WORLD TRADE
ORGANIZATIONTN/RL/W/99
6 May 2003
(03-2404)
Negotiating Group on Rules Original:  English
INDIA’S REPLIES TO QUESTIONS FROM THE UNITED STATES1
ON ITS SUBMISSIONS (TN/RL/W/4 AND TN/RL/W/26)
The following communication, dated 5 May 2003, has been received from the Permanent
Mission of India.
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India's Replies to Questions from the United States (TN/RL/W34) on its submission
(TN/RL/W/26)
India  Proposals on Implementation-related Issues and Concerns: Agreement on Subsidies and
Countervailing Measures/Anti-Dumping Agreement  (TN/RL/W/4, 25 April 2002)
Q1. India links developing countries’ inability to secure an increased share of international
trade to the imposition of anti-dumping measures against imports from developing countries.
Could India please explain the basis for it s statement that anti-dumping actions have
prevented it and other developing countries from securing a share in the growth in international
trade?
Reply
For the majority of developing countries, exporting to developed markets requires the
attainment of export competitiveness and high quality standards as also effective marketing.  Also,
exporting firms in developed country Members are generally significantly larger than exporting firmsfrom developing country Members and, therefore, have a greater capacity to bear the costs of
exploring new markets.
Further, products where developing countries have export strength are limited.  Any adverse
impact on one export product significantly affects the overall export effort.  Potential exporters ofother products will hesitate to explore export markets, as they will perceive anti-dumping duties as
being one of the consequences of export success in developed country export markets.
In India’s view it is also relevant in this context to take into consideration the fact that
exporters from developing country Members face considerably more problems in responding todetailed anti-dumping questionnaires than those from developed country Members.  These problems
are attributable to the paucity of physical and human infrastructure, lack of financial and
administrative resources and the less developed nature of accounting systems in developing countries.
These problems have also restricted the ability of developing country exporters to respond promptly
or appropriately in anti-dumping investigations, resulting in adverse findings.
                                                     
1 TN/RL/W/25 and TN/RL/W/34TN/RL/W/99
Page 2
India’s experience has been that its exports have been frequently subjected to anti-dumping
and countervailing duty action  which has led to a reduction if not complete cessation of the exports to
the country concerned of the in respective products.  In certain cases the very initiation of anti-
dumping investigations chilled exports, although su ch investigations were subsequently terminated.
In the absence of the anti-dumping action its export s would otherwise have continued to grow.  Such
experience is perhaps shared by other developing countries.  It is therefore India’s view that anti-
dumping actions have prevented it and other developing countries from securing a share in the growth
of world trade.
Q2. India observes that from 1995 to the firs t half of 2001, 60 per cent of definitive anti-
dumping measures imposed were against imports from developing countries.  However, asignificant percentage of those measures were imposed by developing countries.  Moreover, the
United States notes that in recent years a majo rity of anti-dumping investigations have been
initiated by developing countries.  The targets of many of these antidumping investigations by
developing countries have been other developing countries.
Given this increased use of anti-dumping measures by developing countries, which
would better serve development goals:  reducing use of antidumping measures against
developing country exports, including by other developing countries, or reducing dumping into
developing country markets?
Reply
India is of the view that resort to anti-dumping action by both developing as well as
developed countries, when taken in violation of obligations under Anti-Dumping Agreement impedes
trade and consequently developmental goals.  It should however be recognised that the ability of adeveloping country to either withstand dumping act ion in its market or when it suffers unfair anti-
dumping action overseas on its exports is extremely limited as compared to developed countries.
Q3. India identifies a “changed global trade and economic scenario, especially for exports
from developing countries”, and states that revisions to the de minimis  standard and negligible
import volume are necessary to address this chan ged scenario.  India offers detailed proposals.
(a) Would India please describe the specific changes to which it refers?
(b) How would revisions of de minimis  and negligibility standards address problems caused
by the changed scenario?
Reply
During the Uruguay Round full-fledged commitments were taken on for the first time by the
developing countries in the hope that they could increase their share in global trade.  With the benefit
of hindsight, it is now recognised that the gain s from the Uruguay Round commitments were less than
hoped for.  In areas of particular interest to developing countries such as market access, the realised
gains have been more limited than expected.  It is this change in global trade and economic scenario
viz. developing countries taking on full-fledged obligations for the first time and the gains hoped for
from such commitments not being realised, that India referred in its submission.
The past seven years have also witnessed an increasing trend in resort by developed countries
to anti-dumping measures against developing country imports.  The absence of any meaningful
increase in developing country exports may be due to a variety of factors including the adverse impact
of trade remedial action imposed by developed countries on developing country exports.TN/RL/W/99
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Developed country markets are usually the largest export markets for the developing
countries.  The loss of a developed country market –which may seem a relatively minor event in the
overall context of the export basket of a develope d country Member or an export-oriented developing
country Member –takes on a huge and oppressive dimension in the context of the developing countryMember’s export effort. It is in this context, in conjunction with the absence in increase in global
share of developing country exports, that India has proposed a revision of de minimis  margins and
negligible volume benchmarks.
In India’s view the raised de minimis margins and enhanced negligible volume would have a
two-fold advantage.  First, the exporters may not expend resources required for participating in the
investigation, in those cases in which their expo rt volumes are below the raised negligible volume
benchmark.  Second, there would be fewer cases of imposition of  anti-dumping measures on exports
from developing countries.  This would have a positive impact on developing country exports and
would have a demonstration effect on other domes tic producers who may feel encouraged to make
improvements in productivity so that they are also able to export a part of their production.  This
would facilitate the overall efforts of developing countries to increase their share in global trade.
Q4. India proposes that Article 5.8 be amended to increase the de minimis  level from 2 per
cent to 5 per cent for imports from developing countries.
(a) Would India please explain in more deta il the justification for this proposal?
(b) What is the specific basis for the 5 per cent figure which India proposes as the
appropriate de minimis  standard?
(c) Would India please explain how this proposal would address the problems of developing
countries that it has identified?
Q6. India proposes that, for developing countri es only, Article 5.8 be amended to increase
from 3 per cent to 5 per cent the threshold volume of dumped imports which should be
regarded as negligible.  In addition, India propos es that the stipulation that anti-dumping action
can still be taken against a country whose volume of imports is below this threshold, providedcountries which individually account for less than the threshold volume collectively account for
more than 7 per cent of the imports, be deleted.
(a) Would  India please explain in more detail the justification for this proposal?
(b) In particular, how has India identified 5 per cent as the correct figure below which
imports from an individual country should be considered negligible?
(c) Would India agree that in many instances, dumped imports accounting for 5 per cent or
less of total imports may cause significant injury to a domestic industry?
(d) Would India agree that in many instances, dumped imports accounting for 7 per cent or
less of total imports may cause significant injury to a domestic industry?  If so, how does
India justify deleting the cumulative 7 per cent threshold provision?
Reply
India would respond to questions 4 and 6 together.TN/RL/W/99
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In India’s view, the thresholds specified in Article 5.8 have little scientific basis and are really
an attempt to lay down “bright lines” in th e Anti-Dumping Agreement to prevent arbitrary
interpretations by investigating authorities and, at th e same time, to avoid disputes.  In India’s view,
the thresholds in Article 5.8 err on the side of caution in favour of the importing Member that wishes
to protect its domestic industry.
The rationale behind India’s proposal for enhancing the negligible volume thresholds in the
case of developing country Members is that more flexible rules should apply to developing countries.
Article 5.8 of the Anti-dumping Agreement specifies two thresholds that must not be exceeded if an
investigation is to be terminated on the ground that the volume of dumped import is negligible:
1. The volume of dumped imports must be less than 3 per cent of imports of the like
product; and
2. Countries that individually account for less than 3 per cent of the imports of the like
products in the importing member should collectively account for less than 7 per cent
of such imports.
Under Article 5.8, neither of these thresholds may be exceeded if investigations are to be terminated.
India’s proposal seeks to raise the 3 per cent threshold to 7 per cent in the case of developing country
Members and to make the second inapplicable to them.  Thus, when India stated that the cumulation
requirement should not apply, India was only pro posing that once a developing country Member is
shown to have less than a 7 per cent share of total imports in the importing Member, the investigation
should be terminated in respect of that developing country Member without applying collective
thresholds of any kind, whether for imports from all countries that individually account for less than
3 per cent of total imports or for imports from developing country Members that individually account
for less than 7 per cent of total imports in the importing Member.
For reasons stated in reply to various questions a bove, India is of the view that raising the de-
minimis level from 2 per cent would help ensure that number of cases in which anti-dumping duties
are imposed on developing country exporters is reduced and the adverse impact of such measures is,
to a certain extent, made less harsh for developing countries.  India is willing to  engage
constructively for reaching an agreement on the appropriate benchmark of raised de-minimis  margin
and negligible volume that would help in addressing the concerns expressed above.
Q5.  India proposes that the de minimis  threshold should be extended to apply to all refund
and review proceedings, as well as to initial investigations.
Given that in the review phase, unlike in th e investigation phase, there has already been
a finding of injurious dumping and, thus, exporters have prior notice that their pricing is
subject to further scrutiny for dumping, is it a ppropriate to apply a more stringent standard for
pricing by those exporters?
Reply
India requests the US to clarify would it means by “is it appropriate to apply a more stringent
standard for pricing by those exporters?”
Q7.  India proposes that the “lesser duty rule” in Article 9.1 be made mandatory when
imposing an anti-dumping duty against imports from a developing country Member by any
developed country Member.
(a) Would India please explain in more deta il the justification for this proposal?TN/RL/W/99
Page 5
(b) What methodologies would India recommend implementing for determining the duty
necessary to remove the injury to the domestic industry?
(c) Why should the mandatory lesser duty rule for imports from developing countries only
apply in cases brought by developed countries?
Reply
In India’s view, the purpose of an anti-dumping measure is to address the injury caused to the
domestic industry due to dumped imports.  Otherwise protection may be accorded to the domestic
industry beyond the injury that may have been caused by the dumped imports.  In its submission(TN/RL/W/26) India has identified the issue of in jury margins for negotiations in the second phase.
India would like all investigating authorities  to adhere to the lesser duty rule in furtherance of the
desirability of this as already provided for in Article 9.1 of the Anti-Dumping Agreement.  In any case
the lesser duty rule should be made mandatory at least in the context of operationalising the Article 15
of the Anti-Dumping Agreement.
SUBSIDIES AND COUNTERVAILING MEASURES
India    Proposals on Implementation-related Issues  and Concerns: Agreement on Subsidies and
Countervailing Measures/Anti-Dumping Agreement  (TN/RL/W/4, 25 April 2002)
Q1. India asserts that the threat and imposition of countervailing duties have serious
adverse effects on developing country economies, including a fall in production, large
unemployment, decline in incomes and increase in poverty levels.
Could India please explain the specific factual basis for this assertion?
Reply
Industry in developing countries are characterised by low level of infrastructure development,
high cost of capital, prevalence of under-developed regions where industries may be reluctant to
invest etc.  The various export incentive schemes in developing countries are less in the nature ofconferring an advantage to the exporters in such countries and more for the purpose of creating a level
playing field, in view of the fact that their competitors from the developed countries do not suffer
from these disadvantages. It has therefore been recognised that governments have to assume a more
active role in assisting the industry by creating a level playing field.
Technology improvement and productivity enhancement have been recognised as the key
elements in economic development and the governments are generally eager to update the technology
to realize the goal of economic development.  According to economists it can be shown that export
promotion measures like export subsidies are definitely beneficial to developing countries in updating
technology, improving productivity and stimulating employment. (Xingshuo Yin 2000).
In recent years Export Processing Zones have become increasingly popular where incentives
are offered by the government.  Economists have generally noted the benefits of EPZs to the economy
of the concerned country.  There are many cases of catalyst and demonstration effects (Rhee, 1990,
Rhee and Belot, 1992) on the host economy.  They can contribute to building human capital throughtheir demonstration and catalyst effects on the country entrepreneur pool.  Also, an efficient,
competitive zone is an industrial infrastructure that many countries lack.  These effects, together with
the labour training, may be the zone’s lasting contributions to the country in which it operates.(Dorsati
Madani 1999).TN/RL/W/99
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In view of the above it would be difficult to deny the positive impact on the economy of a
developing country due to increased exports.
It has been India’s experience that imposition of anti-dumping and countervailing duties has
on various occasions led to closure of the business entities which were producing the subject goods,
besides having adverse consequence for other industries supplying inputs to the affected industry. Due
to such linkages, resort to anti-dumping/counterva iling duty action by developed countries against
developing country imports has led to adverse economic consequences in developing countries.
Q2.  India notes that characteristics of developing countries include high cost of capital, low
level of infrastructure development, inadequate integration and organization of the economy,and poorly developed information networks.
(a) Could India please explain how its proposal s would specifically ameliorate the economic
problems identified?
(b) Could India please explain why these problems could not more appropriately be
addressed directly?  General infrastructure development, for example, can be achieved
through direct government infrastructure investment, which is not restricted under the
Subsidies and Countervailing Measures Agreement.
Reply
India’s submission had highlighted some of the co nstraints like high cost of capital, low level
of infrastructure development, that are characteristics of industry in developing countries.  India
however, did not argue that these problems could be  ameliorated by its proposals.  Nevertheless as
indicated in reply to question 1 above some success in  exports can have a positive impact on other
domestic production.
India agrees that general infrastructure development can be achieved through direct
government intervention.  However governments in developing countries may not have all the
resources to invest in infrastructure which is capital intensive.  Such governments may therefore be
permitted to grant targeted incentiv es to compensate its industry for costs incurred due to the various
bottlenecks as identified in India’s proposal.  These are particularly relevant as exporters from
developing countries are in competition with manufacturers in countries not affected by such
problems.
Detailed Proposals:
Proposal 1:  A new provision to be added in Article 27.10 to provide for countervailing duties on
imports from developing countries being restricted only to that amount by which the subsidy
exceeds the de minimis  level.
(a) Could India please explain in more detail the justification for this proposal and how it
would meaningfully and directly address the economic problems of developing
countries?
(b) Is this proposal likely to encourage developing countries to subsidize their exports?Proposal 2:  Article 27.10 (b) shall be amended to provide for countervailing duty not being
imposed in the case of imports from developing  countries where the total volume of imports is
negligible, i.e. 7 per cent of total imports.TN/RL/W/99
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(a) Could India please explain in more detail  the justification for this proposal?  In
particular, what is the specific basis for proposing 7 per cent as the figure below which
imports should be considered negligible?
(b) Is it India’s position that subsidized imports of 7 per cent or less can not cause adverse
effects to the domestic industry of a Member?
Proposal 3:  Article 27.2 shall be amended so that the prohibition in Article 3.1 (a) does not
apply to export subsidies granted by developing countries where they account for less than 5 per
cent of the f.o.b. value of the product.
(a) Could India please explain in more detail  the justification for this proposal?  In
particular, what is the specific basis for se tting the level for export subsidies at 5 per
cent of the value of the product?
(b) Is it India’s position that export subsidies are not trade-distortive?Proposal 4:  Article 27.11 shall be amended to provide for the de minimis  level of subsidization
below which countervailing duty shall not be imposed in case of imports from developing
countries being raised above 3 per cent.
What specifically would India propose as the revised de minimis  level for developing
countries?  Would a different level apply to Members in Annex VII of the SCM Agreement?
Reply
India would like to respond to questions on proposals 1-4 together.
As has been mentioned in replies to various questions above, developed country markets are
usually the largest export markets for developing countries.  The loss of a developed country market
pursuant to the imposition of a countervailing duty  has adverse consequences not only for the
industry producing the relevant product but could also adversely affect other sectors of the economy.
It is in this context, in conjunction with the absence in increase in global share of developing countryexports, that India has proposed a revision of de-minimis  subsidy margins and negligible volume
benchmark.
In India’s view, the thresholds specified in Article 27.10 and 27.11 have little scientific basis
and are really an attempt to lay down “bright lines” in the Subsidies Agreement to prevent arbitraryinterpretations by investigating authorities and, at th e same time, to avoid disputes.  In India’s view,
the thresholds in Article 27.10 and 27.11 err on the side of caution in favour of the importing Member
that wishes to protect its domestic industry.
In India’s view the raised de minimis margins and enhanced negligible volume would have a
two-fold advantage.  First, the exporters may not expend resources required for participating in the
investigation, in those cases in which his export  volumes are below the raised negligible volume
benchmark.  Second, there would be fewer cases of  imposition of a countervailing duty measure on
exporters from developing countries.  India’s proposal No. 3 has been made in the same spirit.
Acceptance of these proposals would have a positive impact on developing country exports and wouldhave a demonstration effect on other domestic producers who may feel encouraged to make
improvements in productivity so that they are also able to export at least a part of their production.
India does recognise that exports subsidies are trade distortive.  But where they are meant to make up
for the various handicaps faced by exports from developing countries by providing them a levelTN/RL/W/99
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playing field, they become necessary.  Developed countries should be willing to give positive
consideration to these proposals made so that developing countries are able to achieve a share in
global trade commensurate with the needs of their economic development.
It is the view of certain experts that :“From an historical point of view the legislation relating to subsidies was flexible and
adapted itself to the specific conditions of developed countries during the various
stage of their development.  One cannot, therefore, talk of an inviolable principle
which is unalterable when the need arises” (Michael Rom 1968).
The above view remains equally valid today.  In a Doha Development Agenda the developed
countries should show sensitivity to these legitimate concerns and adapt the Subsidies Agreementaccordingly.
Proposal 5:  Article 27.3 shall be amended so that the prohibition of paragraph 1(b) of Article 3
shall not apply to developing country Members. The reference to expiry of this flexibility after
five/eight years from the date of entry into force of the WTO Agreement shall be deleted.  It
should also be clarified that the provisions of the amended Article 27.3 shall be applicable
notwithstanding the provisions of any other agreement in the WTO acquis.
(a) Is it India’s position that making the receipt of a subsidy contingent upon the use of
domestic over imported goods is an appropriate economic development policy?  CanIndia point to any economic literature which supports such a position?
(b) Is it India’s position that making the receipt of a subsidy contingent upon the use of
domestic over imported goods does not distort trade?
Reply
India does not deny that making the receipt of a subsidy contingent upon the issue of
domestic over imported goods distorts trade.  As  regards the appropriateness of the receipt of a
subsidy contingent of use of domestic over imported goods as an economic development policy, the
economic literature presents no clear answers. It is nevertheless pointed out that in a thesis on the
rationales of import substitution industrialisation strategy (Liang Hong 1993) the general conclusionwas that import substitution as an industrialisation strategy remains viable and may be of great
importance for less developed countries that want to catch up economically with industrialised
countries.  As import substitution subsidy would be an important component of import substitution
strategy, its relevance for developing countries cannot be over- looked.  It would also be useful to
know from the United States if it can confirm that  such a policy has not been used at all in its
economic development at a comparable stage of development to some of the present day developing
countries.
India’s replies to questions from the United States (TN/RL/W/34) on its submission
(TN/RL/W/26)
Q1.  India proposes that the options for identifying profit under Article 2.2.2 should be
considered a hierarchy.  What order of those op tions does India propose, and what is the
rationale for that order?TN/RL/W/99
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Reply
India has not proposed that there should be a hierarchy for identifying profits under
Article 2.2.2.  Instead, India has proposed that there should be a reasonability test for the profits used
under options (i)- (ii) of Article 2.2.2
Q2.  India proposes deliberation on certain questions relating to the calculation of “injury
margins”.  What is an “injury margin”?  India states that Article 3.4 lists 15 “injury
parameters”.  Would India please clarify its view of the connection between such “parameters”
and the  “injury margin”?
Reply
The margin of injury may be defined as a quantification of the injury being suffered by the
domestic industry due to dumped imports.  One possible method of such a calculation is the difference
between the landed value of the imported product and the fair selling price for domestic industry.
India is willing to engage constructively in further refining this definition.
As indicated in India’s submission (TN/RL/W/26), the evaluation of injury factors is an
exercise separate from injury margin determination.  While the evaluation of injury factors is not
aimed at obtaining a quantitative figure of injury being suffered by the domestic, calculating such a
figure is the goal of margin of injury.
Q3.  India proposes more specific provisions on price undertakings, including establishing
rules for identifying an appropriate price for an undertaking, defining “ satisfactory”
undertakings, and clarifying conditions as to when non-acceptance of price undertakings is
permissible.  Would such provisions change  the essential nature of price undertakings as
mutually agreeable settlements between export ers and the investigating Member?  Is India
proposing that there should be conditions under which exporters would be required to accept
undertakings proposed by the Member?  Shou ld there be conditions under which exporters
would be required to provide reasons when rejecting undertakings offered by a Member?
Reply
India is of the view that its proposal to have more specific provisions on price undertakings
would not change the essential nature of price undert akings.  More specific provisions in this regard
would add to the transparency of the process of submission and acceptance of undertakings.  India is
not proposing that there should be conditions under which exporters would be required to accept
undertakings proposed by the Member.  India is also not proposing that exporters would be requiredto provide reasons when rejecting undertakings offered by a Member.
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