The basis of dumping allegations are questionable

Feb 16 - 22, 2004



It looks almost certain that European Union (EU) will impose 13.1% anti-dumping duty on bed linen originating from Pakistan from March 2004. However, Ministry of Commerce is still hopeful that it will succeed in reverting the decision. Some of the experts believe that high ups in the Ministry are hoping against the hope. Looking at the proceedings gone so far one can resist from saying, 'a bad strategy has not helped in resolving the issue that was only a routine matter'.

It is necessary to understand that issue of call notices will be a routine as time gets closer to complete phase out of textile quota regime and also enters into free trade regime of textiles and clothing. In order to protect the domestic industry, importing countries of textiles and clothing will resort to creating various hurdles and imposition of anti-dumping duties will be common. The importing countries know very well that domestic industry cannot compete with textiles and clothing manufacturers operating in the developing countries.

In the past, a number of developing countries, including Pakistan, were extended 'favours' due to geopolitical reasons. These included GSP, enhanced quota ceilings and greater access to the markets for the selected countries. However, continuation of these favours is largely dependent on the foreign policy of the developed countries aimed at achieving certain controls in the various regions. However, it was also evident that they never wanted the influx of cheaper goods to hurt their domestic industries. One such example was the resistance by the US manufacturers regarding providing additional market access to textiles and clothing manufacturers from Pakistan.

After the 9/11, Pakistan got enhanced access to the EU market and yet another favour was provided under support strategy to the country tryiny to combat drug trade. Ironically, India which has been a key ally of Pakistan in fighting aganist the practices of devloped countries has went against Pakistan due to grant of concession against drug combat. This has caused substantial damage to Pakistan particularly because Pakistan grossly lacks the indigenous expertise to effectively counter anti-dumpting proceedings.

Saying that, many experts are of the view that 'waking up last minute' habit of Pakistan's private sector and officials does not help Pakistan putting up a convincing argument. They also say that the whole process, particularly the most recent mishap is due to gross mishandling of the affairs. Till last minute efforts were made to solicit political favour rather than putting up convincing argument in the proceeding. Hardly any effort was made to prove that 'structured cost' formula was incorrect. Some of the experts said the basis for alleging dumping was incorrect, to start with. Had Pakistan contested the basis of alleged dumping appropriately, it would have won the case in the initial stages.

As regards structured cost formula, it is clear that bed linen manufacturers and exporters do not enjoy any hidden subsidies and/or incentives. They buy cotton at international prices. Cotton growers are not provided any subsidy as the GoP no longer follows the policy of fixing support price of cotton. Bed linen exporters do get dutydraw back but the basis of calculation of such drawbacks is transparent. The manufacturers do not get electricity at concessional tariff. Almost all the leading manufacturers have their manufacturing facilities located in the tariff area. Therefore, the question of selling below cost does not arise at all.

It may be heartening that the government has not given up. However, it is also important to work out the recourse if this duty is imposed. Not only that export of bed linen from Pakistan will be seriously affected, but textile industry as whole may run in problems. As such export of textiles and clothing has come under threat due to short fall of cotton production and its higher prices. Pakistan had earned more then one billion dollar from export of bed linen during last financial year and expectation was that export in current financial year would be higher than last year.

At this juncture it is most appropriate to reiterate that Pakistan grossly lack the indigenous expertise to effectly counter dumping allegations. In the past some effort was made by Akbar Sheikh from the platform of All Pakistan Textile Mills Asociation (APTMA). However, he did not get the requisite support from neither the government nor the private sector and forced to bid farewell to his endavour. Pakistan is still dependent on the expertise of foreign attorneys and pay huge amount as fee that too in foreign currency.

It is still not too late. It may be good that Pakistan is still the front line partner in fight against terrorism but days past soon. Looking at the past experiences, the increase in uncalled for investigations should not be rules out completely.