- Provides basis for remedial measures, not promoting protectionism, says Minister Samarawickrama
By Ministry of Development Strategies and International Trade
Two much awaited Bills relating to international trade - Anti-Dumping & Countervailing Act and Safeguard Measures Act - were passed in Parliament on 07 March, and will provide domestic industries with a robust framework to guard against unfair trade practices and unforeseen surges of imports. The enactment of these two laws was long overdue in Sri Lanka as many countries - both developed and developing - including India, Pakistan, and Bangladesh had already enacted the required domestic legislation.
Speaking on the passage of these two laws, Development Strategies and International Trade Minister Malik Samarawickrama stated: “While we grow our trade with the rest of the world and forge ahead with trade liberalisation, we have not forgotten the need to look after the interests of our own industries here at home. The Anti-dumping and Countervailing Measures and Safeguard Measures laws passed by Parliament are vital to protect domestic industry from unfair trade practices. I am pleased that our Government was able to get this done, after it had been delayed for many years. But let me be very clear - these new laws are not aimed at providing blanket protectionism to the domestic industry, but rather a credible set of remedial measures in the event of injury to the domestic industry caused by dumping, or by subsidisation, or by sudden surges of imports. The primary purpose is to re-establish fair competition and to provide the domestic industry a level playing field, not promote protectionism.”
What is the significance of trade remedy easures such as anti-dumping, countervailing and safeguard measures in Sri Lanka?
The local industry has been making representations that imports are being made at lower prices than the normal value into the country. Furthermore, Sri Lanka is in the process of rationalisation of its tariff regime and will also phase out Custom duties on imports under the Free Trade Agreements (other than items, which are not subject to tariff liberalisation). With these developments, there can be a tendency to resort to dumping or subsidisation goods into Sri Lanka, thereby creating unfair competition and injury to domestic industry. Therefore, the need for this legislation.
The anti-dumping or countervailing measures or safeguard measures do not aim at providing protection to the domestic industry per se. These are only remedial measures for removal of injury to the domestic industry, caused by the dumping or subsidisation or surges of imports of goods. The object behind such measures is to re-establish fair competition and to provide the domestic industry a level playing field.
What is anti-dumping? What is its purpose in international trade?
Dumping occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect. Anti-dumping is a measure to rectify the situation arising out of the dumping of goods and its trade-distortive effect, and will provide relief to the domestic industry against the injury caused by dumping.
Does dumping mean cheap or low-priced imports?
Often, dumping is mistaken and simplified to mean cheap or low-priced imports. However, it is a misunderstanding of the term: dumping, in its legal sense, means export of goods by a country to another country at a price lower than its normal value. Thus, dumping implies low-priced imports only in the relative sense (relative to the normal value), and not in absolute sense.
The Bill passed defines specific criteria to determine when product is to be considered dumped and provide provision to levy compensate duties on the import of products that are benefiting from dumping or subsidisation. However, mere complaints that goods are dumped will not be sufficient to levy anti-dumping duty. It should be done through a process where applications should be submitted by the industry for initiation of anti-dumping investigations and imposition of anti-dumping duty. Thereafter, following an investigation based on a submission made by domestic industry to the Department of Commerce, it will make a preliminary determination and thereafter final determination on whether to impose anti-dumping duty, if it is established that imports have caused injury to domestic industry. The procedures will also allow both interested parties, as well as affected parties, to present their submission and their case before the authority.
These two Acts will be implemented by the Director General of Commerce and will be subject to a decision-making process through an inter-ministerial committee, and final duty imposition will be made by the Ministry of Finance. Thus, while the receiving of application, investigation and recommendation will be made by the Director General of Commerce and the inter-ministerial committee, it is the Ministry of Finance which will levy such duty.
In addition to anti-dumping, the section on countervailing and subsidies will provide provision to take remedial measures against other unfair trade practices, because apart from dumping, countries also resort to the subsidisation of their exports to Sri Lanka. Subsidies that are granted by other countries to their exporters, which are categorised as actionable subsidies, will be addressed by way of levying anti-subsidy countervailing duty equivalent to subsidy granted, after investigation and determination.
The section on safeguards in the Act, on the other hand, authorises to restrict imports for a temporary period, if it is established after investigations carried out by the Department of Commerce that imports are taking place in such increased quantities as to cause a serious injury to the domestic industry that produces similar or directly competitive products.
This Ministry wishes to state that continuation of a distorted Import tariff regime will not make domestic industry internationally competitive. What is important is to create the necessary economic environment for entrepreneurs to be competitive and protect them from unfair trade practices. These two Bills enacted in Parliament will enable the Government to achieve this objective.
This Ministry, as a part of its economic development strategy and new National Trade Policy, will be entering into Free Trade Agreements at the bilateral level, particularly with growing large economies such as India and China which are progressing well.
The FTA with Singapore already been signed; we propose to commence negotiations with Thailand, and FTAs with Malaysia and Bangladesh are in the pipeline. Under these Free Trade Agreements, we will be undertaking tariff liberalisation programs, while seeking market access from these countries.
As we implement tariff liberalisation programs under these initiatives, with removal of tariff and also removal of cess in a phased-out manner, such agreements should not lead to imports surges and dumping of products into the domestic markets. Therefore, the new domestic legislation will address such concerns. These two Acts are therefore, two significant enactments, which will contribute and support the development of international trade.