NEW DELHI: Negotiations on rules were incorporated in the agenda for the World Trade Organisation’s Doha round of trade talks with a basic purpose of ensuring that the existing rules became more transparent and less protectionist. However, the draft text circulated recently by Uruguayan ambassador Guillermo Valles Galmes, who chairs the WTO committee on rules, does just the opposite. By justifying the much disputed “zeroing” methodology used by the US in calculating dumping margins, the chair has attempted to legitimise a methodology which could lead to much higher degree of protectionism than otherwise warranted.
 
Moreover, the text has no mention of the lesser duty rule which is based on the premise that the anti-dumping duty should be lower than the margin of dumping if this lower duty is sufficient to remove injury. The lesser duty rule followed by both India and the EU ensures that the anti-dumping duty is not higher than the level necessary to ensure that the domestic industry doesn’t suffer.

Speaking to ET, commerce secretary GK Pillai said that India was opposed to the chairman’s text, both for including zeroing and excluding lesser duty rule. “We have already registered our protest with the WTO,” Mr Pillai said.

India and fifteen other countries, including include Brazil, China, Japan, Hong Kong, New Zealand and Norway, have submitted a proposal at WTO opposing the inclusion of zeroing in the draft text circulated by the chairman of the committee on rules. They have said the move would lead to increased protectionism.

Dumping margin, which is the difference between the normal price of a product in the market of the exporting country and the export price, gets inflated through the process of zeroing (used by the US department of commerce) and, in the process, the anti-dumping duties imposed on the exporter are also higher. This happens because while calculating the average dumping margin by looking at a number of similar products, the negative dumping margins are ignored and designated as zero.

The US uses the zeroing method as a routine in calculating all dumping margins and as a result the dumping duties imposed by the US on others is inflated in many cases.

The WTO Appellate Body struck down certain applications of such methodology both by the EU and the US on several occasions. However, if the proposal in the draft text circulated by Uruguayan ambassador Guillermo Valles Galmes, which states that the process of zeroing could be allowed under certain circumstances, is taken forward, the zeroing process could be legitimised.

In its representation against the move, the 16-member group pointed out that zeroing was a biased and partial method for calculating the margin of dumping and inflated anti-dumping duties. “If the use of such practice prevails in the future, it could nullify the results of trade liberalisation efforts,” it said. Trade experts believe that the move needs to be strongly opposed by all countries from the word go or soon it may become an issue which the US could use for bargaining for concessions in other areas.

Commerce ministry officials said that since it was only the US which was openly advocating zeroing, it would not be a difficult task to remove it from the negotiations if all other nations join forces. “One has to act right away. It may become too late if the issue is allowed to languish,” an official said.