AGAINST DUMPING

At the time of the global economic downturn, the need to protect import-substituting production in Azerbaijan has multiplied. Specifically, we are talking about the factor of dumping while importing goods and services. In order to prevent pressure on the domestic market, the Milli Maclis has developed an effective law "On anti-dumping, countervailing and protective measures"

History of the issue

Even in ancient times, during the formation of markets and commodity production in ancient cities, trade confrontations were reported. For example, the restrictive measures of Athens on supplies of goods from the region of Megara resulted in a series of bloody Peloponnesian Wars in the 5th century BC. Protective measures against dumping of fabrics or spices were frequently practiced by medieval cities - Venice, Genoa, Pisa, etc. With the beginning of industrial commodity production in the 19th century, trading companies of the vast British Empire began to make systematic use of the practice of reducing prices to oust competitors from the market.

However, the peak of trade wars came in the twentieth century, when the concept of dumping - exports of goods and services at artificially low prices, often below the cost of goods - was formulated. The purpose of dumping is to seize the external markets and expand your own production to the maximum. Dumping is used by large industrial groups and trade oligarchies that sell certain goods in their own countries at high monopolistic prices and much cheaper on foreign markets. And the losses of dumping companies are covered with direct or hidden state subsidies, or through special tax and customs preferences that reduce the costs of such expansionary practices.

Based on methods of unfair competition, dumping leads to significant losses for local producers, and today most countries apply anti-dumping laws and impose special protective duties. Such protective measures are also supported by the World Trade Organization (WTO), which has a special committee on anti-dumping practices. Over the last fifteen years, the WTO committee has investigated hundreds of cases - mostly on lower prices when exporting steel products and chemicals, illegal subsidies to agricultural products, etc. However, despite the efforts of the WTO to prevent discrimination against trading partners, in practice economically weak countries of Africa, Asia and South America are often unable to protect their own markets from the price pressure of multinational companies.

For the WTO, but against the refusal of subsidies

The most important reason that Azerbaijan does not expedite the negotiations on WTO accession is linked with the requirements of members of that organization to reduce customs Baum-tariffs that protect the domestic agricultural sector and to abandon the current level of subsidization for farmers. And Azerbaijan, on the contrary, wants to join the WTO with the status of a developing country and, accordingly, get a limit on subsidies for the agricultural sector at a rate of 10 per cent despite the fact that the WTO agrees to only a 5-per-cent limit. To date, the level of subsidization for the agricultural sector in Azerbaijan reaches an average of 14-15 per cent, taking into account the tax benefits. Moreover, the reduction of this level is a difficult task given the number of objective factors. Thus, without state support it would actually be impossible to build reservoirs, maintain reclamation and irrigation systems and carry out measures to protect lands from salinity and erosion. For the same reason, cuts in the preferential sale of agricultural equipment, fertilizers, pedigree cattle and other assistance to farmers will make many agricultural sectors in the country unprofitable. In this situation, the competitiveness of Azerbaijani agricultural production will drop to a minimum, and even a slight increase in the importation of "cheap" food from abroad will finally bury domestic production.

It is noteworthy that, despite the maximum protection of national production and the country's failure to enter the WTO, the Azerbaijani market has faced the problem of dumping in different periods. For example, at the beginning of the new century, the reviving domestic poultry industry experienced pressure from dumping deliveries of eggs from Iran and Turkey, as well as poultry from Brazil, the United States and other regions. At various times, attempts of price expansion were observed in the supply of fruits and vegetables from neighbouring countries while some companies exporting building materials also pushed prices down, trying to oust local producers from a number of positions.

The situation in the field of supplying the state with goods and services was no less difficult: according to the law on public procurement, government agencies are obliged to give preference to products of local manufacturers. However, until recently, this legal provision was practically not used. An analysis of procurement practices showed that over 90 per cent of winners in tenders are local companies, but nonetheless, almost all these suppliers favoured foreign goods, materials and equipment, even if there were competitive locally produced analogues. Such an imbalance was partly due to the fact that intermediary companies participating in tenders are very poorly informed about the products made in the country and their competitiveness in terms of price and quality. For their part, local producers have not always used such an important competitive advantage as the tariff margin that provides them with certain advantages.

At the legislative level

To overcome these inconsistencies and to protect the domestic market, a number of important steps have been taken in the current year. In January 2016, the Milli Maclis amended the law "On public procurements", and now while registering state procurements, the products and services of domestic companies will get an absolute advantage (considering their quality), while the level of preferential margins for local producers has increased from 15 to 20 per cent of the cost of purchased goods (works, services). In other words, the state customer is obliged to choose the products of local companies if their price does not exceed the offer of a foreign competitor by more than 20 per cent.

Since late last year, the Ministry of Agriculture of Azerbaijan has also been concerned about the need to raise the level of the country's self-sufficiency in food and to introduce new mechanisms for protecting the domestic agricultural market. In particular, the Ministry of Agriculture is studying the possibility of introducing import quotas and seasonal customs duties, as well as increasing quality control over imported agricultural products.

In order to protect the domestic market, the Milli Maclis is preparing to adopt the most complete and effective anti-dumping mechanism. The draft law "On anti-dumping, countervailing and protective measures", drafted by the Parliamentary Committee for Economic Policy, Enterprise and Industry, is aimed at protecting the local producer, preventing damage or a threat of damage to domestic production caused by dumping or subsidized import. The draft law also contains articles governing the rules for the implementation of anti-dumping and countervailing measures and the introduction of special duties.

"The main purpose of anti-dumping measures is to protect the economic interests of local producers. Similar rules are used in many countries, and in the process of developing the draft national anti-dumping legislation, the deputies relied on four directives of the WTO," Deputy Economy Minister Sahil Babayev said.

It is noteworthy that the protective measures stipulated in the draft law can be applied only after serious market research by a relevant state body and only 60 days after the beginning of such an inspection. Under the bill, the influence of dumping or subsidized imports on local production will be determined by analyzing a number of indicators such as the volume of import, its impact on the cost of local products, the difference between the price of imported and local goods, the level of the dumping margin, and others.

If cases of dumping in the process of importing goods are confirmed, anti-dumping, countervailing and protective measures can be applied. In particular, it is planned to introduce a special anti-dumping customs duty on the import of certain products, and its size may be equal to the dumping margin. The rate of such temporary duties cannot exceed the dumping margin and the amount of subsidies. The timing of its application is from four to nine months, depending on appeals from exporters, and temporary countervailing measures - no more than four months. In general, anti-dumping and countervailing measures cannot be used for more than five years.

If the price parity with domestic products is violated during the import of a product, local manufacturers can also count on some compensation.

According to the head of the parliamentary committee on economic policy, Ziyad Samadzada, Azerbaijan trades with more than 140 countries of the world, and many of them use similar anti-dumping laws, but some of our trading partners are doing this in spite of the agreement. "The new law is intended to support local production and stabilize the domestic market: it is extremely important as in some areas of agricultural production, our products cannot compete with imported analogues," Samad-zada said.

All this ultimately makes it necessary to adopt effective measures to protect the domestic market in vulnerable areas of domestic industry, and this legislative initiative may be another effective step in this regard.