07.07.2025
Anti-dumping duties
Context :
China has imposed anti-dumping duties on European brandy, mainly French cognac, in response to EU’s probe into Chinese EV subsidies, escalating trade tensions.
About :
- New Duties: China placed 27.7%–34.9% duties on EU brandy.
- Duration: Measures will last five years, starting July 6, 2025.
- Target Product: Aimed mainly at French cognac, part of EU luxury exports.
- Triggered By: Linked to the EU’s investigation into Chinese electric vehicle subsidies.
Characteristics / Provisions :
- Trade Protection Tool: Anti-dumping duty protects against unfairly priced foreign imports.
- WTO Compliance: Allowed under Article VI of GATT 1994 and the Anti-Dumping Agreement.
- Chinese Action: Follows a formal investigation into EU brandy pricing.
- Retaliatory Sign: Seen as economic retaliation by China against the EU.
- Wider Scope: Reflects a broader China-West trade conflict, beyond a single product.
- Legal Backing: Based on findings of unfair trade practices hurting local producers.
Anti-Dumping Duty (ADD)
Anti-Dumping Duty is a tariff imposed by a country to protect its domestic industry from unfairly cheap imports, which are sold below their normal market value.
- Dumping happens when a product is exported at a lower price than it is sold domestically.
Example: Selling Chinese tiles in India at ₹20/sq.ft, while ₹35/sq.ft in China.
- Dumping harms domestic industries by undercutting local prices and reducing competitiveness in the home market.
Example: Indian paper mills facing losses due to low-cost Indonesian imports.
- Anti-Dumping Duty helps neutralize the effect of dumping by increasing the price of such imports.
In India, anti-dumping duties are imposed by the Ministry of Finance based on investigations and recommendations by the DGTR (Directorate General of Trade Remedies.).
- The WTO permits the use of ADD under the Anti-Dumping Agreement, ensuring global trade remains fair.
Countries must follow WTO procedures to impose ADD legally and proportionally.
- ADD is different from Countervailing Duty, which targets imports subsidized by the exporting country's government.
Example: CVD on Chinese solar panels that receive production incentives.
- A ‘Sunset Review’ can extend ADD by another five years if dumping and injury risks are still present.
Reviews are conducted based on evidence or requests from the domestic industry.
- India uses ADD actively through the DGTR to protect sectors like steel, textiles, and chemicals.
These actions help secure jobs, stabilize markets, and support Make in India goals.
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Challenges :
- Trade War Risks: Tensions may escalate, as seen in US-China tariff disputes.
- Export Uncertainty: EU exporters like France may face sales decline in China.
- Global Supply Impact: Such duties can disrupt trade flows and pricing globally.
- WTO Strain: Retaliatory duties may weaken multilateral trade dispute norms.
Way Forward :
- Diplomatic Talks: EU-China should use WTO consultation platforms to resolve issues.
- Diversify Markets: Affected EU exporters should explore India, ASEAN as alternative markets.
- Monitor Spillover: India must track such disputes to adjust trade policy strategies.
- Strengthen DGTR: India’s DGTR should enhance capacity to address dumping cases efficiently.
Conclusion :
China’s anti-dumping duties mark a rising phase of global trade tensions. While legal under WTO, these actions highlight the need for dialogue, rule-based order, and market diversification.