Anti-dumping Duty on Pharma API from China

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    In News 

    • Recently, the Ministry of Commerce and Industry recommended the imposition of anti-dumping duty on a pharma raw material—Ceftriaxone Sodium Sterile— from China to guard domestic players from cheap imports.

    Ceftriaxone Sodium Sterile

    • It is an API(Active Pharma Ingredient) used in the formulation for treating diseases like lower respiratory tract infection, skin and skin structure infection, and surgical prophylaxis.

    About 

    • Directorate General of Trade Remedies (DGTR) recommended the duty after concluding in its probe that the API from China has been exported at dumped prices into India, which impacted the domestic industry.
    • The recommended duty is $ 12.91 per kg. The Finance Ministry takes the final decision to impose a duty.
    • The imposition of anti-dumping duty is permissible under the World Trade Organisation (WTO) regime.
      • The duty is aimed at ensuring fair trading practices and creating a level-playing field for domestic producers vis-a-vis foreign producers and exporters.

    Anti Dumping Duties

    • It is a tariff imposed on imports manufactured in foreign countries that are priced below the fair market value of similar goods in the domestic market.
    • It is imposed to protect local businesses and markets from unfair competition by foreign imports.
    • The duty is priced in an amount that equals the difference between the normal costs of the products in the importing country and the market value of similar goods in the exporting country or other countries that produce similar products.
    • The anti-dumping duty can be anywhere from 0% up to 550% of the invoice value of the goods.

    WTO Guidelines

    • According to the WTO Anti-Dumping Agreement, dumping is legal unless it threatens to cause material injury or material retardation in the importing country’s domestic market.
      • Material Injury: Injury that has been caused to domestic industry and is not negligible.
      • Material retardation: means that although no material injury is there, yet the establishment of the domestic industry has been seriously retarded.
    • In case of dumping, the WTO permits the affected country to take legal action against the dumping country as long as there is substantive evidence.
      • The government must show that dumping took place, the extent of the dumping in terms of costs, and the injury or threat to cause injury to the domestic market.
      • But the governments can not discriminate between trading partners and need to honour the DATT 1994 principle when calculating the duty.
    • The GATT 1994 principle requires that imported goods not be subjected to internal taxes in excess of the costs imposed on domestic goods.
      • National Treatment: Imported goods need to be treated the same way as domestic goods under domestic laws and regulations.
    • There are several ways of determining the extent of Dumping
      • Calculate the anti-dumping duty based on the normal price of the product.
      • Use the price charged on the same product but in a different country.
      • Calculate the duty based on the total product costs, expenses, and the manufacturer’s profit margins.

    Criticism

    • Narrowed Choices for Domestic Consumers: While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
    • Higher Prices and Inflation: While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
    • Tool of Protectionism:  Often the anti-dumping Duties have been used to impose subtle protectionism.
    • A form of “retaliation”: Many countries have imposed Anti Dumping Duties (ADDs) against products of countries that impose ADDs against the products of the host country.
      • The USA has been consistently alleged to have abused anti-dumping measures with its practice of Zeroing.
      • Similarly, in only around 2% of cases, the EU has been found to have imposed ADDs to offset dumping.
        • The remaining 98% of cases of anti-dumping have been used for purposes other than offsetting dumping.

    Way Ahead

    • Developed and Developing Countries need to discuss the issues again.
    • The rules like the 5 per cent rule which is already under footnote 2 of the Anti-Dumping Agreement should be properly and openly evaluated by a 3rd party agreed by both states.

    Facts of India China trade relations

    • Trade Volume: The bilateral trade that stood at US$ 3 billion in the year 2000 grew to US$ 77.7 billion in 2020.
      • China was India’s second-largest trading partner in 2019 and emerged as the largest trading partner in the first half of FY 20-21
      • China accounted for 5% of India’s exports and 14 % of India’s imports in 2019. This has led to a very high trade deficit of US$ 40 billion in 2020.

    Issues in economic relations

    • Trade deficit: The rising trade deficit with China is a matter of concern for India. India blames it on the dumping of cheap and low-quality Chinese goods in India, while Indian products face heavy regulatory checks in China, which are beyond WTO norms.
    • Currency manipulator: China manipulates its currency in order to keep the value of the Yuan very low compared to other currencies, it makes its export cheaper.
    • IPR violation: Even though it is more of western concern, China’s blatant violation of IPR norms is also one of the reasons behind the low price of Chinese products.
    •  Key imports: India imports some of the key raw materials from China, which China can anytime block, in order to choke India’s manufacturing capacity. According to data from 2019, a staggering 70% of electronic components, 45% of consumer durables, 70% of Active Pharmaceutical Ingredients (APIs), and 40% of leather goods come from China.
    • Chinese Companies: There are clear intelligence reports many Chinese companies working in India, work covertly for the People’s Liberation Army creating a strategic issue.
    • India’s actions have irritated China: India has banned 59 Chinese Apps including TikTok, We Chat, etc.
    • New barriers have been created to reduce participation by Chinese companies in a variety of Indian infrastructure projects, such as highway construction.
    • The new FDI Policy of India is aimed against thwarting Chinese investments.
    • The Five Year Development Program for Economic and Trade Cooperation:  Between India and China was adopted during the visit of President Xi to India in September 2014 to address the issue of trade deficit and facilitate market access for more Indian products in China.
    • In 2018, market access was achieved for the export of Indian Non-Basmati rice, rapeseed meal, fishmeal and fish oil.
    • In 2019, protocols for market access for Indian tobacco leaves and chilli meals were concluded.

    Conclusion 

    • India needs to engage itself more with the informal ‘Quadrilateral Security Dialogue’ (or the ‘Quad’) featuring the US, India, Australia and Japan but should not rely totally on as a bulwark against China.
    • India must try to rebuild SAARC in order to gain the lost ground with our South Asian neighbours. This is the only platform to counter China’s Cheque Book Diplomacy.
    • India should try forming a coalition of like-minded democratic countries like Japan, the EU, etc to fight against China’s unethical trade practices and human rights violations in Hong Kong and Xin Xiang.
    • India needs to accelerate the growth of its economy, for that it is required to increase exports and attract more investment.

    Source: TH

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