Tony Abbott should support anti-dumping measures

With Tony Abbott recently calling for an examination of the anti-dumping regime, there are welcome signs that the tide may be turning in Australia towards a more sensible balance between government intervention and free trade in regard to our industry needs.

Sophie Mirabella (Shadow Minister for Innovation, Industry and Science) notes that "if Australia is to be more than a tourist destination … we need to ensure that our markets are not distorted by goods that are subsidised by foreign governments". Hence, the Coalition appears willing to address concerns by businesses that "the current anti-dumping regime is too expensive to access, too cumbersome and more often than not retrospective".

Contrary to the free trade idealist Chris Berg suggesting that anti-dumping is merely a protectionist measure that undermines Australia's ability to develop lower prices and a more competitive economy, such measures should be used to counter China's willingness to export a product to another at a price either below the price charged in the home market or below its costs of production.

According to Paul Howe (Australian Worker's Union), Chinese state-owned firms are "dumping" products in Australia, including aluminium "at prices cheaper than you can buy bauxite" and steel "at prices cheaper than you can buy iron ore", as part of China's Communist Party bid to wipe out local producers.

While Berg clings to free trade ideals, and even argues that cheaper goods subsidised by foreign governments actually represents "a straight transfer of wealth from overseas taxpayers to Australian consumers", only naïve political leaders will continue to allow recent trends to go on unabated to the detriment of our national industries.

As hopefully Abbott will realise, Western nations (including Australia) must increasingly use various measures to encourage China to adhere to accepted rules rather than eliminating all trade barriers at its own expense while China's authoritarian leaders take advantage of the benefits of freer trade in their own mercantile way.

As argued by Gordon Chang, a Forbes columnist and author of The Coming Collapse of China, the US still has the power to influence China. While China holds $847 billion in Treasury securities, thus being the largest foreign holder of US debt, he notes that China's export industry would virtually collapse without the US market. Chang rightly argues that a go soft approach to China is merely teaching the Chinese that they "can get away with bad behavior" as the US has created "perverse incentives, which is part of the reason why China has become more aggressive recently".

Nevertheless, the US (and others) are making some effort to counter the rise of China. In August 2009, Beijing backed down in a dispute over auto parts to alter its import tariffs after losing an appeal of a World Trade Organization case brought by the US, Europe and Canada.

The US is prepared to do more to protect its domestic industry against unfair competition. With imports of stainless steel pipe from China increasing from 13,993 tons in 2005 to 31,766 tons in 2007, taking about 30 per cent of the US market, such imports declined to less than 7,000 tons in 2008 after antidumping and countervailing duty petitions were filed.

During February 2011, the US International Trade Commission again found China guilty of illegal product dumping when it ruled that Chinese-imported drill pipe and drill collars were unfairly subsidised and dumped onto the American market. The US Customs and Border Protection will now (within 90 days) enact antidumping and countervailing duties on certain Chinese exporters at margins ranging between 0.00 and 69.32 percent at the direction of the Department of Commerce.

An August 2010 article also reflected greater common sense about China, noting that corporations and nations were now less prepared to tolerate China's behavior, although recognising that China is not alone in its use of "subsidies, non tariffs barriers, currency manipulation to further what they consider their national interests". William Gamble argues that China is nowhere near being a market economy given that over 50 per cent of its economy is directly controlled by the government with the rest tightly managed through a vast regulatory bureaucracy and the state banks.

Further, Gamble indicates that Google was just one of many corporations (perhaps up to 100) which had their security breached, thus encouraging a view that they should move to other countries with lower wages that are building infrastructure with governments more amendable to changing laws. Interestingly, Gamble points out that India filed more trade complaints against China than any other nation in 2009, and that Indonesia, Brazil, Thailand, Russia, and Europe also expressed greater concern.

So you see Chris Berg, there are good reasons why Tony Abbott should be considering a tougher line to China's industry approach. At the very least, we need a vigorous debate about dumping and other forms of industry protection.

Contrary to the theoretical hopes of free trade supporters, it is China that continues to benefit most with its authoritarian leadership having little regard for reform more in line with our own national interest which goes well beyond exporting what we have in the ground.