Anti-dumping reforms are barking up the wrong tree

12 March 2013

According to those sitting on both sides of Federal Parliament dumping is an abhorrent, inexcusable practice that harms Australian manufacturing. The shared view is we need to get tougher on dumping to protect Australian manufacturers from importers who cheat global trade rules.

Most recently the government proposed to establish an Anti-Dumping Commission dedicated to investigating applications by Australian industry for the imposition of anti-dumping and countervailing duty measures. 

Legislation to establish the Commission was recently debated in Parliament.  All sides of politics united in condemning dumping and improving the anti-dumping system to deal with dumped and subsidised imports better.

In his second reading of the Bill to establish the Commission the Minister for Home Affairs, the Honourable Jason Clare, opened as follows:-

Australia is a trading nation.  Trade is the key to our success.  One of the things that can harm trade is dumping.  Dumping is cheating.

Dumping is not cheating.  It is simply a form of price discrimination.  It involves selling goods into an export market at a price less than the price at which the same good is sold in the domestic market.

According to WTO rules dumping is not unlawful or illegal nor is it described as cheating.  Rather, dumping is condemned by WTO rules only if it causes injury to a domestic industry in the export market producing like goods.  In such circumstances anti-dumping measures equal to or less than the margin of dumping can be imposed to offset the injury caused by the dumping. 

If no injury is caused by the exports, then it is perfectly lawful to export the goods in question at dumped prices.  Indeed, there are benefits.  Not only is the exporter able to sell more of its products into export markets but purchasers of those products in the export markets are buying them at lower prices.

Equating dumping with ‘cheating’ is a dangerous assertion for any government to make. 

Governments around the world (perhaps unwittingly) assist their producers to ‘dump’ in export markets through subsidies and other incentives. Exporters that are subsidised in their home markets can sell their exports at a lower price than if they received no government financial support. This happens in many markets around the world, including in Australia.

As an example car manufacturers in Australia receive subsidies from the Federal Government under the $5.4 billion New Car Plan.  One of the recipients is Holden which last year received a reported $275 million in subsidies.  Recently Holden announced it was exporting its new Holden VF Commodore to the USA under the Chevrolet badge.  More importantly, while the export model would have a larger engine than the model sold in Australia, Holden confirmed it would be sold in the USA for approximately $10,000 less than the model sold in Australia. 

It’s a clear case of dumping, but is Holden cheating WTO trade rules?

It would seem that many of our politicians think so. The Minister for Home Affairs said as much in his second reading speech on the Anti-Dumping Commission Bill.

But this is categorically untrue. Holden is not a “trade cheat”.  WTO rules only ‘condemn’ dumping if it causes material injury to a domestic industry producing like goods. 

Exporting a few thousand Commodores to the US at prices less than that charged in Australia will not materially injure US motor vehicle manufacturers…not even remotely.

Indeed, Holden’s decision to export its Commodore to the USA is a valid and important commercial trade strategy, and no doubt one that is profitable, consistent with WTO trade rules. Not cheating.

Australia’s manufacturing industry has considerable problems, not the least of which is the high Australian dollar and tough international competition.   The easy response has been to blame cheap imports from Asia, in particular, China, and try to impose tougher anti-dumping and countervailing measures. 

But this strategy makes little sense in the long run. It’s barking up the wrong tree. A better way forward is to support Australian manufacturing to become internationally competitive without tariff protection.  We have previously written on how this can be achieved.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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