Ideas@TheCentre
Dumping on free trade
Many factors have been cited behind Ford Australia’s decision to cease production. While government policy has supported the local car industry to the tune of billions of dollars, other government policies have directly undermined the industry’s competitiveness.
Australia’s anti-dumping system is a case in point. Anti-dumping duties on imports of Chinese-made alloy wheels and the threat of duties on steel imports in response to complaints from BlueScope Steel have directly hurt the local car industry.
There is a certain irony in the government’s subsidies to the car industry being undermined by its anti-dumping system, which is notionally intended to help industry, but in reality hurts Australian producers and consumers.
The government is establishing a new Anti-Dumping Commission from July this year and has committed extra resources to identify and impose additional duties on imports deemed too cheap under Australia’s anti-dumping laws.
Dumping is not an exception to the general case in which a country that is a net importer of a good benefits from lower prices. The gain to Australian consumers – including Australian businesses that consume the dumped good – from lower prices is larger than the loss to Australian producers of the dumped good.
Despite its pejorative connotations, Australia’s economic welfare is enhanced as a result of ‘dumping’ by foreign producers.
Dumping is no different to an improvement in Australia’s terms of trade (the ratio of export prices to import prices); allowing increased domestic consumption out of the same amount of domestic production.
Dumping is not illegal under World Trade Organization rules. Nor does the WTO require Australia to have an anti-dumping system.
Australia should dump rather than enhance its anti-dumping system.
Even if Australia retains an anti-dumping system, the responsible Minister should use their discretion under the existing law to refuse anti-dumping and countervailing measures applications on public interest grounds.
They should instead highlight the benefits of cheaper imports for Australian consumers and the economy as a whole, building community support for free trade.Dr Stephen Kirchner is a Research Fellow at The Centre for Independent Studies and author of ‘Time to Dump Australia’s Anti-Dumping System’ released this week.
