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Unfair Trade Practices and Remedies

Which are the features of Agro-based industries?

1. These industries are an example of mutually beneficial industries, with dependence between the primary and secondary sectors of an economy.

2. They derive their inputs from agriculture and include sectors like processed food, products of rubber, jute, cotton, textiles, paper, etc.

3. In India, they address important issues of poverty and unemployment by utilizing local resources.

4. These industries employ fairly large number of people but, they do not account for a very high share of emoluments.

5. Micro, small and medium-scale agro-based industries contribute to about 1/5th of India’s total exports.

6.  But, they face competition from cheap and often low-quality imports and are subjected to trade barriers in destination countries.

What can be done to make agro-based industries competitive?

1. Organizing these industries into clusters

2. Intervention for skill and technology up gradation.

3. Support for financial assistance

4. Overcome marketing challenges

5. Renovation of marketing outlets

6. Showcasing products of artisans and organising exhibitions, etc.

How do unfair trade practices impact domestic industry?

1. Domestic industries lose their competitive edge due to unfair trade practices adopted by exporters of other countries.

2. Such practices can be in the form of dumping or subsidies by the exporting country.

3. These practices put domestic industry at a loss.

4. It also results in

a. Loss of market share

b. Increase in unsold stocks

c. Reduction in return on capital employed

d. Reduction in profits and increase in losses

e. Increase in unemployment

f. Closure of manufacturing units

5. Cheap imports of low quality also add to environmental problems and hygiene related issues.

Where lies the remedy?

1. WTO member countries negatively affected by unfair trade practices of exporters of other countries can impose anti-dumping duties (ADD) and countervailing duties (CVD).

2. ADD or CVD make the imports costlier and provide a level playing field to the domestic industry.

3. An affected country can also impose a safeguard duty when there is a surge of imports of any commodity affecting the domestic industry seriously.

4. India’s Customs Tariff Act, 1975 and related Anti-Dumping Rules and CVD Rules, 1995 provide the legal backing for Government of India to protect the domestic manufacturer.

5. ADD or CVD is recommended by Directorate General of Trade Remedies (DGTR), a quasi-judicial body under Government of India.

6. Agro-based industries can approach DGTR to redress their grievances in cases where exports of other countries have materially injured them or are likely to injure them.

7. As most of the agro-based industries are in micro, small or medium enterprises, Government’s role is important to save them from competition from cheaper or subsidized imports.

8. Awareness amongst these industries is important for successful utilization of available trade remedies and to protect them from unfair trade practices of exporters of other countries.