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With reference to Countervailing duty (CVD), consider the following statements:
- It is imposed to protect domestic producers by countering the negative impact of import subsidies.
- World Trade Organization (WTO) does not permit the imposition of CVD as it is trade distorting.
Which of the statements given above is/are correct?
- a)1 Only
- b)2 Only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
With reference to Countervailing duty (CVD), consider the following st...
Countervailing Duty (CVD)
CVD is a trade remedy measure imposed by a country to protect its domestic industries from the negative impact of import subsidies provided by foreign governments. It is essentially a tariff or tax imposed on imported goods that have been subsidized by the exporting country's government. The purpose of CVD is to level the playing field for domestic producers who may be facing unfair competition from subsidized imports.
Statement 1: It is imposed to protect domestic producers by countering the negative impact of import subsidies.
This statement is correct. Countervailing duty is imposed by a country to offset the negative impact of import subsidies provided by foreign governments. When a country subsidizes its exports, it enables its producers to sell goods at a lower price in the importing country, which can harm domestic industries. By imposing a countervailing duty, the importing country can increase the price of the subsidized imports to a level that is comparable to the price of non-subsidized domestic goods. This helps protect domestic producers from unfair competition and supports their competitiveness in the market.
Statement 2: World Trade Organization (WTO) does not permit the imposition of CVD as it is trade-distorting.
This statement is incorrect. The World Trade Organization (WTO) recognizes the need for countervailing measures to address the negative impact of import subsidies. The Agreement on Subsidies and Countervailing Measures (ASCM) is a part of the WTO framework that provides guidelines and rules for the imposition of countervailing duties. The ASCM allows WTO members to impose countervailing measures, including countervailing duties, when imports are subsidized and causing injury to domestic industries. The WTO does have certain rules and disciplines in place to ensure that countervailing measures are applied in a transparent and non-discriminatory manner. However, it does permit the imposition of countervailing duties as a legitimate trade remedy measure.
Conclusion
In conclusion, statement 1 is correct as countervailing duty is indeed imposed to protect domestic producers from the negative impact of import subsidies. Statement 2 is incorrect as the World Trade Organization (WTO) does permit the imposition of countervailing duties as a legitimate trade remedy measure.
CVD is a trade remedy measure imposed by a country to protect its domestic industries from the negative impact of import subsidies provided by foreign governments. It is essentially a tariff or tax imposed on imported goods that have been subsidized by the exporting country's government. The purpose of CVD is to level the playing field for domestic producers who may be facing unfair competition from subsidized imports.
Statement 1: It is imposed to protect domestic producers by countering the negative impact of import subsidies.
This statement is correct. Countervailing duty is imposed by a country to offset the negative impact of import subsidies provided by foreign governments. When a country subsidizes its exports, it enables its producers to sell goods at a lower price in the importing country, which can harm domestic industries. By imposing a countervailing duty, the importing country can increase the price of the subsidized imports to a level that is comparable to the price of non-subsidized domestic goods. This helps protect domestic producers from unfair competition and supports their competitiveness in the market.
Statement 2: World Trade Organization (WTO) does not permit the imposition of CVD as it is trade-distorting.
This statement is incorrect. The World Trade Organization (WTO) recognizes the need for countervailing measures to address the negative impact of import subsidies. The Agreement on Subsidies and Countervailing Measures (ASCM) is a part of the WTO framework that provides guidelines and rules for the imposition of countervailing duties. The ASCM allows WTO members to impose countervailing measures, including countervailing duties, when imports are subsidized and causing injury to domestic industries. The WTO does have certain rules and disciplines in place to ensure that countervailing measures are applied in a transparent and non-discriminatory manner. However, it does permit the imposition of countervailing duties as a legitimate trade remedy measure.
Conclusion
In conclusion, statement 1 is correct as countervailing duty is indeed imposed to protect domestic producers from the negative impact of import subsidies. Statement 2 is incorrect as the World Trade Organization (WTO) does permit the imposition of countervailing duties as a legitimate trade remedy measure.
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With reference to Countervailing duty (CVD), consider the following st...
The commerce ministry has recommended the imposition of countervailing duty on imports of a chemical used in making personal care products from Indonesia, Malaysia, and Thailand as it was impacting the domestic industry.
About Countervailing duty (CVD):
- It is a specific form of duty that the government imposes to protect domestic producers by countering the negative impact of import subsidies.
- CVD is thus an import tax by the importing country on imported products.
- Why is CVD imposed?
- Foreign governments sometimes provide subsidies to their producers to make their products cheaper and boost their demand in other countries.
- To avoid flooding the market in the importing country with these goods, the government of the importing country imposes CVD, charging a specific amount on the import of such goods.
- The duty nullifies and eliminates the price advantage enjoyed by an imported product.
- The duty raises the price of the imported product, bringing it closer to its true market price
- The World Trade Organization (WTO) permits the imposition of CVD by its member countries.
- Who administers CVD in India?
- The countervailing measures in India are administered by the Directorate General of Anti-dumping and Allied Duties (DGAD), in the commerce and industry ministry’s department of commerce.
- While the department of commerce recommends the CVD, the department of revenue in the finance ministry acts upon the recommendation within three months and imposes such duties.
Hence only statement 1 is correct.
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With reference to Countervailing duty (CVD), consider the following statements: It is imposed to protect domestic producers by countering the negative impact of import subsidies. World Trade Organization (WTO) does not permit the imposition of CVD as it is trade distorting.Which of the statements given above is/are correct?a)1 Onlyb)2 Onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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