India answers back as Japan pushes for WTO dispute

By Meghaa Gangahar

Despite historically amicable Indo-Japanese relations, Japan has requested the World Trade Organisation (WTO) to set up a Dispute Settlement Panel to investigate the penal duties imposed on steel imports by New Delhi. India is well prepared to counter the Japanese stance on the matter. It is all set to block this request, maintaining its position that no trade norms were violated while imposing safeguard duties on certain categories of steel.

What caused the tension?

The rift has its roots in the Finance Ministry’s decision of imposing definitive safeguard duties on imports of “hot-rolled flat products” of non-alloy steel in coils in the previous year. This was done in order to counter a sudden and unforeseen surge in imports of steel. The surge was attributed to the cheap price of imports and the consequent dumping of steel in the country. India’s decision was based on the apprehension that the abrupt rise in imports held potential to harm the domestic steel industries. Thus, duties were imposed to regulate the excessive dumping and imports.

Japan accused India of failing to follow the benchmarks of the WTO safeguards agreement before imposing the duties. The two countries engaged in a mandated sixty-day duration of bilateral consultations to resolve the issue via negotiations. These efforts turned out to be futile and inconclusive. Japan and India went into consultation on two issues in December — minimum import price for certain steel products, and anti-dumping safeguard duties imposed on imports of hot-rolled flat products of non-alloy and alloy steel by India.

Guarding with steel gates

India had resolved to impose safeguard duties which would take effect in phases, fading in intensity as the domestic industry stabilised. A safeguard duty of 20 percent minus anti-dumping duty was imposed on imports of hot-rolled flat products between 14 September 2015 and 13 September 2016. This reduced to an 18 percent duty between 14 September 2016 and 13 March 2017, then a 15 percent duty between 14 March 2017 and 13 September 2017 and is expected to fall to 10 percent between 14 September 2017 and 13 March 2018. India also set a floor price for some steel products in February 2017. This predatory pricing was done to keep the prices below the actual cost of producing these goods – an effort to keep China, Japan and Korea from flooding Indian markets with steel. India, however, terminated the minimum input price in February 2017. Now, safeguard duties will continue, but in a diminishing trend.

The Japanese situation

Japan claims that its steel imports to India have plunged to half the initial quantity over the course of a year. It requested the services of the panel after asserting India’s failure to provide “convincing reasons” for its anti-dumping and safeguard actions which hurt Japanese steel exports. Japan remains sceptical of India’s explanation of the “causal link between the alleged increase in imports and the alleged serious injury and/or threat of serious injury to the domestic industry”, according to a Japanese official.

India may block the first request by the Japanese, although it will not be able to prevent the establishment of a Dispute Settlement Panel in the case of a second request from Japan in the dispute settlement body meeting. This process may even dissuade other Japanese-steel-importing countries from imposing such protective measures. However, it will not have a significant impact on the current situation since by the time the proceedings are over, the duties would have been phased out.

Featured Image Source: Reuters