China dumps large-scale optic fibre cables from India, tariff wars expected
Dumping is an unfair trade practice that entails the export of a product at a price lower than its value and is countered by punitive actions, which are acceptable measure under multilateral trade agreements, the officials said.
India has found a large-scale dumping of optic fibre cables from China, days after Beijing extended anti-dumping duty for five years on import of fibre optic product made in India, which could trigger a similar tariff measure to check influx of the Chinese product in the Indian market, two officials aware of development said.
The government is considering imposing remedial duty on the import of ‘single mode optical fibre’ as an investigation by the Directorate General of Trade Remedies (DGTR) has confirmed its dumping mainly from China, the officials said requesting anonymity. The DGTR is a single-window agency for administering all trade remedial measures including anti-dumping, countervailing duties and safeguard measures.
After a detailed investigation, the DGTR on Friday concluded that import of single mode optical fibre at dumped rates is threatening to cause “serious injury” to Indian manufacturers and recommended imposition of a 10% safeguard duty on its import from all countries except for developing nations barring China, the officials said. The government had already raised basic customs duty (BCD) on it by 5% in July 2019.
The finance ministry is expected to take a final decision on this matter soon, they said. Single mode optical fibres are used as a medium for telecommunication operations such as community access televisions (CATV), fibre to the home (FTH) and computer networking because it is flexible and can be bundled as cables.
“Effectively, the measure is against Chinese firms as combined import from all other developing countries is less than 9%. China alone has a share of over 84% in its import,” one of the officials said.
The DGTR’s recommendation came close on the heels of Chinese commerce ministry’s punitive tariff on the same product imported from India for five years, effective from August 14.
According to officials, China is resorting to tariff barriers as its companies are suffering from overcapacity, and also diverting its exports to the Indian market after global boycott of the Chinese products. “Based on complaints by the domestic optic fibre industry, the DGTR had initiated the investigation on Chinese dumping on September 23 last year. It had issued a primary finding on November 6 last year, but its recommendations could not be implemented at that time,” the first official said.
A second official said India is very cautious about Chinese unfair trade practices especially after June 15. Sino-Indian tensions have shot up after a violent brawl between Chinese and Indian soldiers on June 15 along the Line of Actual Control in the Galwan Valley in eastern Ladakh in which 20 Indian army personnel and an unspecified number of Chinese soldiers were killed.
Divakar Vijayasarathy, founder and managing partner at consultancy firm DVS Advisors LLP, said, “The precursor for this issue has been laid much before the border issue with China. However, the timing of the notification of the findings and recommendations indicate towards China considering the fact that in November the same was not notified.”
Dumping is an unfair trade practice that entails the export of a product at a price lower than its value and is countered by punitive actions, which are acceptable measure under multilateral trade agreements, the officials said. Remedial actions include imposition of anti-dumping duty (against under-priced imports), safeguard measures (imposition of a duty, a quota, or both against unexpected import surge) and countervailing duty (against export subsidies) to protect domestic units.
India has taken a tough position against unfair Chinese trade practices as it is committed to protecting domestic industry under the government’s Make in India campaign, the officials said.
India-China bilateral trade is heavily tilted in favour of China. According to trade figures released by the General Administration of Customs of China (GACC) in mid-January 2020, India’s trade deficit with China was $56.77 billion in 2019; bilateral trade amounted to about $92.68 billion last year, a 1.6% annual increase.
“Given the domestic economic scenario, the finance ministry is expected to accept this,” Vijayasarathy said adding that the move cannot be linked to China alone as the government has been indicating its intentions of protecting the domestic industry.
“In the budget, customs duty was increased for more than 10 products. Since China is a major supplier for India with huge trade surplus, any action on imports across the board would impact China. Atmanirbhar Bharat itself is to restrict the influence of China on Indian markets and with relationships soaring, indirect economic sanctions will help both in hurting China and giving a boost to the fortunes of the domestic industry,” he said.