INDIA AS A DUMPING GROUND FOR CHINA

PRESENTED BY: ASHITA SAKARIA - 1

NIKITA DESAI

- 13 PRIYANKA KALE - 23 SHRADDHA MODI- 36 MASOOM - 49 VARUN ALIMCHANDANI - 58

DEFINITION OF DUMPING
Definition: Dumping is an informal name for the practice of selling a product in a foreign country for less than either (a) the price in the domestic country, or (b) the cost of making the product. It is illegal in some countries to dump certain products into them, because they want to protect their own industries from such competition.

India-China bilateral trade: Current status

Indian exports of goods account just about 1% of

Chinas total imports, while Chinese exports of goods account for just about 5% of Indias total imports. India-China bilateral trade is focused on a very narrow range of goods. Both economies have comparative advantage in similar sectors, i.e. chemicals, processed metals and alloys, machinery and machine tools and textiles.

 Why Indians consume china products?

consumer are basically two types -one who

wants best features at affordable prices, and the others who go with quality and brand tag. Indian lower middle class constitute a big part of the indian market.they fall under the first category of consumers.Chinese product have benifitted the consumers of first category. Cheap chinese products are a relief to the lower middle class in India. Companies operating in India are facing a good competition against these chinese products.

Advantages of using china products

Cheaper price of products benefits the Indian

consumer. Cheaper raw materials are beneficial for industries. Importer and trader makes money by selling goods. Import business leads to some employment generation Government collects tax by way of customs duty. It may lead to competition which in turn may lead to better quality products.

Disadvantages of china products

(1) Cheap imported Chinese products kill

competition and local small scale industries suffer. Sometimes, may close down. (2) Closure of local industries due to Chinese imported goods, may lead to unemployment. (3) It may also lead to loss of revenue due to the closure of local industries. (4) Closure of local industries may also lead to social unrest arising out of unemployment of staff and employees. (5) Cheaper goods means cheap quality and consumers may suffer on account of both inferior quality as well as lack of after sales service.

Case study

This case study brings out the injury that can be caused by dumping to the domestic firms. Anti-dumping investigations are taking place against import of Silk fabrics from China. It has caused injury to Indian silk domestic industry by causing significant decline in production, decline in capacity utilization, closure of several power looms, decline in sales, drop in employment, loss of market share in demand and decline in profitability. Share of exports from China has increased in absolute terms as well as in relation to demand of product in India. This affects the small scale industries involved in the production of silk adversely.

THREAT OF DUMPING
In developing countries, especially those

neighbouring the non-market economies, dumping can pose a serious threat. Dumping from China in India is an example of this. More than one-third cases decided by the Designated Authority in India involve China. These exporters are indulging in very aggressive pricing which is evident from the huge dumping margin. Moreover, in a majority of the cases, the exporters and producers of the exporting country have not cooperated in the investigation process.

HOW TO CALCULATE THE EXTENT OF DUMPING????

GATT (Article 6) provides three methods to

calculate a products normal value. The main one is based on .price of the product in exporters domestic market When this method cannot be used the other two alternatives are Price charged by exporters in other country &calculation based on combination of cost of production,other expenses and normal profit margin.

ADAM SMITH APPOSING THE DUMPING ACTIVITY

Quoting Adam Smith, by restraining, either by duties,

or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them. Thus Adam Smith was of the opinion, that, the importing countries should discourage those imports which will harm the domestic industries, by imposing duties on such items. arises for imposing anti-dumping duties.

EFFECT OF CHINA DUMPING ON THE FDI OF INDIA

The dumping by China has further dampened India's

potential to attract foreign investors. With the removal of quantitative restrictions (QRs) from April 1, 2001, it is feared that the dumping would increase. Moreover, the world FDI trends are that the earlier attraction of local markets is giving way to global integration. Global integration means development of borderless production to cater to the needs of both the domestic and export markets. In this changed situation, if India wants to compete with China, it will have to strengthen its manufacturing facilities. But thi s is not easy. Hence, the only alternative would be to open up its service sector more boldly, that is, well before China does so after gaining WTO entry.

WHAT IS ANTI-DUMPING?????
The WTO agreement allows governments to

act against dumping where there is genuine (material) injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporters home market price), and show that the dumping is causing injury or threatening to do so.

WHAT IS PRICE DISCRIMINATION????

Practice of selling goods or services at

different prices to different buyers, even though sales costs are the same for all the transactions. Buyers may be discriminated against on the basis of income, ethnicity, age, or geographic location. For price discrimination to succeed, other entrepreneurs must be unable to purchase goods at the lower price and resell them at a higher one.

DUMPING AS A CASE OF PRICE DISCRIMINATION

Increasing volumes of apple juice concentrate imports from China into the U.S. began in the mid 90s as a result of low Chinese prices. In 1999, the U.S. Apple Association launched a complaint with the US International Trade Commission (USITC) regarding the Chinese price strategy. During the course of investigation, the U.S. Apple Association requested that the Department of Agricultural Economics at Washington State University analyze the impact on the total value of juice apples utilized in Washington during the span of the USITC investigation. To determine the magnitude of the effect of the USITC investigation, not only on finished apple juice prices but also on the Washington raw product price, an inverse demand for finished product and an input demand function for raw product was developed and parametrically estimated. Results from a derived demand analysis for juice apples revealed that a decrease in Chinese apple juice price reduced the prices paid by the processing sector by approximately 0.07 percent. However, throughout the course of the investigation process, juice apple prices increased significantly, resulting in an increase in the value of the juice apples purchased by processors of approximately USS 35,831,024 million dollars

DUMPING OF CHINA GOODS IN INDIA

The government of India has levied anti-dumping duties on

certain types of stainless steel that are shipped in from countries like China and Japan. The anti-dumping duties were imposed after finding that certain types of imported steel are landing at below the normal value in the country's port. The Central Board of Customs and Excise imposed the duties by saying that the domestic industry has suffered badly due to the imports from other countries. As per a notification of Central Board of Customs and Excise, the duties will remain effective till October 21, 2009.. India is the fifth largest producer of steel in the world with a capacity of producing 53 million tonnes of steel annually.

ACKNOWLEDGEMENT
WE WOULD SINCERELY LIKE TO THANK

OUR TEACHER MS NIDHI VINAYAK.FOR GIVING US SUCH A GOOD TOPIC 4 THE PROJECT. WE HAVE LEARNED A LOT N DEEPLY ABOUT CHINA DUMPING N ITS EFFECT ON INDIA AS WELL AS ON OTHER COUNTRIES..

BIBLIOGRAPHY
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SOME ARTICLES OF BBC NEWS

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