The new fiscal year 2015-16 starts with a new budget that provides some protection to the country's domestic industries. Although most of the local manufactures and producers are not happy enough as they find the protection measures, mostly through tariffs, are limited or inadequate.
It is, no doubt, difficult for the government to continue with such direct protection for the domestic industries for long at a time when the country has significantly liberalised its trade regime and is committed to do more in near future. An analysis prepared by the Policy Research Institute (PRI) reveals that in the FY'16 budget, average Nominal Protection Rate (NPR) has declined to 25.8 per cent from 26.7 per cent in FY'15 which shows that the average NPR is still high. The real scenario may not be like this.
Nevertheless, local businesses and industries feel more comfortable with tariff protection. They don't seem eager to seek recourse to trade remedial measures to counter any uneven competition originating from imported goods.
There is a safeguard mechanism since June 2010 when the government appointed the chairman of the Bangladesh Tariff Commission (BTC) as the designated safeguard authority. The function of the safeguard authority is to investigate whether a surge in import of a particular product is hurting similar local product and recommend necessary remedial measures through imposition of safeguard duty. Sometimes quantitative restriction can be imposed on import of certain products instead of imposing additional or safeguard duty.
Three things have to be ensured before taking the safeguard measure. First, there is a sudden surge in imports of a certain product. Second, there is an injury or threat of injury to domestic industry as result of the excessive imports. Third, there is a causal link between increased import and injury or threat to injury. So, without establishing these three factors through investigation as per standard international practices, it is not possible to take any safeguard measure by the designated authority.
As the whole procedure is time-consuming and cumbersome, it is also very difficult for enterprises, especially small and medium enterprises, to furnish the required information to the designated authority to initiate the proceedings. There is, however, a provision for imposing provisional safeguard duty on the basis of the findings of preliminary investigation indicating that imports have caused or threatened to cause serious injury. Such measures may be maintained for a maximum of 200 days.
Safeguard measure is one of the three trade remedies endorsed by the World Trade Organisation (WTO). The others are: anti-dumping and countervailing measures. Of the three, safeguard measure is relatively complex and less applied. According to WTO statistics, since the inception of the world body in 1995, some 255 safeguard measures have been initiated by member countries while the number of measures actually taken is 123. In 2014, there were 23 initiations of safeguard measures and only 14 measures were taken.
Compared to safeguard, anti-dumping measure is widely used. Statistics available with WTO reveals that in 2014, members have some 236 anti-dumping initiations while the number of anti-dumping measures taken was 117. Total initiations of anti-dumping procedure stood at 4757 in last 20 years (1995-2014).
Like safeguard duty, anti-dumping duty can be imposed only after thorough investigation confirming linkage of dumping and injury to local manufacturers is established. Dumping means selling a good to another country at a price lower than the price normally charged in the country of production.
Bangladesh has interesting experience with anti-dumping procedure. Following the imposition of anti-dumping duty by India on export of lead-acid battery by Bangladesh company Rahimafrooz, the company took up the matter with the government to deal with the issue. After a hard exercise lingering over years, Bangladesh government finally moved, in January 2004, the Dispute Settlement Body (DSB) of the WTO to challenge the Indian anti-dumping measure. As part of the procedure, the DSB asked the two parties, Bangladesh and India, for consultation. After the consultation, India unilaterally withdrew anti-dumping duty in January 2005. It is the first and so far the only case initiated by a Least Developed Country (LDC) against a developing country in the history of WTO.
Bangladeshi textile manufacturers have long been complaining about dumping of Indian textile and fabric in Bangladesh. More than a decade ago, they have taken an initiative and formally lodged a complaint with the Tariff Commission. But failure to provide adequate supporting information and elaborate documentation left the procedure incomplete.
Countervailing measure is another recognised trade remedial measure applicable for containing subsidised export. If a manufactured product, subsidised by country-A is exported to country-B and causes harm or injury to related domestically manufactured product of country-B, then country-B can go for initiating actions for imposing countervailing duty on the import of that product. The duty is meant to offset (countervail) the subsidy on manufacturing and exporting of the product.
Like the two other remedial measures, countervailing measure also requires thorough investigation with proper documentation and so it is also time-consuming. At the global level, the number of countervailing measures is also small. In 2014, there were some 45 countervailing initiations while in only 12 cases countervailing duties were imposed.
All these statistics indicate that seeking protection through trade remedial process is not an easy task. Local manufacturers have a lot of limitations including little understanding of these procedures. There is also a concern regarding information secrecy. Although the Tariff Commission assures everyone that no data or information would be disclosed to third party or any government authority, a certain legal complication still persists. So far, there is no legal protection to keep information furnished by the producers for investigation, secret. This is really a big concern. Without legal provision for keeping business information secret, the safeguard authority cannot be expected to be functional.
Finally, Bangladesh needs to encourage businesses and enterprises to be familiar with these procedures. Even a very small number of measures, initiated and pursued properly, can give the signal that the country is on guard against any form of unbecoming surge in imports affecting domestic industries.
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