FOREIGN TRADE: by Colin TeeseNews Weekly
Anti-dumping rhetoric no assistance to local industry
, July 23, 2011
Quite why the Gillard Labor Government has announced a revised approach to the import of goods into Australia at below market prices (what is technically called dumping) is not clear. If genuinely new rules had been devised for protecting Australian manufacturers against unfair pricing from import competition, that would be cause for celebration.
The changes announced are far from that. In fact, they offer almost nothing new to help local producers.
The rules on dumping currently enshrined in the World Trade Organisation agreement are generally in line with those previously existing in the General Agreement on Tariffs and Trade, which preceded the WTO.
The old GATT rules offered less than perfect protection against dumped imports, but they helped — less from what the rules specified than from what was left to the discretion of governments. Much of the interpretation of how action should be taken against offending imports could be decided by the country acting against dumping.
The rules allowed — and still allow — action to be taken against dumped goods which cause or threaten harm to a local industry. It wasn’t necessary to wait for an industry to be damaged; it was enough that there was a real threat of harm.
The reason for this was understandable. If action under international trading rules was not possible until after damage had been done to a local industry, that would in effect be an inducement rather than a deterrent to dumping.
The GATT rules gave the importing country much discretion in deciding whether or not to act. The process was (and remains) that if an industry makes a complaint about dumped import competition, the government must first decide whether the imports in question are being sold at below market prices. If the imports are shown to be dumped, then the question remains whether they are harming the local industry.
This becomes a quite technical issue surrounded by controversy. Usually, the importer is required to provide evidence of selling prices at home and selling prices for export. And the local industry must demonstrate to its government that harm has been done or is threatened.
This is a complicated, painstaking and usually controversial process which can be frustrated by delays on the part of uncooperative foreign manufacturers.
Some countries, notably the United States, don’t tolerate delay. If information from the importers is not provided within a very short period, the U.S. assumes that the local industry complaint is justified and applies anti-dumping duties immediately.
The duties remain in place until the information provided by importers allows a final decision to be made on the basis of evaluation of evidence.
While this is not in strict conformity with WTO rules, theU.S.has found this approach very effective, and thus far it has remained unchallenged.
For most countries, including the U.S., the question of whether foreign imports are being dumped and harming a domestic industry will be determined by skilled investigators on the basis of the volume of imports relative to domestic production along with the cost difference between the imported product and the locally produced alternative. Governments for the most part are not disposed to reject such expert judgments.
Unfortunately, that process is not necessarily followed in Australia. Here both sides of politics have embraced the idea that protection of local industries — manufacturing or farming — is against the public interest. If countries want to sell below cost in our market, the received economic wisdom is that our consumers should enjoy the benefits, regardless of the effect on local industry.
Accordingly, our expert investigators are faced with a political problem when it comes to dealing with dumping.
Which official can set aside what he knows is the stated opinion of his government (and the opposition), when he is confronted with a dumping inquiry? Both sides of politics want him to take a permissive approach to dumping investigations.
Given all of this background, it is hard to make sense of the Gillard Government’s apparently tougher rhetoric on dumped imports.
It has announced it intends to provide more physical resources to deal — presumably more quickly — with dumping complaints. However, it has not provided officials with access to new resources to enable them to tackle the problem.
Instead, the Government is taking customs officials from border protection and assigning them to dumping inquiries — as if they were instantly transferable and that dumping investigations did not need specialised skill and experience.
On the face of it, there is only one area where the government has toughened its enforcement of the rules. The trade minister is now required to deal with any report on a dumping case within a month. Previously, local industry had been known to wait up to nine months for a ministerial decision.
In the wider scheme of things, this amounts to minor tinkering in an otherwise deeply flawed process. Most of the serious disadvantages suffered by local industry remain untouched — in particular, the new understanding reached in the WTO negotiations some 12 years ago.
Even if dumped imports were found to be causing harm, governments were nevertheless encouraged to allow the admission of dumped imports if by doing so it served the wider “public interest”, i.e., the public benefiting from cheaper prices.
It is, of course, a silly provision, as if the WTO had to remind governments of their obligation to serve the public interest. More insidious still, the WTO seemed to be suggesting that consumer interest in cheaper imports might be regarded as a superior public good to the well-being of local industries endangered by dumping.
Unfortunately, successive Australian governments, on both sides of politics, needed no encouragement to do just that. Indeed, it gave them and the officials serving them the excuse they needed to deny relief to local industries harmed by dumped imports.
Labor’s position on industry protection has recently been reinforced by the present Prime Minister.
The only hope, therefore, for a more realistic approach on dumping, is if the Opposition parts company with the government.
Colin Teese is a former deputy secretary of the Department of Trade.