On January 5, 2017, the Indian government imposed an anti-dumping duty on jute products from Nepal and Bangladesh ranging from $6.30 to $351.72 per ton for a period of five years beginning 2017. The decision came from the Indian revenue department after the Directorate General of Antidumping and Allied Duties, based on the complaint made by the Indian jute mills association, concluded that the imports were “undercutting and suppressing the prices of the domestic industry”.

The move made by the Indian government can be analysed from another perspective too. The National Jute Board of India (NJB) has recently invited bids from agencies to conceptualise, design and execute a sustained campaign to build a brand identity for Indian jute and jute products within India and internationally. While the Indian Ministry of textiles has also proposed a Common Facility Centre for the development and promotion of diversified jute products, schemes like Jute Raw Material Banks (JRMB) have also been launched. Looking at the overall picture, the decision to impose anti-dumping duty on the import of jute and jute products alongside the attempts to promote Indian jute industry is clearly in line with the Modi government’s ‘Made in India’ policy. However, this decision from the Indian side is against the spirit of encouraging bilateral and regional trade.

Nepal-India bilateral trade

The Nepali jute cultivation has shrunk down to 11,000 hectares from a high of 56,000 hectares three decades ago. Following the withdrawal of subsidies on electricity, fertilisers, seeds and pond construction relevant to raw jute cultivation by the Nepal government, competing with Indian and Bangladeshi jute products has become a challenge for our domestic companies. As a result, among the 12 jute factories in the country, only four—Arihant, Raghupati, Baba and Swastik—are in operation. And jute production has dropped from 150,000 to 17,000 tonnes in three decades, making Nepal highly dependent on raw jute imports. As much as 70 percent of raw material is imported from India. According to Nepal Jute Mills Association, exports to India have virtually stopped following the imposition of countervailing duties in mid-December last year. This shows how badly the already fragile Nepali jute industry will be impacted by the anti-dumping duty from the Indian side. Nepal’s jute mills provide employment to more than 20,000 people with an investment of almost Rs2.61 billion.

The Nepal-India Trade Treaty, which covers only trade on goods, provides for, among others, exemption from basic customs duty and quantitative restrictions imports of listed primary (including agricultural) goods on a reciprocal basis; access for Nepali manufacturing products, (except for three items on the negative list) to the Indian market free of customs duties; and preferential entry of goods from India to the Nepali market. The imposition of the anti-dumping duty is clearly against the terms of the treaty. But this is not the first such case despite the presence of the Nepal-India Trade Treaty. In 2009, a Special Additional Duty was imposed on Nepali readymade garments (RMG). Furthermore, countervailing duties, levied on imports to balance the excise duty imposed on like domestic products, were imposed on the maximum retail price of RMG instead of on the border price, as is standard international practice. Although it was withdrawn later, such frequent breaches of the treaty not only hurt the export industry, but also undermine investors’ confidence in Nepal.

Spirit of regional trade

The South Asian Free Trade Agreement (Safta) seeks to allow free movement of goods among the Saarc member states through the elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods, and any other equivalent measures. As per the adoption of trade liberalisation programme under Safta, Non-Least Developed Contracting States should subsequently reduce tariff by 20 percent or below to 0-5 percent within a second time frame of five years, beginning from the third year from when the agreement comes into force. India has however used the non-tariff barrier (NTB) on jute and jute products, thus imposing an anti-dumping duty against the spirit of Safta.

Although Article 16 of Safta provides safeguard measures to the contracting nations, it clearly states that such measures are for cases where the imported products are “in such a manner or in such quantities as to cause, or threaten to cause, serious injury to producers of like or directly competitive products in the importing contracting state”. However, considering the state of the Nepali jute industry, it is highly unlikely that Nepali jute products can cause “serious injury” to India’s jute industry that produces 1,567 thousand tons of jute goods per annum While bilateral talks are held between the Nepali and the Indian sides, the issue should also be evaluated from a regional perspective, since it involves three of the Saarc nations. For the smaller party, a regional agreement provides a more predictable trading environment through the negotiation process than does a bilateral agreement. While the experts and diplomats on the Nepali side should clearly communicate the serious implications of the antidumping duty on the Nepali jute industry, all the Saarc signatory states should work together to enhance the effectiveness of Safta and make regional trade more favourable.

Pant has a master’s degree from Nanyang Technological University, Singapore