The Chinese Dumpyard!

Many countries, including India, believe that China has craftily undervalued exchange rates, manipulated its state-controlled banking system, tinkered with its wage controls and trade mechanisms, to go one up against competing economies. India, in particular, has been at the receiving end of China's self-aggrandinsing economic policies. One thing that is starkly obvious is the imbalance in trade. In 2011-12, India sold goods worth $18 billion to China and bought $57.5 billion, which meant a whopping trade deficit of $40 billion, up from $16.2 billion in 2007-08.

At one end of the spectrum, imports of cheap capital goods, particularly power equipment (currently without duty) threatens the survival of our domestic capital goods companies. At the other end of the spectrum, imports of smaller consumer items (plastics, toys, crackers, food) might not constitute the bulk of imports from China, but at about $5 billion they are significant in absolute terms. These directly compete with our SME sector, which is the biggest employer in manufacturing.

Keeping in view the trade imbalance with China, India has now been forced to initiate an anti-dumping probe to determine whether its domestic industries have been hurt because of surge in cheap imports of any product. In a written reply to Lok Sabha, Anand Sharma, Minister of Commerce and Industries wrote, “The Directorate General of Anti Dumping and Allied Duties has initiated anti-dumping investigations into 290 cases as on date involving various countries since 1992. Out of these, 159 cases involve imports from China." This act of dumping had not only hurt the domestic market but has created a huge trade deficit too. Due to cheap imports from China,  domestic industries have suffered badly.

In a paper titled "Unfair Play: Examining the U.S. Anti-Dumping War" against China by Francis Tanczos, the author writes, “over the past two decades or so, more than 30 countries have opened about 600 anti-dumping cases in the WTO against 4000 different types of Chinese products. Over this same two-decade period, the US had made 110 petitions and 68 orders against Chinese goods topping the list among the US’s trading partners for such measures. Currently, 25 per cent of all WTO anti-dumping investigations are directed at China.”

Rebutting such arguments in a working paper titled “China And Anti Dumping: Regulations, Practices And Responses”, Le Thi Thuy Van & Sarah Y. Tong state how the WTO maintains a step-motherly attitude against China, and write, “Since China’ WTO accession in 2001, the government has worked hard to attain a complete market economy status from its trading partners. By February 2008, 77countries have officially recognized China as a full market economy. However, major industrial economies, such as the US, EU, and Japan, as well as some developing countries, such as India, continue to regard China as a non-market economy."

Incidentally, these economies also top the list of initiators of anti-dumping investigations against Chinese exports. India, in particular, has to consider the issue of anti-dumping seriously. Both countries need to intensify efforts to iron out trade differences, and address mutual concerns over anti-dumping investigations and barriers to investment.