PC inquiry into anti-dumping

Some good news. The Rudd Government is sticking to the commitment it made at the July, 2008 COAG to refer questions of the purpose and effectiveness of Australia's anti-dumping legislation to the Productivity Commission for review. Just the right policy-signal to be sending ahead of the G20 meeting.

"The Commission has been asked to assess the policy rationale for, and objectives of, Australia's anti dumping and countervailing system, and assess the effectiveness of the current system in achieving those objectives. It is to make recommendations on the appropriate future role of an anti-dumping and countervailing system within the Government's overall policy framework.

This will involve an examination of the economy-wide costs and benefits of Australia's anti-dumping and countervailing system including its impact on Australian industry, consumers and the broader community." Extract from Australian Labor Party : PC inquiry into anti-dumping and countervailing

Australia has taken very little anti-dumping action recently. Investigations are down from a top of 42 in 1997 to single digits in the past few years. But we have a 1% share of world trade: so why should we be the world's sixth biggest anti-dumper?

In recent years, India has claimed the unlovely crown as the world's most intensive anti-dumper in relation to its merchandise trade ranking (18^th ranked importer according to WTO statistics). China is the biggest target of anti-dumping investigations worldwide: a total of 640 cases since 1995—more than twice the number of the second-ranked target country, South Korea. You can find the official WTO statistics on the WTO web site.

Overall, anti-dumping cases accepted by the authorities in WTO member countries have fallen from peaks of 360 cases in 1999 and 2001 —the depths of the last recession— down to half that level on an annual basis by 2008. But there is every reason to think that the rate of anti-dumping will pick up in the current recession.

Anti-dumping cases are typicallly counter-cyclical, rising as the business cycle declines. Anti-dumping is a 'lagging indicator' of trade volumes. When sales margins are tight, rational producers make sure that their fixed costs (capital) are covered and let their variable costs (labor, leases, stock) take a hit as they cut prices to maintain output volumes. This is especially true of manufacturers with large fixed capital costs (steel, concrete, chemicals etc) who pretty much have to "dump" to stay in business because they're first into the trough of a cyclical downturn. Dumping is a rational strategy for firms and a good thing for consumers. Everyone does it, and it's perfectly legal in domestic markets.

The best thing about this Rudd government reference to the Productivity Commission is that it is framed in the right way for a review of a policy that is about competition on the domestic market: an 'economy-wide' review of who gains and who loses anti-dumping. This is the only way to assess the balance that must be struck between the import-competing firm's interest in 'fairness' and the interests of consumers in un-impeded competition among suppliers, whether domestic or foreign.

Tags for this entry: trade policy anti-dumping productivity commission competition