Global Journal of Politics and Law Research

Vol.9, No.3, pp.52-58, 2021

ISSN: ISSN 2053-6321(Print),
ISSN: ISSN 2053-6593(Online)
BANGLADESH-INDIA LEAD ACID BATTERY CASE: IMPORTANCE OF WTO’S
DISPUTE SETTLEMENT MECHANISM AND LESSON FOR LDCS

Md. Anwarul Azim

Lecturer, Department of International Relations,
University of Dhaka, Bangladesh. Email: [email protected]

ABSTRACT: Bangladesh-India trade dispute over India’s imposition of anti-dumping duty on

Bangladesh’s lead acid battery export is a significant event in the history of World Trade
Organization’s (WTO) dispute settlement mechanism. After 10 years of WTO’s establishment, this
was the first instance when a least developed country (LDC) challenged a much stronger economy
at the highest level of trade related international legal process. After the beginning of the legal
proceedings, India’s decision to go back to negation table to find a mutually agreed solution and
subsequent termination of anti-dumping duty proves that the process is important for making the
big economies follow the norms and laws of international trade. In addition, the very existence of
such mechanism acts as a deterrent against arbitrary enactment of unfair, unlawful and unilateral
trade measures. Finally, this is a milestone for other LDCs to overcome the psychological barrier
of standing up against stronger economies and claim their fair rights in international trade regime.

KEYWORDS: WTO, trade dispute, dispute settlement mechanism, LDC, Bangladesh, India.

INTRODUCTION

Trade dispute among nations is not uncommon phenomenon. Before General Agreement of Tariffs
and Trade (GATT) and World Trade Organization (WTO), the dispute settlement process was
mostly bilateral in nature which frequently favored economically powerful countries. The advent
of WTO dispute settlement mechanism has given least developed countries (LDCs) a strong
platform to deal with trade disputes irrespective of their relatively weak economic power. This was
the case of Bangladesh-India trade dispute regarding the imposition of anti-dumping duty by India.
Despite being a LDC, Bangladesh’s decision to utilize WTO Dispute Settle Mechanism and initiate
legal proceedings at WTO prompted India to rethink their decision, go back to the negotiation
table and find a mutually beneficial solution.

Bangladesh-India Trade Relations:

Bangladesh and India are neighboring countries in South Asia. In 2001, when the dispute was
starting to unfold, India was top trading partners of Bangladesh in terms of imports (Bangladesh
Bank, 2020). Currently, India ranks 2nd after China as 12.24% of total imports of Bangladesh
comes from India (Bangladesh Bank, 2020). It is noteworthy that he trade balance have always
favored India.

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Vol.9, No.3, pp.52-58, 2021
ISSN: ISSN 2053-6321(Print),
ISSN: ISSN 2053-6593(Online)
Table 01: Bangladesh-India Trade Balance
Fiscal Year Total Export Total Import
(Million USD) (Million USD)
1990/01 31 181
1991/92 2 231
1992/93 8 342
1993/94 21 395
1994/95 29 689
1995/96 24 1100
1996/97 28 922
1997/98 50 928
1998/99 48 1306
1999/00 59 833
2000/01 57 1184
2001/02 44 1019
2002/03 84 1358
2003/05 89 1602
2004/05 144 2030
Source: (Bangladesh Bank, 2020)

The Dispute in Brief:

Bangladeshi entrepreneurs have developed a lead acid battery industry which dominated the
domestic market and set their eyes on neighboring country’s market. In particular, Indian market
was lucrative as it was a big one. However, the tariff rate in India for lead acid batteries was 40%
MFN tariff rate which was high for Bangladeshi exporters (Taslim, 2005). As a result, export was
not financially viable at that time. This scenario changed after the South Asian countries signed a
regional preferential trading agreement called South Asian Preferential Trading Area (SAPTA).
Under SAPTA, India agreed to give 60% tariff concession. As a consequence, effective rate of
tariff came down to 16% which made battery export to India more viable for Bangladeshi
exporters.
Utilizing the benefit of tariff reduction, export of Bangladeshis lead acid batteries to India has
started to increase.

Table 2: Lead Acid Battery Export from Bangladesh to India

Financial Year Export Volume (USD)
1998/99 541181
1999/00 1060905
2000/01 1281240
2001/02 0 (result of anti-dumping duty)
2002/03 0 (result of anti-dumping duty)
Source: (Export Promotion Bureau, 2020)

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Vol.9, No.3, pp.52-58, 2021
ISSN: ISSN 2053-6321(Print),
ISSN: ISSN 2053-6593(Online)
Among the lead battery producers and exporters, Bangladeshi company Rahimafrooz was at the
forefront. Ever since Rahimafrooz started exporting to Indian market, fearing loss of market share
Indian manufacturers Exide Industries Limited and Amara Raja Batteries Ltd. attempted to create
obstacle by petitioning to the Directorate General of Anti-Dumping (DGAD) with dumping
allegation. The DGAD started investigating the matter in January 2001 where the investigation
period was September 01-30, 2000. In March 2001, DGAD in its primary finding concluded that
dumping was happening and decided to carry on full investigations. In its final report in December
2001, DGAD stick to its initial findings. Consequently, DGAD proposed to impose ad valorem
duty equivalent to 131% (Taslim, 2005). This high tariff lead to complete halt of battery export
from Bangladesh from 2001/02 onwards as shown in table 2.

Bangladesh’s Initial Response:

Bangladesh has previously experienced anti-dumping duty in two separate cases. The first was
imposed by USA in 1992 against Bangladeshi cotton show towel export (Bhattacharya et al. 2000).
The second was imposed by Brazil in the same year against Bangladeshi jute bag export
(Bhattacharya et al., 2000). In both cases Bangladesh did not contest the decision because of her
lack of legal expertise to pursue such litigations and also due to the fact that the local firms were
unwilling to proceed as the cost involved was very high relative to prospective gain.

In case of India, however, the opportunity to enter Indian battery market was too good to pass up.
Initially Bangladeshi company Rahimafrooz proceeded with the Indian legal system to find a
solution. They appealed at the Indian Customs, Excise and Gold Appellate Tribunal (CEGAT)
and subsequently at the Indian High Court. In both cases the company did not get favorable result.
Apart from the legal process Bangladesh attempted to resolve the issue through diplomatic process.
Bangladesh Commerce Minister negotiated the matter with Indian counterpart in March 2001. This
issue was again raised in October 2001. In both occasions, the Indian commerce minister did not
agree to halt the ongoing quasi-judicial process conducted by a statutory authority. Rather it was
advised by the Indian Minister that Bangladeshi accused company should give a price undertaking
in line with article 8 of WTO Agreement on Implementation of Article VI of GATT. Article 8
suggests that any proceedings related to anti-dumping can be adjourned or dismissed if the exporter
provides an undertaking that it would revise the price of the export product in question or cease
the export of the product in order to ensure that any injury caused by the previous dumping can be
removed (WTO, 2020). However, Bangladeshi company was reluctant to do so as it was confident
that it did not dump and unwilling to accept the unfair allegation by giving the undertaking.

The Political, Economic and Legal Challenges of Bangladesh:

Given the fact that Bangladesh have exhausted legal options within Indian legal domain and
possibility of resolution through bilateral negotiation became low, only option left was to seek
redress from a multilateral forum. As both Bangladesh and India were members of WTO, it seemed
to be a reasonable option to initiate WTO’s dispute settlement mechanisms.

However, primarily Bangladesh was hesitant to initiate WTO proceedings because of several
factors. Bangladesh had little experience and legal expertise in dealing with anti-dumping matters.
As a result the country was unsure of its ability to efficiently conduct the legal process and also
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ISSN: ISSN 2053-6321(Print),
ISSN: ISSN 2053-6593(Online)
whether the case had merit to win. Another reason of reluctance is that at that time India was
Bangladesh’s top trading partner and Bangladesh was in the middle of a series of trade negotiations
with India. Commerce Ministry officials were unsure of the impact of initiating WTO proceedings
on bilateral trade negotiations.

Overcoming the Challenges:

Bangladesh government assigned the issue to Bangladesh Trade Commission (BTC) – the sole
authority to deal with matters related to dumping. BTC has conducted detailed study and finally
concluded that the imposition of antidumping duty was a violation of WTO Agreement on
Implementation of Article VI of GATT. BTC also identified some procedural flaws by the Indian
authorities in the process of imposing anti-dumping duties. Considering the fact that WTO laws
favors Bangladesh’s position, BTC advised to go forward with the WTO Dispute Settlement
Mechanism.

BTC suggested that the lack of expertise in conducting litigations at WTO could be overcome by
the support from Advisory Center on WTO Law in Geneva (Hossain, 2005). This center provide
legal support to the least developed countries (LDCs) a very low cost (10% of original costs). The
center informed BTC that total cost would be around 150000 USD in case the anti-dumping case
went through all the dispute settlement process (Taslim, 2005 ). Bangladesh, as an LDC, had to
pay 10% of that cost which is 15,000 USD. In this was the challenges related to financial and legal
expertise could be solved.

Regarding the prospective diplomatic rifts, Bangladesh Ministry of Foreign Affairs officials and
Bangladesh’s permanent mission in Geneva had the view that there was less chance that the dispute
would have any spillover effect on overall relations between two countries. Their logic was that
despite India is a big market for Bangladesh, the opposite is also true as Bangladesh was one of
the big markets for Indian exporters. Any arbitrary retaliation from India means Bangladesh could
also retaliate accordingly which may risk Indian exporters. Under this circumstances, chances were
low that India would jeopardize trade negotiations with Bangladesh for relatively less significant
issue.

Legal Justification of Bangladesh’s Position:

BTC found two major flaws in the anti-dumping tariff imposition process by India.
First, gross violation of article 5.8 of WTO Agreement on Implementation of Article VI of GATT.
Article 5.8 requires that the statutory authority of any country is required to terminate any ongoing
investigation in case of finding evidence that the margin of dumping is de minimis (WTO, 2020).
In other words, if the potential or actual imports even in case of dumping occurs is negligible then
the investigation should not continue. The term de minimis is not a vague one rather exact
percentage is set to explain what constitutes a minimum percentage. In case of exports, the limit
of is set at less than 2 percent of export price and in case of imports the limit is set as less than 3
percent of total imports of the similar product by the importing country (WTO, 2020). In case of
lead battery import from Bangladesh, the percentage was less than 3% which was published by the
DGAD of India in its preliminary report (Taslim, 2005). As per law, the investigation should have

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Vol.9, No.3, pp.52-58, 2021
ISSN: ISSN 2053-6321(Print),
ISSN: ISSN 2053-6593(Online)
stopped at that stage. However, DGAD not only continued its investigation it eventually proposed
to impose anti-dumping duty.

Second, article 6.8 of WTO Agreement on Implementation of Article VI of GATT, the parties
involved are obliged to provide required information to the investigating authority (WTO, 2020).
In case of denial by any party to provide necessary information, the authority are allowed to made
decision on the basis of the facts available. Bangladeshi company provided necessary information
and completed the questionnaire given by Indian DGAD. It submitted the information through
Bangladesh Battery manufacturers Association (BABMA). Despite that Indian DGAD made their
decision based on the information provided by complainant Indian companies which is a violation
of article 6.8.

Dispute Settlement Process at WTO:

Dispute settlement is a one of the central pillars of WTO. It is an important catalyst to make global
trade more stable, secure and predictable. The process is based on specific rules and time tables.
It is important to note that the full process is quite lengthy one that sometimes discourages
countries to go for it:
Process Timeframe
Consultation, mediations etc. 60 days
Panel setup and panelists approved 45 days
Final panel reports to parties 6 months
Final panel report to WTO members 3 weeks
Dispute settlement body approves report (if no appeal) 60 days
Total time (without appeal): 1 year
Appeals report 60-90 days
Dispute settlement body adopts appeals report 30 days
Total time (with appeal): Total: 1 year 3 months
Source: (WTO, 2020)

Bangladesh at WTO:
On 28 January 2004, Bangladesh formally notified its intention to start consultation process with
India on following grounds (WTO, 2020):
1. Failure to stop the investigation after finding out negligible amount of import during the
preliminary stage analysis.
2. DGAD’s unfair determination of injury caused by alleged dumping.
3. Improper treatment of evidence as the data and information provided by Bangladeshi
company Rahimafrooz was not properly taken into account in the decision making process.
4. Finally, Indian DGAD failed to issue public notice and also did not provide the involved
parties any notice whatsoever regarding the factual evidence, laws and explanations that have led
to the imposition of anti-dumping duties.
Bangladesh argued that India violated Articles 1, 2.1, 2.2, 2.4, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 5.4, 5.8,
6.2, 6.4, 6.5, 6.8 (including para. 3 of Annex II), 6.9 and 12.2 of the Anti-Dumping Agreement
(WTO, 2020).

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ISSN: ISSN 2053-6321(Print),
ISSN: ISSN 2053-6593(Online)
In response to Bangladesh’s invitation, Indian team showed no appetite to engage into a lengthy
legal battle. After the consultation, they indicated that they would like to withdraw the anti-
dumping duties. India team also requested Bangladesh to stop the legal process at WTO. In reply,
Bangladesh notified that it was willing to terminate the legal process pursuant to formal declaration
by the Indian side of the removal of antidumping duties. On January 04, 2005, Indian side removed
the antidumping duties by Customs Notification No. 01/2005 (Customs India, 2020). As a result,
both parties informed dispute settlement body that a solution has been reached and terminated the
legal process at WTO on February 20, 2006.

Implication of the Outcome

1. The direct result of favorable outcome is resumption of lead acid battery export from
Bangladesh to India.
2. Bangladesh has gained knowledge and expertise related to conducting international legal
litigation at WTO. The country could use the experience gained in the settlement process in any
future anti-dumping measures taken by other countries. In 2019, Pakistan imposed anti-dumping
duty on hydrogen per oxide (HP) manufactured and exported from Bangladesh. Bangladeshi
authorities is now analyzing the laws and preparing to take Pakistan to WTO.
3. India would be more cautious in future to repeat the imposition of anti-dumping duties
which does not have merit. The same applies to any other trading partners of Bangladesh.
4. This is a moral boost for other LDC countries as a LDC has stood up to much stronger state
and got favorable result. In fact, after 10 years of the establishment of WTO, it was the first case
brought forward by an LDC.

CONCLUSION

The outcome of Bangladesh-India anti-dumping case was an example of the importance of WTO
dispute settlement mechanism. Given the fact that it was the first case by a LDC against a much
stronger economic power and subsequent favorable outcome can be attributed to the existence of
fair international legal system in solving trade disputes. This puts pressure on bigger economies to
play by the rules of the game. This also gave other LDC countries confidence to act against unfair
trade measures by stronger countries in an international forum. Therefore, the significance of
Bangladesh-India case is not limited to Bangladesh only rather it has opened a window of
opportunity for other LDCs too.

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ISSN: ISSN 2053-6321(Print),
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This paper is updated version of an essay the author had to submit as part of Masters program at
The Australian National University, Australia.

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