With fewer meetings and no travel during the WuFlu pandemic, it has been a bit harder to resist sticking my nose into some of the current policy debates. Some thoughts on the cliche ‘not wasting the crisis’, appeared in an article in the Australian, and as an Op Ed in the Australian Financial Review on Monday 4 May (see publications section). Plus I even found myself writing a letter to the editor on that hoary old trade policy topic, ‘anti-dumping’.
What prompted the last was a report in the Fin about Indonesia’s successful WTO action against Australia’s imposition of anti-dumping duties on imported copy paper (AFR, May 18). Coming at the same time as China’s much criticised 80 per cent anti-dumping duty on our barley exporters, I was curious to see how our own anti-dumping and countervailing subsidy regime stacked up these days.
Australia has always been a relatively active user of this trade safeguard measure. It is allowed (but not required) by the WTO where it can be shown conclusively that exporters are ‘dumping’ their products on foreign markets at prices below the ‘normal value’ in their own. Its origins lie in the concern of industrial countries at the creation of the multilateral trading system last century, that significant reductions in trade barriers could see some exporters unfairly undercutting local suppliers. While it has passionate adherents among certain import-competing industries, the economics profession has generally been skeptical of any economic rationale for such action, except to the extent that it may enable greater liberalisation than might otherwise occur. (See my publication, The anti-dumping experience of a GATT-fearing nation.)
Similarly, the Productivity Commission, in a major public inquiry back in 2010, was critical of the system for its lack of transparency, disregard for costs imposed on downstream user industries and consumers, and the excessive duration of measures in force. Among other things, it recommended the inclusion of a ‘public interest’ test, as found in other countries, as well as time limits on measures, and better appeal processes. Governments have disregarded these proposals, instead loosening further the criteria for imposing duties.
Revisiting the regime, I found a system still lacking in transparency (just try finding the duty margins for example!) or real independence (it resides within the Department of Industry) in which the devil lies in arcane administrative detail. And since the current, more ‘permissive’ regime has been introduced, anti-dumping and countervailing duty actions have trebled on an annual basis, making us one of the world’s biggest exploiters of this WTO ‘safeguard’.
Australia’s steel and aluminium industries have been the main beneficiaries (and among its most vocal supporters), accounting for two-thirds of 81 anti-dumping/countervailing measures currently in force. The countries copping most of the penalty duties comprise six of our Asian trading partners, with China alone accounting for one-third of measures.
As in the past, anti-dumping actions have often been taken on the same products against multiple countries, which would seem to tell us more about the competitiveness of Australian producers than the fairness of foreign exporters.
It may well be that China has fiddled the numbers on barley, as anti-dumping lends itself to such games. And the timing of its action, along with other sanctions against Australia, seems more than coincidental. But Australia would be more credible in this trade dispute (and others to come) if our own anti-dumping system were above reproach. It isn’t.