What is dumping?
- Dumping is the practice of selling a product in a foreign market at an unfairly low price (a price that is lower than the cost in the home market, or which is lower than the cost of production) in order to gain a competitive advantage over other suppliers.
- Dumping is done to gain access to the foreign market and eliminate competition. It creates a monopoly in the market.
- Dumping enables consumers in the importing country to obtain access to goods at an affordable price. However, it can also destroy the local market of the importing country, which can result in layoffs and the closure of businesses.
- An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports when it believes that the goods are being “dumped” – through the low pricing – in the domestic market.
- Anti-dumping duty is imposed to protect local businesses and markets from unfair competition by foreign imports.
Ill effects of such duties
- While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
- In the long-term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods.
Dumping and WTO
- The World Trade Organization (WTO) plays a critical role in the regulation of anti-dumping measures.
- The WTO Anti-Dumping Agreement allows the government of the affected country to take legal action against the dumping country as long as there is evidence of genuine material injury to industries in the domestic market.
- 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.
- In other cases, the WTO intervenes to prevent anti-dumping measures.
Why in News?
- The Directorate General of Trade Remedies (DGTR) under the Ministry of Commerce has recommended imposition of anti-dumping duty on a pharma raw material—Ceftriaxone Sodium Sterile— from China to guard domestic players from cheap imports.
- DGTR has recommended the duty after concluding in its probe that the API (active pharma ingredient) from China has been exported at dumped prices into India, which impacted the domestic industry.
- APIs refer to the biologically active component of a drug product. APIs are intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease or to affect the structure or function of the body.
- Other ingredients of Drug products are commonly known as “excipients.”