Jute, a versatile natural fibre, has long been a cornerstone of Bangladesh's industrial landscape. The industry, in recent years, has been facing a crisis due to various obstacles in exports posed by India. Jute has already been under anti-dumping since 2017. Moreover, India has started conducting an investigation recently on the import of Bangladeshi jute goods to impose countervailing duty (CVD).
Countervailing duties, also known as anti-subsidy duties, are import duties imposed in accordance with World Trade Organisation (WTO) rules with the aim to neutralise the negative effects of subsidies. The imposition requires an inquiry that reveals a foreign country is subsidising its exports, which undermines local producers in the importing country. The possibility of CVD threatens to push Bangladesh's jute industry to the edge of collapse.
The issue of imposition of CVD came up as the Indian Jute Mills Association (IJMA) filed a petition to the relevant government agency. The IJMA stated that significant subsidies are being provided by the Bangladesh government for the import of capital machinery used in local jute industries. It claims the subsidy facility has been affecting the Indian jute industry as jute sacks and other bags made by subsidised jute mills in Bangladesh cut the export prices. Indian Directorate General of Trade Remedies (DGTR) has started an inquiry in this regard. The DGTR has already written to the Commerce Ministry of Bangladesh on August 04 for a consultation meeting on the issue, which is yet to be held.
Dhaka and Delhi are scheduled to sit in a consultation on October 30 to present arguments and counter-arguments on the proposed CVD. According to the authority involved in the proceedings, the consultation's goal is to interact with industries and stakeholders in order to gather relevant information to reach an acceptable and mutual resolution of the issue.
Dhaka is expected to persuade Delhi not to impose countervailing duty (CVD) on jute goods since such products are already facing anti-dumping duty (ADD) imposed by India. The Indian finance ministry imposed ADD for five years on jute products from Bangladesh at rates ranging between $6.03 and $351.72 per tonne amid allegations of dumping goods like jute yarn, twine, jute sacking bags, and hessian fabric. The ADD has become effective since January 05, 2017 and has been renewed through a Sunset Review done in 2022.
As the ADD is still effective in the export of Bangladeshi jute goods to the Indian market, the fresh countervailing duty would be an overlapping measure. Simultaneous imposition of ADD and CVD is recognised as double remedies by the GATT signatories from the outset. The same product cannot be shown for both ADD and countervailing measures. Article VI:5 of GATT provides that 'no product … shall be subject to both anti-dumping and countervailing duties to compensate for the same situation of dumping or export subsidisation'.
Key Element of a US Legal Argument suggests that Article VI: 5 of GATT addresses Double Remedies for Export Subsidies. In a dispute between China and the US Department of Commerce over double remedies in the SCM Agreement, the US Court of International Trade (CIT) ruled in favour of the United States. However, the WTO Appellate Body disagreed and gave the ruling that double remedies were inconsistent with the agreement on subsidies. The Appellate Body referred to Article 19.3 of the SCM Agreement, which forbids concurrent duties that offset the same subsidisation twice.
According to local media, currently, export shipments of jute goods -- hessian and jute sacks -- are enjoying a 12 per cent cash incentive, and jute fiber like yarn and twine, a 7.0 per cent incentive. Export of carbon and jute particleboard produced from natural fiber gets a 20 per cent subsidy. Except for export incentives, the government isn't offering any other subsidies as no jute industries are located in SEZs and EZs.
Double remedies also contradict the rule of Indian custom tariff. Section 9B (1) of the Indian Customs Tariff Act 1975 prohibits imposition of ADD and CVD simultaneously in the same situation. The section also prohibits imposing any countervailing duty under section 9 or section 9A unless satisfactory voluntary undertakings from the exporting country or territory agree to eliminate or limit the subsidy or take other measures concerning its effect or if the exporter agrees to revise its prices or cease exports to the area in question at dumped price.
While dealing with a trade partner like Bangladesh, India should act according to the existing rules and regulations. Over the past decade, trade between India and Bangladesh has increased to record heights, with India now serving as one of Bangladesh's top import sources. Besides, various ongoing connectivity projects are now set to shape the future of bilateral trade. Despite increasing trade volume through many of the trade liberalisation initiatives, the trade deficit has increased substantially.
Meanwhile, the imposition of an anti-dumping duty on jute products, one of the major exports to India, has negatively affected exports. Since the imposition of ADD in 2017, jute and jute goods shipment to India stumbled, which varies from 5 to 30 per cent depending on the product. Prior to the ADD, 140,000 metric tonnes (MT) of jute goods were being exported to India from Bangladesh. Among those, 110,000 MT were jute yarn. After the imposition of anti-dumping measures, export volume to India has come down to 55,000 MT. Many private jute mills had to shut down their operation due to dwindling exports, which also led growers to stop producing jute.
India should act carefully, as the double remedy is prohibited by both the WTO and the Indian Customs Tariff Act. The fate of this vital sector, which plays a significant role in Bangladesh's export sector after garments and leather products, now hangs in the balance. The industry employs thousands of workers and contributes substantially to the economy. The adverse consequences of any oversights can destroy a promising sector in Bangladesh. Thus, Dhaka should explain the legal grounds and clarify their stance on the accusation. Diplomatic or political channels may play a strong role in persuading India against imposing CVD.
Khalid Saifullah is a freelance journalist and researcher.
© 2024 - All Rights with The Financial Express
