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Mon 16 Aug 2010 02:42 PM

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Indian import duties could start 'trade war' - GPCA chief

Trade chief accuses India of protectionism over polypropylene duties plan.

Indian import duties could start 'trade war' - GPCA chief
TRADE CHIEF: Dr Abdulwahab Al Sadoun, secretary general, GPCA, said import duties on Gulf polypropylene producers would set a precedent. (ITP Images)

India will start a trade war if it endorses a proposal to slap a fresh round of import duties on Gulf polypropylene producers, the head of an industry trade group has warned.

India is mulling a proposal to place new duties on plastic imports from Saudi Arabia and Oman, after its ministry of industry and commerce concluded that the low costs of feedstock in the Gulf gave its petrochemical producers an unfair cost advantage.

The 140-member Gulf Petrochemicals and Chemicals Association (GPCA) has accused India of throwing up new barriers against trade and of breaching World Trade Organisation (WTO) rules.

“It would set a precedent which would have ramifications on the entire export industry from this [Gulf] region. There is no basis for this case and I think that this will effectively lead to a trade war,” said Dr Abdulwahab Al Sadoun, secretary general, GPCA.

“It’s protectionism: exactly that. This is the result of the global financial crisis.”

India and China last year imposed similar tariffs on polypropylene imports from Saudi Arabia and Oman, after accusing firms of dumping subsidised, cut-price produce on the Indian market. The duties expired in January.

Saudi Arabia, OPEC’s largest exporter, has a natural advantage in feedstock as a result of its close proximity to oil and gas resources, Al Sadoun said.

“It’s not a subsidy. The price reflects the prices of the feedstock, it reflects the cost of production and this has been endorsed by the WTO in the acceptance of Saudi Arabia and other Gulf states. This is the bottom line. India and China sit on the WTO, they’re signatories, and we all play by the rules. Those advantages are natural and the basis for the anti-dumping [tariff] is false,” he said.

The GPCA has said it is prepared to launch a legal challenge if India pushes ahead with fresh import duties. It is also understood to have met with Gulf ministries in a bid to press India towards a resolution.  

“We’re talking to the ministries in the Gulf states, the GCC secretariat and we’re considering several options. Most of those producers are wholly or majority owned by the governments in the Gulf. [Legal action] is likely, because the WTO is the platform for settling those differences. We believe our case would win – very much so,” said Al Sadoun.

“I’m still optimistic that the Indian government will realise the ramifications on its indigenous, downstream industries will be significant. There is a mutual interest here for ensuring there is free trade between Indian and the Gulf countries.”

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