Australia’s new Anti-Dumping Commission - Shuffling deckchairs on the Titanic?

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21 February 2013 | Andrew Percival

Australia is to have a new anti-dumping “policeman” charged with protecting Australian manufacturers from competing with allegedly dumped cheap imports. But will the new Anti-Dumping Commission lead to more dumping investigations and better outcomes for manufacturers or is it a case of ‘the more things change, the more they stay the same’?

Late last year the Prime Minister announced her commitment to a new Anti-Dumping Commission and more funding to investigate dumping complaints.

It’s a move that’s been applauded by many in Australia’s struggling manufacturing sector.  Pressure on the Government to protect manufacturers against alleged dumping has intensified as Australia’s stubbornly high dollar has pushed down prices of imported goods.

The Anti-Dumping Commission is said to be Australia’s new “policeman”, ensuring our manufacturers don’t face “unfair” competition from cheap, dumped imports.

But history tells us that anti-dumping laws and systems are less about ‘fair trade’ or a ‘level playing field’ and more about protecting local industries from international competition.

Canada introduced the first anti-dumping law in 1904 in response to the U.S. Steel Corporation aggressively selling steel rails for the Canadian railway.

New Zealand, Australia, Great Britain and the United States all quickly followed with their own anti-dumping legislation.  Since then it has found its way into WTO rules as a WTO sanctioned form of protectionism.

Canada’s anti-dumping law sought to address what is now known as ‘predatory dumping’. That is, where a producer gains a monopoly or near monopoly position in its home market due to protection from high tariffs, then seeks to enter markets in other countries through low export prices to obtain a similar position in those markets.  When it has achieved that monopoly or near monopoly position in its export markets, it raises its prices to the monopoly prices it enjoys in its home market.

This view of anti-dumping laws remains current.  The ACTU, in response to the announcement of the new Anti-Dumping Commission, not only welcomed it but also commented that:-

Once local competitors close down, importers are able to raise their prices to make bigger profits in the Australian market."

While predatory dumping is an interesting theory, there is no evidence it has occurred anywhere in the world, and given today’s universally low levels of customs tariffs, it is unlikely to ever occur.

Those in favour of harsher anti-dumping laws assert dumping is inherently ‘unfair’.  But is it?  Dumping is simply price discrimination – selling a product into export markets at a price less than the price at which that product is sold in the home market. 

As noted by the Member for Hughes, Craig Kelly on 13 February 2013 during a debate on the legislation establishing the Anti-Dumping Commission:-

“When it is all boiled down, dumping is merely geographic price discrimination on an international basis – selling the same good in different markets, segmenting those markets by international boundaries and charging different prices.

If speaker after speaker on both sides of this parliament comes in here and condemns international geographic price discrimination, we also must condemn geographic price discrimination when it occurs within our borders, especially when it causes or threatens to cause material injury to an Australian business.  If we fail to do so… we are nothing more than hypocrites.”

In the past, price discrimination was prohibited within Australia under the Trade Practices Act. However, it was repealed in 1995 because it was seen as detrimental to competition.  Accordingly, within Australia, supermarkets, fast food restaurants, cinemas and medical practices regularly charge different prices in different states and cities.  It is lawful to do so and it also would seem to be ‘fair’.

So, if price discrimination is ’fair play’ within Australia, why is it ’unfair’ in international trade?  Some assert the aim of an anti-dumping regime is to address ’unfair trade’ so there is a ’level playing field’.  This, however, suggests that trade is a ’game’ and that competition within this ’game’ should obey a set of rules (i.e. anti-dumping rules) notwithstanding that domestic manufacturers are not restrained by rules precluding price discrimination when competing with imports. Is that ‘fair’?

Another issue is the notion of a ‘fair price’.  Anti-dumping rules measure a ‘fair price’ as being the price at which the goods in question are sold by exporters in their domestic market.  Given that most imports subject to dumping investigations are commodity products from low cost countries, they are still likely to be cheaper than the Australian product they are competing with even at undumped prices.

The General Agreement on Tariffs and Trade recognises that dumping “is to be condemned if it causes or threatens material injury” to an industry in the country of export.  In other words, dumping per se is not unlawful or ‘unfair’ according to WTO rules.     Rather, action against dumping is only permitted if it causes or threatens to cause injury and that injury is material.

In these cases anti-dumping measures (i.e. import duties) should be imposed only to the extent that the dumping margin is eliminated and any injury caused by dumping is thereby prevented. 

Unfortunately, anecdotal evidence suggests anti-dumping measures are not effective in preventing injury to local producers given that a number of Australian manufacturers who successfully applied for anti-dumping measures to be imposed no longer manufacture in Australia.

More importantly, anti-dumping regimes are not administered in a way so that anti-dumping measures are levied only to the extent necessary to remove the margin of dumping.  In many cases dumping margins are calculated in a way that produces an artificially inflated dumping margin that does not reflect commercial reality, i.e. protectionism by another name.

While this kind of protection may conceivably benefit companies and their shareholders through higher prices being charged to domestic consumers, it is those same consumers who pay for this protection in the form of inflated prices. Is this ‘fair’?

Will Australia’s new Anti-Dumping Commission provoke more dumping investigations and an increase in the imposition of dumping measures?  Time will tell but logic suggests not. 

The Commission will still operate under and be restrained by WTO anti-dumping rules or, at least, Australian legislation based on those rules.  It is simply a different body administering the same set of dumping rules - the equivalent of shuffling deck chairs on the Titanic.


Post Script

Those with good memories will recall Australia has previously had a separate body for anti-dumping administration. Established in 1988, the Anti-Dumping Authority made important changes to Australia’s anti-dumping system.  It adopted a more rigorous approach to assessing material injury as well as to the way in which dumping margins were calculated.  The upshot was it became harder, not easier, for dumping applications to succeed.  Perhaps this was the reason for its demise five years later.  Will this be the fate of the Anti-Dumping Commission?

 



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Andrew Percival

Special Counsel. Sydney
+61 2 9210 6228

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