Protectionism against Chinese manufactured products will only boomerang on Indian industry

By Wang Jiamei Source:Global Times Published: 2017/7/31 20:03:39

The list of Chinese products covered by India's trade remedy investigations is getting ever longer, expanding from garments, glass, minerals and other low-end items to advanced products such as new materials and machinery.

It seems that the Indian government is trying to protect domestic industries from overseas competition through trade remedy measures, but although this strategy offers certain short-term benefits, it will eventually hinder India's industrial development.

On July 21, India announced that it would launch an anti-dumping investigation into photovoltaic (PV) cells and units from the Chinese mainland, Taiwan, and Malaysia. The investigation was the latest of a series of probes launched by India against Chinese goods this year.

Amid a rise in bilateral trade, India initiated 12 investigations against Chinese products in the first half of this year, becoming the country with the most trade remedy probes against China. During the period, 11 investigations were launched by the US, according to statistics from China's Ministry of Commerce (MOFCOM).

Wang Hejun, head of the MOFCOM's trade remedy and investigation bureau, said last week that India should avoid abusing trade remedy measures and bilateral trade disputes should be settled through consultation.

There are other explanations behind the intensified trade conflicts between India and China. After years of development, India's industries have made progress, and many companies in India now produce items that could compete with those from China.

Chinese producers still have the upper hand, but it seems understandable for the Indian government to be eager to protect local industries.

But it is wrong to resort to trade remedy measures to drive Chinese products out of the local market.

First, curbing imports of certain products from China may affect the relevant downstream market in India. For instance, with the support of China's high-quality PV products, India's solar-power generating capacity surged 3.7 times over the past three years. If India imposes anti-dumping tariffs on Chinese PV products, the growth of the country's own fast-growing PV market may slow.

Second, without outside competitive pressure, local industries will be less motivated to invest in technical innovation to reduce costs and improve quality. That won't be conducive to the long-term development of the industry.

Based on what China experienced a decade ago, it is inevitable that some companies will fail under the pressure of competition, but the ones that survive do so by upgrading and moving up the value chain.

At the same time that it is making great efforts in liberalizing foreign investment rules, India should also open up to foreign competition to facilitate the development of domestic manufacturing.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

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