Abuse of anti-dumping instrument in textiles and clothing sector by EC, US

The EC and US are resorting to levelling charges of dumping, however unfounded, against Third World exporters of textiles and clothing in order to protect their domestic industry, a group of developing countries has complained in a submission to the WTO.

GENEVA: The use and abuse of the anti-dumping instrument, in particular by the European Union and the US, to start investigations and harass exporters of textiles and clothing products from developing countries, which are already severely subject to quota restrictions, so as to hit their exports, has been brought out in a communication from 18 developing countries to the WTO Negotiating Group on Rules.

The paper is by Bangladesh, Brazil, China, Colombia, Costa Rica, Egypt, Guatemala, Hong Kong, India, Indonesia, Korea, Macao, Maldives, Pakistan, Paraguay, Peru, Thailand and Vietnam.

These 18 developing countries, which are members of the International Textiles and Clothing Bureau (ITCB), have highlighted the way the anti-dumping investigations are initiated, with levy of provisional duties and the complaints subsequently dismissed, only for new investigations to be started on the same products - aimed at harassing the export trade of countries.

The communication calls for proper disciplines to prevent such misuse of anti-dumping actions. It notes in this connection that at the WTO’s 2001 Ministerial Conference in Doha, in their decision on implementation, the Ministers had agreed that members should exercise particular consideration before initiating investigations in the context of anti-dumping remedies against textiles and clothing exports of developing countries.

While the Agreement on Textiles and Clothing will disappear at the end of 2004, when all the trade in this sector is to be fully integrated into the GATT disciplines, the fact that the major restraining markets are keeping to the very last day and minute a substantial majority of quota restraints on imports from developing countries, has created considerable apprehensions in the Third World that instruments like anti-dumping, environment, health protection and other grounds would be invoked to harass the trade.

From this perspective, and to ‘encourage’ the restructuring of the industry in the North in the two years remaining before its integration into normal WTO discipline, Third World trade experts believe that perhaps the focus of developing countries should not be on any invoking of special and differential treatment and such ideas, but on denying the ability of the importing countries to use such instruments and heavily discouraging the industry groups in the North from invoking them.

The Rules Negotiating Group was mandated by the Doha Ministerial to clarify and improve the WTO rules on anti-dumping and subsidies. It is now at the stage in which participants indicate their positions and the trade-distorting practices that need to be disciplined by clarifying the rules.

The joint developing-country paper focusses on one of the areas relating to anti-dumping, namely, use of the anti-dumping instrument against the textiles and clothing exports from the developing world.

The Negotiating Group is also seized of complaints and calls for clarification and further disciplines on a wider front, with a range of proposals.

Catalogue of complaints

The textiles and clothing sector, the paper of the 18 nations brought out, has seen 197 initiations of anti-dumping actions during 1990-99, ranking it the fifth among all sectors. The EC has been the biggest user in this sector, targeting as many as 53 new investigations during 1994-2001 or the third among all sectors. Of the 53 new initiations by the EC, 46 or 87% targeted imports from developing countries, and all but two were initiated on complaints from interested industry associations.

The sector itself has already long been subject to quota restrictions. [As part of the family of WTO agreements, the Agreement on Textiles and Clothing, which provides the framework for liberalization of the trade and phaseout of existing restrictions and full integration into the GATT by 31 December 2004, was concluded in April 1994.]

The joint paper brings out, with illustrations and concrete analysis, the egregious practices used by protection-seeking interests in the importing industrialized countries to prompt anti-dumping investigations.

In the EC, the very fact that developing countries accounting for 44 to 67% of EC imports in a range of products were targeted and alleged to be dumping was indicative of a strong protectionist purpose, the paper by the ITCB members pointed out.

The investigations lasted two years (with no determination at the end), though the Tokyo Round code which applied to cases (before 1995) required investigations to be concluded within one year of initiation. The Uruguay Round also required investigations to be concluded within one year, and in any case no more than 18 months.

The communication has also brought out that instead of dismissing such complaints which on the face of it were not sustainable, investigations were started (for example by the EU’s executive Commission) and provisional duties levied, only for the investigations to be ended after 18 months to two years with no final orders (in effect dismissing the complaints). Then new investigations on the same products were initiated, and by the same complainants.

The EC has been the most egregious user of the anti-dumping instrument against textiles and clothing exports from developing countries. The US has also been using anti-dumping instruments across a large number of industries (in particular the steel industry), but has been using it much less than the EC in the textiles and clothing sector.  However, even in this sector, the US has been maintaining for many years the anti-dumping measures put in place from the time of the Tokyo Round codes and continued under the WTO rules.

Peru, which is the vice-chair of the ITCB, introduced the developing-country paper  and  said that developing countries were apprehensive that when the Agreement on Textiles and Clothing expires (in the end of 2004), the restrictions under  the agreement would be replaced by  trade   remedies,  including anti-dumping actions. Peru cited some of the abuses and said that “the problem for developing countries  starts from the very complaints and initiation of investigations.”

The analysis in the paper, Peru said, brought out that “most often the complaints are lodged with protectionist aims, and once the investigative process starts, the adverse effects on the exporters of developing countries begin to be reflected on trade.” The investigations also involve a heavy financial burden on the exporters concerned; many of the exporters were small concerns whose exports were about a million dollars in value, and they could not afford to engage counsel and defend themselves before the investigating authorities.

In discussions and comments, the EC said that it shared the conclusions about the concerns voiced by the 18-member paper, though it was “less enthusiastic about the facts.” The EC also suggested that the investigations were against some “global players” from the developing world.

India, however, said that while one or two might be big firms - not by US or EU standards but their own - most of the others were small and medium enterprises.

Clear protectionist pattern

In explaining the paper, Peru also said that the textiles and clothing trade has experienced a “significant level of anti-dumping activity, especially in the EC where it ranked third among all sectors in terms of new initiations in recent years.” While there have been attempts to portray the investigations as involving a relatively minor share of overall trade, for the developing countries concerned they accounted for a large chunk of exports.

Some analytical data cited in the paper (about investigations on synthetic fibres, cotton fabrics and bed linen) showed that in each of the three product lines, complaints have been lodged by the same industry association (in the EC) at the same time. There could hardly be any mistaking the protectionist aim behind the complaints.

The investigations dragged on for two years or even longer, despite clear provisions in the Anti-dumping Agreement that these be concluded within 18 months. No relief or remedy is available to the affected countries or companies even though the investigations did not result in any affirmative findings.

It was also a matter for reflection, said Peru, that the investigating authorities could not prevent damage to the exporting countries despite the fact that the complainant association grouped a large number of products which could not properly qualify as “like products” of domestic production being hit by the allegedly ‘dumped’ exports. Both on cotton fabrics and synthetic fabrics, a similar group of products were cited. The plain question is “how could highly processed printed fabric be considered ‘like product’ alongside raw, unbleached fabric? Yet the investigations continued!”

The second and third investigations in the EC, for which the product coverage was reduced, showed that the product coverage for the first had been misused.

The mere fact of the same industry association persisting with complaints, sometimes even before an earlier one resulted in no action, brought out the clear protectionist pattern and the serious lacuna in initiating investigations simply on receipt of complaints.

In the end, each of these investigations proved to be unfounded and unjustified, but nevertheless they resulted in noticeable damage to exports of the countries concerned. The import shares of affected countries dropped, for example, from 59% before initiation of complaints (in the case of cotton fabrics) to 38% when the investigations were dropped without any affirmative duty. Even after the action was dropped, the share of imports from the affected countries could not recover, thus resulting in lasting damage to their interests without any justification.

Given that the enterprises of the developing countries were rather small, could they be capable of dumping and causing injury? Could companies with such small volumes of trade be expected, physically or financially, to defend their interests by taking advantage of any procedural rights during investigations, even when in theory these rights might be available to them?

The paper also showed that once anti-dumping duties are imposed, they tend to stay, for as long as 19 years or more, irrespective of whether trade might have totally disappeared in the meanwhile.

For the developing countries, the problem started with the very complaints and initiation of investigations. Most often complaints are lodged with protectionist aims, and once the investigation starts the trade is affected, and this involves a heavy financial burden on exporters.

In the textile industry, industry associations of major developed countries “are predisposed to equating any price declines with dumping and applying pressures for anti-dumping actions.”

Detailing some data about the various investigations, the ITCB member-country paper brought out that these data showed the “alacrity” with which investigations were launched, the persistence of a protectionist bias in investigations, as well as flaws in the automatic initiation of such investigations, which resulted in significant distortion on businesses and exporting-developing-country trade. The methodology used by the EC in the investigations had also been discredited by the WTO dispute settlement panel and Appellate Body in a dispute raised against the EC.

China hoped that the paper by the ITCB members could provide inputs for the negotiations, and help bring more clarity and discipline in the rules. The anti-dumping actions had now become impediments to market access. Indonesia said that it had been a particular victim of the anti-dumping actions. Pakistan said that the anti-dumping investigations had “chilling effects” on textile exports. (SUNS5280)

From Third World Economics No. 300 (16-30 March 2003)