The leaders of top 20 industrialised countries met in Washington last month and pledged to enhance their cooperation and to work together to restore global growth and achieve needed reforms in the world’s financial systems. On protectionism, they declared, “We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organisation (WTO) inconsistent measures to stimulate exports”. India’s Prime Minister was a party to the declaration.
Within a week of the pledge, on November 21, 2008, the Indian commerce ministry restricted the import of hot rolled coils, transmission shafts, bumpers of motor vehicles, ‘other articles of iron or steel’ covered under customs tariff 73269099, seamless tubes/pipes under the heading 7304, carbon black, new pneumatic tyres, of rubber — radials covered under exim code 40112011, medium density fibre board (MDF) covered under the heading 4411 and synthetic filament yarn- elastometric — covered under the heading 5402. Imports of these items required a licence/authorisation from that date. On December 4, the commerce ministry removed the restriction of imports of certain types of MDF.
On December 2, 2008, the Director General of Foreign Trade (DGFT) amended the application form for license/authorisation for restricted items calling for more information on purchases made of the item(s) applied for (excluding imports made) in the preceding licensing year and about the purpose of import. On December 5, the DGFT issued a circular stating that despite restriction on import of items classified under Exim Code ‘54024400 — Elastomeric and 54024700 — Other, of polyesters’, these restricted items are being mis-declared and imported freely. The Circular asked all authorities concerned to ensure that there is strict adherence to the laid down import policy and that no item is imported under the wrong code.
In the meantime, the finance ministry imposed anti-dumping duties on acrylic fibre, compact fluorescent lamps and sulphur black and 5 per cent Customs duty on steel items and 20 per cent Customs duty on crude soyabean oil. It reduced the tariff value on brass scrap and poppy seeds and brought back duty drawback on iron and steel items.
Clearly, the government wants to help the industry revive, if need be even by resorting to ‘protectionism’. As such, India is one of the highest users of anti-dumping mechanism, with 520 initiations as against 3,305 worldwide, since 1995. With recession in developed countries getting entrenched and international prices coming down, more and more domestic producers want to petition for anti-dumping duty. Unlike ‘restriction’ that may be lifted anytime, anti-dumping action gives protection for five years.
The government, clearly on the defensive after the terrorist attacks in Mumbai, is keen on putting economic agenda in the forefront. Already, petrol and diesel prices have been cut. The economic revival package is on its way. The government that had been harping on protecting the interests of the farmers is now more than ever inclined to protect the interests of domestic industries. With the general elections round the corner, the time seems ripe for lobbying to get concessions or protection from a government quite willing to oblige domestic industries, despite the Washington declaration to reject protectionism.