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MGT601 - SME Management - Lecture Handout 42

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WORLD TRADE ORGANIZATION (WTO)
PAKISTAN & WTO – II

Anti-Dumping

In economics, "dumping" can refer to any kind of predatory pricing. However, the word is now generally used only in the context of international trade law, where dumping is defined as the act of a manufacturer in one country exporting a product to another country at an unfairly low price.

Antidumping Duty

A penalty charge on imports to protect domestic industry against disruptive pricing practices by foreign firms (see dumping). An antidumping duty is supposed to be set equal to the margin of dumping, defined as the difference between fair value and the actual sales price. GATT Article 6 permits members to levy antidumping duties, while the GATT Antidumping Code attempts to standardize and discipline importing governments' activities in this area. See also circumvention and injury test.

During recent years, Pakistan’s exports especially of textile and clothing have been subjected to anti-dumping and safeguard measures in Japan, EU and USA. EU is presently investigating a dumping case against Pakistan bed-linen exporters.

There is prima facie evidence that cases of imposition of ANTI Dumping Duties (ADDs) against different sub-sectors of the textile industry have been registered in orde4r to protect jobs of textile industries of developed countries. This is seriously impacting on Pakistan’s economy. Even in cases where investigations do not lead to eventual imposition of definitive ADDs, trade is disrupted in the interim period and valuable customers are lost.

Given the backdrop of increasing anti-dumping measures against our exports, we need to implement anti dumping measures to protect domestic industry against the onslaught of unfair competition. In this context, following ordinances have been promulgated in Pakistan;

  • Anti dumping law 2000
  • Countervailing Duties Ordinance 2001
  • Safeguard ordinance 2002.

National Tariff Commission (NTC), with the assistance of CBR, has been assigned the task to implement these ordinances in Pakistan. Since the promulgation of Anti-dumping law, NTC has levied 27.33 % anti-dumping duty for a period of 54 years on Tinplates of thickness of less than 70.5 mm and width of 600mm or more imported from South Africa. It has also imposed provisional anti-dumping duty at the rate of 96.50 % on Roquette Freres of France and 91.12 % on P.T.Sornini Corporation of Indonesia, for allegedly dumping Sorbiol 70% Solution, a sweetener of pharmaceuticals etc.

Pakistan has resorted to Anti-dumping measures only twice in the eight years of WTO regime, as against on 100 occasions by India. The country urgently needs to build a strong network of ADDs and CDs to protect the local industry. In this context, it is heartening to not that the Trade Policy 2003-04, envisages enhancement of capability of National Tariff Commission in the sphere of Anti-dumping and Countervailing duties and Safeguards measures as well assisting stakeholders in filling their applications with NTC.

Dispute Settlement Body

The developing countries including Pakistan are facing problems of hiring law firms to advise and represent them in WTO related cases. Exorbitant fees of these law firms ranging from US$ 200 to US$ 600 an hour restrict the developing countries from seeking relief. This underscores the need to train local lawyers with WTO expertise.

Customs Valuation

After availing the grace period of 5 years, the finance Act 1999 -2000 amended the Section 25 of the Customs Act 1969 to accommodate the necessary changes for adoption of GATT code of valuation based on transaction value.

There is, however, a general complaint that rules and regulations are not being observed by customs officials with respect to custom valuation. Instead of observing the transactional value system, they apply various procedures including the fixation of ITP on the basis of weak evidences, loading of the declared value with or without any evidence or any other method devised by the assessing officer on case-to-case basis.

Agriculture

It is expected that under UR Agreement, market forces would result in domestic prices rising to world prices, which would stimulate domestic production. Tariffs in developed countries were reduced by 36% on fruits and vegetables, and 48% for such non-traditional products as flower, providing Pakistan improved export opportunities.

The result on rice and wheat could have mixed effects. The agreement to reduce subsidies on rice and wheat maintained by developed countries could result in increased market access. The reduction on subsidies and resulting price increase would mean that total expenses of Pakistan for wheat imports, in wheat deficit years, will rise. Pakistan is not fully availing of investment subsidies generally available to agriculture and other input subsidies admissible under AoA. besides provision on S&DO treatment permit developing countries to use subsidies to reduce cost of making exports of agricultural products including upgrading and other processing costs and the cost of internal and external transport and freight. But GOP is not extending such subsidies to the warranted level on the pretext of budgetary constraints.

It is ironic that while developed countries are slow in phasing out subsides under WTO regime, most of the reductions in farm subsidies in Pakistan so far have been made under the commitments to IMF, ADB and other international financial institutions.

According to Pakistan’s WTO Representative, substantial reduction in tariffs and farm subsidies would mean greater market access to Pakistani agricultural products. Pakistan’s cotton would fetch better prices for our farmers.

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