This week's WTO ruling against the tariffs imposed by the US to help local steel producers is being cited, smugly, by many in the government here in New Delhi as yet another piece of evidence of just how protectionist the US is.

Yet what's ignored is that, not only are India and US the world's largest users of anti-dumping actions, relative to its imports, India is the world's second-largest user of anti-dumping duties -- while the US initiated 0.03 anti-dumping cases per billion dollars of imports, India did 0.69 cases between 1995 and 2000, or over 11 times the world average.

When economists argue such actions distort free trade, politicians/bureaucrats loftily argue the duties are meant to protect small Indian producers. Well, the facts are quite the contrary, as Aradhna Aggarwal at ICRIER has shown in a series of excellently researched papers.

For one, based on the cases for which complete information is available, Aggarwal found in half the anti-dumping cases, there was just one company that asked for anti-dumping protection and its market share averaged 90 per cent.

So much for the fiction of small innocents being protected. When this point was made at a recent workshop, officers of the Directorate General of Anti Dumping came up with one case where there were small companies involved!

Normally, when there's talk of dumping, you'd expect this is to be in large quantities, right? After all, the quintessential raison d'etre for dumping is to be able to capture the local market by pricing so much below competition -- and, having got the market, the argument goes, the dumper jacks up prices.

Well, Aggarwal found in 77 per cent of the cases, the share of imports in total consumption in the country averaged a mere 6.7 per cent! Interestingly, in just 12 per cent of the cases, were there less than four exporters of the goods under question -- in 67 per cent cases, there were more than 11 exporters.

Similarly, in most cases, the number of countries from which exports took place was quite large. In other words, predatory pricing was just not possible in most cases where anti-dumping duties were levied. (If it's any consolation, an extensive review of anti-dumping cases in OECD countries found less than a tenth of anti-dumping cases would pass similar rigorous predation standards.)

How ridiculous and anti-consumer the anti-dumping duties are, is best demonstrated by the case of Styrene Butadiene Rubber where anti-dumping duties were levied in 1999 -- the petitioner, Synthetics and Chemicals Limited, had stopped producing SBR by then, but argued that had it not been for the dumping, the company would have liked to produce SBR! It was only after two years more of non-production that the anti-dumping duties were removed, when it was finally accepted that SCL's problems went far beyond mere import protection.

In the case of photographic paper, the local industry also went sick despite the levying of anti-dumping duties. And in a case currently being decided upon, and whose full details therefore cannot be revealed, examining the petitioner's own reports show that while its returns on capital invested in that product did fall in 2002, these were still much higher than those for the global industry, and yet anti-dumping protection is being sought!

And will probably even be granted, given that the government departments being asked to verify some claims made by the petitioner (on its production, for instance) simply reproduced parts of the company's original petition to the DGAD, with the same para-numbering and wording!

The biggest problem about anti-dumping is that since exporters generally don't wish to part with details of their costs, or their information is treated as suspect, a 'constructed' or normal price is arrived at -- how this is calculated is never disclosed to the exporter, so there is no real way to challenge this.

In the case of Isobutyl Benzene imported from China, for instance, Indian authorities took the price in India as the basis for calculating the normal price for determining the extent of dumping! In the case of Low Carbon Ferro Chrome imports from Russia, Zimbabwe was chosen as the reference country. (In the US, the Department of Commerce assumed a 26 per cent normal profit while constructing the price for dinnerware from Taiwan, for instance, while normal profits for US suppliers was a mere 5 per cent! -- in other words, anti-dumping is a sham, the world over).

Interestingly, while the WTO allows the use of 'safeguards' to protect domestic producers, few countries, not just India, use this. The reason is simple. If a 'safeguard duty' is imposed, it is mandatory for the local industry to come up with a comprehensive restructuring plan, to show that if protection is granted, the industry will become competitive -- in the case of Hard Board, no safeguard duty was imposed despite serious injury due to imports from Holland because local producers could not show they'd be able to restructure sufficiently.

Ditto for Yellow Phosphorus. Safeguard duties also have to be reviewed, and progressively lowered -- in the case of Carbon Black, for instance, the safeguard duty was 16 per cent in the first year and 5 per cent in the second.

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