Why is it in the News?

Vietnam has been pushing the President Joe Biden administration to quickly change its “non-market economy” classification to “market economy”, in a bid to avoid high taxes imposed by the US on the goods imported from the Southeastern country.

Why does Vietnam Want to Get the ‘Market Economy’ Status?

• Vietnam has argued that in recent years it has implemented enough economic reforms that get its name off the non-market economies list.
• The country does meet a number of criteria for the status to be changed.
  • For instance, Vietnam allows foreign investment, wages are determined by free negotiations between workers and management, and most of the means of production are not owned by the state.
• The change in status will also help Vietnam get rid of the anti-dumping duties, making its products more competitive in the US market.
• Vietnam’s Center for WTO and International Trade has said that the method of calculating anti-dumping duties is flawed as it causes “the dumping margin to be pushed up very high” and does not actually reflect the situation of Vietnamese companies.

About Non-market Economy Status:

• Non-market economy status refers to a designation applied to countries by international trade authorities, particularly the World Trade Organization (WTO), based on their economic structure and policies.
• In a non-market economy, the allocation of resources, production decisions, and pricing mechanisms are predominantly influenced by the government rather than by market forces.
  • This can include state ownership of key industries, government intervention in setting prices, and restrictions on foreign investment and trade.
• For trade purposes, countries classified as non-market economies may face different treatment in anti-dumping investigations and trade disputes.
  • This designation can affect how trade regulations and tariffs are applied to goods originating from these countries.
• The US designates a country as a non-market economy based on several factors which are:
  • If the country’s currency is convertible
  • If wage rates are determined by free bargaining between labour and management
  • If joint ventures or other foreign investments are allowed whether the means of production are owned by the state; and
  • If the state controls the allocation of resources and price and output decisions.
  • Other factors like human rights are also considered.
• The non-market economy label allows the US to impose “anti-dumping” duties on goods imported from designated countries.

Market Economies:

• Market economies operate based on the interactions between consumers and businesses, guided primarily by the law of supply and demand, rather than by central government policies.
• Theoretical Foundation: Developed by classical economists like Adam Smith, David Ricardo, and Jean-Baptiste Say, market economies emphasize the role of free markets in allocating resources efficiently.
• Modern Market Economies: Often referred to as mixed economies, modern market economies may still involve some government interventions, such as price-fixing, licensing, quotas, and industrial subsidies, but the majority of decisions are market-driven.
  • Examples include countries like India, the USA, and the UK, where market forces play a significant role in shaping economic activities.

What is Anti-dumping Duty?

• An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
• In order to protect their respective economy, many countries impose duties on products they believe are being dumped in their national market; this is done with the rationale that these products have the potential to undercut local businesses and the local economy.
• While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
• In the long term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods.
• The World Trade Organization (WTO)–an international organization that deals with the rules of trade between nations–also operates a set of international trade rules, including the international regulation of anti-dumping measures.?

Why is it in the News?

The Directorate General of Trade Remedies (DGTR) has now recommended the imposition of anti-dumping duty on sodium cyanide (NaCN) imported from China, the European Union, Japan, and Korea.

Key Facts About Sodium Cyanide:

• Sodium cyanide (NaCN) is a highly toxic, inorganic compound with a white, crystalline appearance.
• It is a solid at room temperature and has a high affinity for metals, making it useful in various industrial processes.
• Due to its toxic nature, proper handling and safety protocols must be followed when working with sodium cyanide.

Applications of Sodium Cyanide:

• Mining and Metallurgy: Sodium cyanide is widely used in the extraction of gold and silver from ores. It is employed in a technique called "cyanide heap leaching," where a dilute sodium cyanide solution is sprayed onto crushed ore.
  • The cyanide forms a water-soluble complex with the precious metals, enabling their recovery from the ore.
• Electroplating: NaCN is utilized as an electrolyte in electroplating processes, particularly for the deposition of silver, gold, and other metals on various surfaces to improve their appearance, durability, or conductivity.
• Synthetic Fiber Production: Sodium cyanide is used in the manufacturing of synthetic fibers such as acrylic and nylon.
  • It serves as a catalyst in the polymerization process, promoting the formation of long-chain polymers that make up the fibers.
• Pesticides: Due to its toxicity, sodium cyanide has been used as a fumigant to control pests and rodents.
  • However, its use in this field has been largely phased out in many countries due to safety concerns and the development of safer alternatives.
• Dye and Pigment Production: NaCN can be used in the production of certain dyes and pigments, particularly those containing nitrogen.
  • It acts as a precursor for the synthesis of these compounds.

What is Anti-Dumping Duty?

• An anti-dumping duty is a tariff imposed by a domestic government on foreign imports suspected of being sold at prices lower than those in the exporter's domestic market.
• This measure aims to prevent these products from undercutting local businesses and harming the local economy.
• The World Trade Organization (WTO) oversees a framework of international trade rules governing anti-dumping measures.
• Under this agreement, governments are permitted to address dumping practices if they pose a threat of significant harm to a domestic industry.

Calculation of Anti-Dumping Duty:

• The calculation of anti-dumping duty involves determining the difference between the normal value and the export value of the product.
• The normal value represents the market value of the product in the exporter's domestic market, while the export value denotes the price at which the product is sold when exported to India.
• The anti-dumping duty is levied to neutralize this price disparity and safeguard the domestic industry from the adverse effects of inexpensive imports.

Anti-Dumping Mechanism in India:

• India's anti-dumping mechanism is overseen by the Directorate General of Anti-Dumping and Allied Duties (DGAD) under the Ministry of Finance.
• The legal framework for anti-dumping in India is established by the Customs Tariff Act of 1975 and the Customs Tariff Rules of 1995.
• The DGAD conducts investigations to assess whether a surge in below-cost imports has negatively impacted the domestic industry.