Developments in anti-dumping arrangements

• Recent changes to Australia's anti-dumping system have increased its protectionist impact.
• Generally soft economic conditions in the wake of the Global Financial Crisis, a supply glut in the global steel industry and the recent changes to the system have contributed to an upswing in cases initiated, new measures imposed and measures in force.
  • Usage of anti-dumping and countervailing measures is concentrated in several capital-intensive industries producing mainly intermediate goods. Steel products accounted for 86 per cent of new investigations during 2014-15 and now make up over 60 per cent of all measures in force.
  • The average dumping and countervailing duty currently in place in Australia is 17 per cent, more than three times greater than the general tariff rate of 5 per cent.
  • Some measures have been in place for more than 15 years.
• Australia ostensibly has an anti-dumping system because WTO rules allow it. However, there is no compelling economic rationale for doing so and it is clear that current anti-dumping arrangements are making Australia, on a national welfare basis, worse off.
  • There is little to distinguish anti-dumping protection from other trade restrictions. As such, the benefits for recipients of protection are outweighed by the costs for industries using the protected goods, consumers and the broader economy.
  • Arguments that the system provides other benefits to the community that would eliminate this net cost are not credible.
• This state of affairs reflects deficient policy processes — and, in particular, inadequate reporting on system outcomes, and limited attention to the detriment to the community of anti-dumping protection in policy evaluation and development.
  • The current environment is one in which policy is being driven by the interests of a small group of local industries.
• The weight of evidence indicates that an anti-dumping policy based on informed consideration of its net impacts would lead at a minimum to heavy modification of the system to reduce its costs.
• The costs of the system could be significantly reduced by increasing the thresholds for accepting anti-dumping and countervailing applications (the de minimis margins), instituting provisions that would allow measures to not be applied if they would be disproportionately costly for the community and putting a finite limit on the duration of measures.
• However, such a 'harm minimisation' approach would have drawbacks and risks, as experience since the Commission's inquiry in 2009 shows. Accordingly, as part of a rethink of policy in this area, serious consideration as to whether it is in Australia's interests to retain an anti-dumping system at all is warranted.

Recent Developments in Anti-Dumping Activity

The Productivity Commission in a research report released today has found the underlying rationale for having an anti-dumping system is extremely weak, and exists to provide protection to a narrow range of Australian industries rather than to advance the interests of the community as a whole.

Despite this, or because of it, usage of the system is on the rise.

The report, Recent Developments in Anti-Dumping Activity, found that there has been an increase in usage of anti-dumping measures in recent years, alongside policy changes that have made anti-dumping protections easier to access. Industry support, often tailored to specific firms, is the consequence.

'The perversity of anti-dumping can best be seen if the pricing principles of the system were extended to domestic markets, where we would see some Australian businesses suffer regulatory intervention that prevented them charging lower prices to those less willing or able to pay,' Commissioner Melinda Cilento, said.

'So businesses holding Boxing Day sales in an effort to reduce excess stock would be required to increase prices. Likewise, Australian exporters would not discount their goods and services as a means of building new export markets, despite this strategy being one recommended by Austrade', the Commissioner said.

The study finds that there is little to distinguish anti-dumping protection from conventional tariffs.

'Changes to the system in recent years have made it easier for local industries to secure anti-dumping protection, increased the likely magnitude of that protection, and led to greater demand for protection. The direction now is in stark contrast to past microeconomic reforms that recognised that the community had paid a collectively high price for the benefits afforded to particular groups from restrictions on trade and competition,' Commissioner Melinda Cilento said.

'This state of affairs has been underpinned by deficient policy making processes, in particular the sidelining of any consideration of the adverse effects of anti-dumping protection. This contravenes generally accepted good policy-making practice and would cause significant economic harm were it to occur more broadly,' Commissioner Melinda Cilento said.

The report finds that cyclical and structural factors — namely weak global demand and excess capacity in key sectors — have contributed to the increase in anti-dumping activity. For example, in the case of the steel industry — by far the predominant user of anti-dumping protection in Australia — the demand for protection reflects a continuing supply glut and longer-term competitive pressures associated with the emergence of China as the dominant global steel producer.

The study sets out options for reducing the detriment caused by the anti-dumping system, consistent with other developed nations (e.g. New Zealand) that have recognised the costs of this system; and expresses reservations about the retention of an Australian anti-dumping system over the longer term. An anti-dumping system is a choice, not an obligation.

Chapter 1 provides relevant background to the research paper.

Chapter 2 looks at the key elements of anti-dumping systems around the world, the role of WTO agreements and rules in disciplining the operation of individual country systems, and some important features of Australia's system.

Chapter 3 examines anti-dumping activity in Australia and globally with a view to highlighting, among other things: the continued concentration of usage in a relatively small number of industries; the correlation between usage and the competitive pressures facing those industries; and the level and duration of anti-dumping measures.

Chapter 4 updates the analysis in the Commission's 2009 report on the various rationales advanced for anti-dumping systems and explains why these rationales lack credibility.

Chapter 5 analyses the broad effects of the changes made to Australia's system since 2009 and explains why these have almost certainly increased its costs. In conjunction with the discussion of rationales in the previous chapter, this analysis provides the basis for the Commission's conclusion that the benefit-cost balance of the system has worsened since 2009.

Chapter 6 considers policy-making practices in this area and canvasses some options that could significantly reduce the costs of Australia's anti-dumping system without the need to make multiple changes to the system's many constituent components. It also considers some of the matters relevant to deciding whether Australia should retain an anti-dumping system over the longer term.

Appendix A details the conduct of the study.

Appendix B details how the Australian Anti-dumping system works.