hsl966 Global Economy

Article title “NTC imposes anti-dumping duties up to

17.25% on imported steel”
Source https://mettisglobal.news/ntc-imposes-
anti-dumping-duties-up-to-17-25-on-
imported-steel/
Date of the article February 7, 2022
Wordcount 799
Date the commentary was written February 17, 2022
Section of the syllabus Global Economy
Key Concept Economic Wellbeing
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Article

NTC imposes anti-dumping duties

up to 17.25% on imported steel
By News Desk -February 7, 2022

February 7, 2022 (MLN): The National Tariff Commission (NTC) Pakistan has imposed the
definitive anti-dumping duty on the imported iron, non-alloy steel rolled coils/sheets from
Chinese Taipei, European Union, South Korea and Vietnam, ranging from 6.18% to 17.25%
for five years effective from August 23, 2021, said the notice on NTC’s official website.

However, anti-dumping duties will not be levied on imports of the said metal that are used as
inputs in products destined solely for exports, the notification added.

This imposition is the result of the application of investigation lodged by Aisha Steel Mills
Limited (ASL) and International Steel Limited (ISL) concerning the dumping of flat-rolled
products of iron or non-alloy steel, cold-rolled, not clad, plated or coated, of prime and
secondary quality, excluding CR Coils/ Sheets exported from the European Union, Republic
of Korea, Chinese Taipei and Vietnam.

The dumped import has caused material injury to the domestic industry manufacturing CR
Coils/Sheets which resulted in a decline in market share, capacity utilization, profitability,
return on investment, production, sales, productivity, salaries and wages. Further, there was
a causal link between dumped imports of the investigated product and material injury to the
domestic industry during the period of investigation.

The investigated product is generally used in the production of automotive parts, sub-
assembly/inner body parts, fabrication of goods like doors/cabinets, pipes, tubes,
refrigerators, washing machines, geysers, ovens, etc.
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The commission has not received any information necessary for the determination of
individual dumping margins from any of the exporter/ foreign producers from the Exporting
Countries in this investigation, it said.
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Commentary

The chosen article addresses the issue of dumping iron in Pakistan from China, South Korea, the

European Union, and Vietnam. Dumping is “when a country or company exports a product at a price

that is lower in the foreign importing market than the price in the exporter's domestic market”. 1 The

Pakistani government has therefore imposed anti-dumping duties of up to 17.25% on imported goods.

Import duty is “a tax on imports with an attempt to restrict imports and possibly raise revenue for the

government”.2

Figure 3.1 illustrates the

negative effects of dumping

on Pakistan’s iron market. The

intersection of the Sdomestic and

Ddomestic curves determines the

domestic market equilibrium:

point A, at Pe and Qe. Foreign

countries sell iron at price Pw

which forms the Sworld supply

curve. However, countries

Figure 1 Self-made

such as China dump Iron at a lower price, thus introducing a third supply curve at Pd. This causes

market disequilibrium because the quantity demanded increases to Q4, however, at this price the

domestic producers are only willing and able to produce Q1. The excess demand (Q4- Q1) is satisfied

through the dumped goods. Hence, the domestic producer’s revenue decreases from (PeQe) to (PdQ1).

The producer surplus is limited to region (j), “leading to a decline in market share, capacity utilization,

return on investment”. The consumer surplus is illustrated by (a+b+c+d+e+f+g+h+i), thus the social

surplus in not maximized, leading to a global misallocation of resources. Additionally, the domestic

1 “Dumping.” Investopedia, 2022, www.investopedia.com/terms/d/dumping.asp. Accessed 17 Feb.

2022.
2 “International Trade: Trade Protection - Tariff.” The IB Economist, 2022,
ibeconomist.com/revision/international-trade-trade-protection-tariff/. Accessed 17 Feb. 2022.
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producers lay off workers who are most likely short of occupational mobility, resulting in future

structural unemployment. The balance of payments deficit may also worsen as the outflow of money

increases through imports. Thus, Pakistan imposes anti-dumping duties.

Figure 3.2 illustrates the

effects of anti-dumping

duties on Pakistan’s iron

market. As a result, the

curve (SChina) moves

towards the free trade

level as price rises from Pd

to Pw, thus decreasing the

imported quantity to (Q3-

Q2). The domestically

Figure 2 Self-made
produced quantity

increases to Q2, therefore, increasing the domestic revenue to (Pw Q2), causing the domestic producers

to be better off. This is supported by the increase in producer surplus from (h) to (h + g). Similarly,

this benefits domestic employment because more labor force is required to produce larger quantities.

Furthermore, the government gains tariff revenues, which not only reduces the balance of payments

deficit but can also be used to subsidize domestic production as further support.

On the contrary, the domestic consumers are worse off because they pay higher prices (Pd→Pw) and

receive lower quantities (Q4→ Q3). This is also evident in the loss of consumer surplus from

(a+b+c+d+e+f+g+h) to (a+b+c). The domestic income distribution also worsens due to the regressive

nature of duties, creating a higher burden on lower-income individuals.

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Moving further, production at the free trade level leads to a net gain in social welfare, thus achieving

allocative efficiency due to the fair nature of trade. Furthermore, the countries who dumped Iron

sheets are worse off because they export smaller quantities, thus losing export revenues.

It is assumed that the anti-dumping duty shifts the SChina curve exactly to the world supply. However,

due to incompleteness of information regarding the degree of unfair subsidies provided by the Chinese

government, Pakistan does not know the exact duty that would increase price to Pw. China may also

feel unjustified because Pakistan cannot truly acquire support and reasoning for imposing antidumping

duties.

Anti-dumping duties may have negative effects on the real GDP of Pakistan. Iron is used as a raw

material in the production of other goods, therefore, an increase in the price of iron will increase the

costs of production for certain domestic producers, causing cost-push inflation. Therefore, the real

GDP decreases while unemployment increases.

Lastly, the iron dumping countries may retaliate through trade wars by imposing their own trade

barriers. This can result in a cycle of protectionist reactions, worsening the global misallocation of

resources.

This illustrates how economic well-being is achieved by methods of trade protection such as import

duties. The Pakistani government imposes duties on imports to protect its own industries, thus

increasing domestic revenue which may move disadvantaged domestic producers out of extreme

poverty as the market is no longer exploitive. This ensures current and future financial security for the

individuals and the economy by creating income-generating opportunities. A reduction in the outflow

of money also gives the government the ability to provide asset-building opportunities, compensation,

and benefits for the labor market, thus increasing economic wellbeing.
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Ultimately, the implementation of anti-dumping duties brings the market back to the free trade level

which eliminates the global misallocation of resources. However, it is not an ideal policy because of

certain limitations, such as the impact on consumers and cost-push inflation. Thus, Pakistan must

consider alternative policies such as providing subsidies to domestic iron producers, which will reduce

domestic prices while maintaining the quantity demanded in the market.