As per the media report SteelMint analyzed, it looks like that India’s position in global assembly of governments like G20 and WTO is unclear regarding minimum import price and steel overcapacity.
What is G20 and its view regarding steel overcapacity?
G20 (Group of Twenty) is an international forum for governments of countries namely Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States—along with the European Union (EU).
Collectively, the G20 economies account for around 85% of the gross world product (GWP) and 80% of world trade (or, if excluding EU intra-trade, 75%).
In the G20 trade ministers’ meeting held last week, India has taken a tactical decision to back G20 move to curb steel overcapacity. However, the government fears that this may influence the support of MIP to the domestic steel industry.
Mr Abhijit Das, Head of the Centre for WTO Studies at IIFT, said, “Under the garb of decreasing excessive steel capacity, the attempt was to cap developing countries’ steelmaking capacity and since developed countries had more capacity, they would supply to the world.”
China – The major threat
34-member organisation for Economic Cooperation and Development, OECD Steel Committee said, global crude steelmaking capacity more than doubled between 2000 and 2014, led by an unprecedented expansion in capacity by China. It is projected to grow further by 2017 to 2,361 MnT, about 700 MnT more than the global steel demand in 2015.
Albeit, China is planning to curtail steel production, the capacity cuts might not help in reducing the country’s overcapacity, as country’s steel demand itself is falling continuously. The China Iron & Steel Association expects Chinese steel demand is likely to fall by 100 MnT by 2030. So, basically, even if China curtails its steel capacity in small doses, on an absolute basis, the country’s overcapacity will stay largely unchanged.
What is WTO and why is pressurizing India not to extend MIP?
The World Trade Organization (WTO) is an intergovernmental organization, which deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process.
In current scenario, WTO is pressurizing India not to extend MIP on steel, which was imposed on 173 steel products ranging USD 341-752/MT on 5 Feb’16 and now going to expire in Aug’16. WTO members said that MIP for long term is not a viable option and it is against WTO rules. India should opt for anti-dumping duty instead of MIP to control steel import.
A Commerce Ministry official stated to media, “We realise that continuing with the MIP for long is not a viable option and could go against WTO rules if seen as a permanent duty. Imposition of anti-dumping duties is a better option, but the process takes time. The government is weighing the situation.”
WTO asked India to justify its continued restrictions on imported steel. India’s representative at the WTO justified that the country had not flouted rules. MIP was imposed for short term due to surge in steel exports by some major steel producers that have adopted predatory pricing practices.
India is also carrying out an anti-dumping probe investigation against steel import from some countries.
What is anti-dumping and in which case it is imposed?
Basically, an anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports. The duty is imposed when it seems that material is being dump at prices below fair market value.
Can anti-dumping replace MIP in India?
In Apr’16, Indian government launched its anti-dumping duty investigations against HRC and CRC imports from China, Japan, Korea, Russia, Brazil and Ukraine and Indonesia.
DGAD (Director General of Anti-Dumping & Allied Duties) had requested the interested parties of both the cases to submit their responses by 20 Jun’16 and market sources reported that the interested parties had submitted their responses on 20 Jun’16. The further process on the same is still ongoing.
If India decides to go with anti-dumping duty, it will take 2-3 months.
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