalized Indian producers.
Bridge stone tyre manufacturing (Thailand) v. Designated Authority[6] it was held that “imposition of anti-dumping, duty is subject to a positive finding on dumping, on injury as well as on the causal link between the two. Injury determination done by the D.A. for the domestic industry is faulty and not convincing. In relation to the matter, when the domestic industry cannot be said to have suffered an injury, there cannot be any anti-dumping duty levied on the subject goods. In the absence of injury to the domestic industry, the anti-dumping duty merely increases the prices of the imported goods for the domestic consumer and also provides a cushion to the domestic industry to increase their prices. The ultimate sufferer is the domestic consumer and imposition of anti-dumping duty in such a scenario cannot also be considered to be in the public interest”[7].
The major product categories on which anti-dumping duty has been levied are chemicals and petrochemicals, pharmaceuticals, fibers, steel, and other metals and consumer goods. Thus, primarily competition law focuses on consumer benefit and aims to cure price discrimination, predatory pricing, and other anti-competitive practices, whereas anti-dumping law focus on the interest of producers and their workers.
Anti-dumping and consumer interest
The worldwide marketplace is growing very swiftly. In the course of free trade, producers can export their products to other countries and gain contact with a bigger customer base. These manufacturers make more sales and create more profits. In addition, consumers tend to get an advantage from better international competition in the form of lesser prices and an augmented variety of products to purchase.
The investigation of anti-dumping by the designated authority to date does not ponder over the impact of the levy of anti-dumping duty on the consumer welfare which is the other significant object of competition law. During the Uruguay Round, members extensively discussed the inclusion of a public interest clause into the ADA. However, such a clause was not incorporated into the final draft of the agreement for lack of consensus. The relationship between the anti-dumping investigations and the competition law proceedings has been identified in the matter of Haridas Exports v. Float Glass Manufacturers Association[8], where the Hon’ble Supreme Court has held “that anti-dumping provision contained in the Customs Tariff Act do not in any way affect the power or jurisdiction of the MRTP Commission. The two Acts operate in different fields and have different purposes. Whether to allow import or not and the terms on which an item may be imported is a matter of policy and regulated by law and MRTP Commission cannot prohibit the import, its jurisdiction commences after the import is completed, and if any restrictive trade practice has taken place. Further, the levy or non-levy of anti-dumping or other duty being a legislative act pursuant to the exercise of powers under the Customs Tariff Act cannot be a subject matter of judicial review by the MRTP Commission as the two Acts substantially operate in the different fields……”
As the MRTP commission did not have the extraterritorial jurisdiction as held in the Haridas case but the position has undergone the change after the enactment of the Competition Act 2002 which has been specifically given extra-territorial operation and competition and anti-dumping laws are no more mutually exclusive.
The consideration of public or Consumer interest during the investigation of anti-dumping has been adopted in some of the jurisdictions such as Canada. Regulations developed under the Special Import Measures Act (SIMA) limit ‘person[s] interested in an inquiry’ to persons engaged in the production, purchase, sale, or trade of goods currently the subject of an investigation; persons engaged in the production of like goods that are the subject of an investigation; persons authorized by Parliament or the legislatures to intervene in the process; a user of any like goods subject to an investigation; and ‘any association whose purpose is to advocate the interests of consumers in Canada.’ Interestingly, the words “public interest” is not defined in either SIMA or the Regulations. Since the Tribunal is of the view that SIMA’s “primary aim… is to protect Canadian producers from injury caused by imports of dumped or subsidized goods,’ arguments in favor of consumer welfare are often rejected by the Tribunal. Most probably, the Canadian International Trade Tribunal (CITT) considers that a liberal interpretation of the public interest concern that would provide equal weightage to consumer welfare interests would make SIMA futile since the imposition of anti-dumping duty is simply an equal trade-off between domestic producers and domestic consumers”. For instance, if two dollars’ worth of anti-dumping duties is imposed on a product, the domestic producer derives a corresponding benefit of two dollars. Accordingly, domestic consumers suffer a loss of at least two dollars. In such cases it would be impossible to establish material injury to domestic industry and imposing antidumping duties in such cases is considered a transfer of wealth from consumer to producer. In a case before an anti-dumping tribunal in Canada (CITT).
Commissioner of International Trade Commission (ITC) Janet Nuzum and David Rohr remarked on the ITC studies on the adverse impact of antidumping laws on the US economy which provides a useful analysis “It must be remembered that the purpose of the antidumping and countervailing duty laws is not to protect consumers, but rather to protect producers. Inevitably, some cost is associated with this purpose. However, unlike the antitrust laws, which are designed to protect consumer interests, the function of the AD/CVD laws is, indeed, to protect firms and workers engaged in production activities in the United States. So it should not come as a surprise that the economic benefits of the remedies accrue to producers, and the economic costs accrue to consumers.” (ITC, 1995, pp. VIII-IX)
The emergence of the Competition law with the aim of consumer welfare has been the reason behind the perishing of many Indian industries and the anti-dumping law could prove to be helpful to a very limited extent. In the Indian context also inclusion of public or consumer interest in anti-dumping investigation appears required. India is densely populated with a huge consumer base therefore the interest of consumers cannot give way to the gain of producers. A fair anti-dumping investigation should always weigh the gain to consumers and injury to producers.
The jurisprudence behind antidumping duty with its international background has been rendered necessary due to the fact that competition rules in spite of its extraterritorial application have not been feasible enough to take care of the aspect of balancing consumers’ and producer’s interests. The recent proliferation of antidumping measures accompanied by its abuse can minimize the damages only if concerns of competition rules and more specifically consumer interest in antidumping investigation is encompassed fairly[9].
The competition policy seeks to protect consumers by maintaining competition in the market and not allowing dominance by any firm so as to injure the consumers. The argument is supported by the reason that predation is curbed by the antidumping policy. The interest of consumers in the distant future against predatory pricing is protected by controlling monopoly pricing. Thus, the goal of antidumping is also to prohibit predatory pricing such as anti-trust[10]. This brings the discussion to the issue that the immediate effect of anti-dumping on consumers may appear antagonistic but sooner or later the consumers will be exposed to monopolistic tendencies and prices which surely will outweigh the immediate gains expected if no antidumping duty is imposed.
Antidumping Investigations on essential goods
The authority which is designated with the duty to investigate and impose anti-dumping is the Director-General of Trade Remedies (DGTR) under the aegis of the Ministry of Commerce. The discussion of some of the cases here will manifest that anti-dumping investigation is entirely confined to the element of injury to domestic industries even in the cases related to the import of chemical which is frequently used in pharmaceutics. In the matter of “Anti-Dumping investigations concerning imports of Acetone originating in or exported from Korea-ROK and Russia[11]” here the product under consideration was Acetone exported from Korea-ROK and Russia. The subject product is an organic chemical also known as Dimethyl Ketone and used in the manufacture of bulk pharmaceuticals, agrochemicals, dyestuffs, certain explosives, and downstream chemicals. The investigation performed by the concerned authority based on evidence submitted relating to injury to the domestic industry proved injury to the domestic industries. The Antidumping duty was imposed and the Authority was of the view that “subject goods produced by the Applicant/ domestic industry are like the article to the product under consideration which is imported from a subject country in accordance with the Rules. The two are technically and commercially substitutable. The consumers are using the two interchangeably”. Thus, it can be seen that the product under consideration was to be used in the preparation of medicines, and its linkage with the right to health as recognized under Art 21, Constitution of India can’t be denied. In spite of it, the right of the consumer hardly found a place in the investigation apart from the fact that it was used as a tool to establish like product if it is used interchangeably. It can be argued here that consumer law and competition law both have been in existence to protect consumer rights. The argument cannot be sustained due to the reason that the price rise of essential goods and more specifically the goods used as raw material in the preparation of essential goods will have an adverse effect on the access as well as the availability of goods.
In the contemporary scenario with COVID 19, period the specific health care products on which anti-dumping investigation has been initiated without consideration of the consumer interest is worthy of discussion here. Recently the Government through DGTR initiated an anti-dumping investigation on the import of Vitamin C from China on the complaint of Bajaj Healthcare[12]. Vitamin is here including in all its forms and is used primarily in medicines by the pharmaceutical industries. It also becomes more significant here from the perspective of consumers here due to the use of Vitamin C in building immunity in the light of COVID19. Here again in spite of the heavy consumer reliance on Vitamin C, the rules on antidumping investigation[13] in India cannot be altered to consider consumer welfare in the investigation while assessing the injury to the domestic industry. The factors required to be taken into consideration during the investigation as stated in the Antidumping Rules states that “The designated authority shall determine the injury to domestic industry, the threat of injury to domestic industry, material retardation to establishment of domestic industry and a causal link between dumped imports and injury, taking into account all relevant facts, including the volume of dumped imports, their effect on price in the domestic market for like articles and the consequent effect of such imports on domestic producers of such articles and in accordance with the principles set out in Annexure-II to these rules[14]”.
It is suggested that prudent incorporation of consumer interest in the antidumping investigation will allow the authorities to reach a more logical determination of injury to the domestic industry after balancing out the consumer interest as any material injury determination in isolation cannot be termed as accurate in the sense to remove injury which is the purpose behind antidumping duty. The author does not deny the fact that dumping per se has pernicious effects on consumers in the long run if anti-dumping measures are not adopted in due course of time. As the exporter country producers will resort to whimsical prices once they have occupied the market of the importing country. The practice becomes all the nastier when essential goods such as chemicals to be used in medicines and other surgical ingredients which are imported from outside India are subjected to such anti-dumping levies. WTO as a global trade regulatory body has been able to perform only a supervisory role with otiose enforcement machinery for compliance to its antidumping regime. Therefore, the municipal authorities have taken the task upon themselves which has sometimes ended up in convenient practices inconsistent with the regulatory mandate.
This article has been written by Priya Vijay, Assistant Professor of Law, National University of Study and Research in Law, Ranchi.
References:
[1] Shu-Yuan Lee, Yung-Ho Weng, Peng-Yin Lin, and Sheng-Ti Hung, A Study of Anti-Dumping Duty under Fair Trade Rule：An Application on the Case of China Towels in Taiwan
[2] Michael Webb, The Ambiguous Consequences of Anti-dumping Laws, Economic Inquiry, 1992, vol. 30, issue 3, pg.439
[3] Viner, J. (1923). Dumping: A problem in International Trade. Chicago: Chicago University Press pg. 135
[4] Li, W. (2003). Anti-Dumping Law of the WTO/GATT and the EC. Gradual Evolution of Anti -Dumping Law in Global Economic Integration. Lund: Jurist för laget I Lund. Referred by The Impact of an Anti-dumping Measure A Study on EU Imports of Chinese by Footwear Karolina Andersson Carin Thuress on April 2008, pg 5
[5] Howse & Trebilcock, (1995) The Regulation of International Trade, Routledge, 1995
[6] 2011 (270) ELT 696
[7] Ibid.
[8] (2002) 6 SCC 600.
[9] Andreas Knorr, Antidumping rules vs. competition rules, Institute for World Economics and International Management, 2004, pg.1
[10] Agarwal Aradhana, Antidumping law and Practice: An Indian Perspective, April 2002, INDIAN COUNCIL FOR RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS, Pg. 6
[11] Final Findings (Case No. SSR 03/2019)
[12] Probe initiated into alleged Vitamin C dumping from China, Sep.4, 2020 available at https://www.thehindubusinessline.com/economy/probe-initiated-into-alleged-vitamin-c-dumping-from-china/article32525953.ece#, last accessed on Oct 8, 2020
[13] Rule 11(1) Determination of Injury, CUSTOMS TARIFF (IDENTIFICATION, ASSESSMENT AND COLLECTION OF ANTIDUMPING DUTY ON DUMPED ARTICLES AND FOR DETERMINATION OF INJURY) RULES, 1995
[14] Rule 11 (2) CUSTOMS TARIFF (IDENTIFICATION, ASSESSMENT AND COLLECTION OF ANTIDUMPING DUTY ON DUMPED ARTICLES AND FOR DETERMINATION OF INJURY) RULES, 1995