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Anti-dumping Duty in India Threatens MMF Industry Governments must act fast to avoid layoffs, shutdowns, but prices rise

India’s MMF industry is protesting against the government’s most recent anti-dumping duty, the latest in a series of protectionist measures since the start of the great recession. Anti-dumping duties depress trade volumes and distort markets, yet many governments seek to capture the positive effects of the restrictions – increasing local competition and protecting jobs, for example.
As the Indian Finance Ministry imposed an anti-dumping duty ranging from 5% to 16.9% on all types of imported yarns from China, Korea, Chinese Taipei, Malaysia, Thailand and Indonesia last month, domestic spinners took advantage of increasing local demand by raising yarn prices in the range of 25-30% per kg. To the country’s MMF industry, that increase poses an enormous threat.
“The domestic yarn prices have appreciated phenomenally and weavers are at a big loss,” said Arun Jariwala, Chairman of the Federation of Indian Art Silk Weaving Industry (FIASWI). According to the Times of India, the price of polyester filament yarn (PFY) alone has gone up from Rs 99 per kg to Rs 125 per kg.

The duty has made importing yarn from China and other rival countries a costly affair, but fortunately the very nature of anti-dumping law is temporary. Such laws are usually suspended when domestic industries are judged to be capable of competing internationally.
Alongside the dumping of imported fabrics and increase in domestic yarn prices, rising competition has led powerloom weavers in India’s textile hub of Surat to call for a similar duty.

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The weavers, represented by the Federation of Indian Art Silk Weaving Industry (FIASWI), are first asking the Ministry of Textiles to form a Man-Made Fiber Development Board (MMFDB). The Board will protect the weavers from competition from fabric imported from China and other Asian countries.
A comparable board was established when an anti-dumping duty was implemented on the cheap imports of silk fabric from China in 2011 and resulted in the immediate imposing of the duty. It was later accused of leaving thousands of workers jobless as silk powerloom units closed.

A request for an anti-dumping duty is a 4-5 month process of analyzing and presenting the effects of the duty to the Ministry of Textiles. In the shorter term, the Board will give a voice to India’s indigenous MMF manufacturers.
The duty has also led the office of the Director General of the Competition Commission of India (CCI) to start investigating the MMF manufacturers in Surat for allegedly indulging in anti-competitive activities by fixing prices and illegally controlling the supply of yarn, violating The Competition Act ratified in 2002.
India is not alone in its anti-dumping push. South Korea is set to extend its anti-dumping duties on polyester yarn products from China and Taiwan by two years, based on recommendations made by the Korea Trade Commission. A duty of 6.26% will apply to polyester filament partially oriented yarn (POY) imported from both countries to protect local manufacturers from unfair price-cutting by foreign suppliers. The government hopes to ensure fair competition in the local market.