Dumping on industry

President Trump's steel tariffs are widely viewed as a deeply flawed protectionist measure that will damage US steel consumers and related industries. And yet, in Australia we are using anti-dumping measures for the same flawed reasons, achieving the same negative result.

Cutting tariffs in the 1990s helped deliver Australia the highest consistent growth rate of any OECD country for over 25 years. Our remaining tariffs are now minor and their impact insignificant compared to our anti-dumping measures.

Dumping is said to occur when goods are imported into Australia at a lower price than their "normal value", usually defined as the comparable price in the exporter's domestic market. Anti-dumping involves the imposition of additional duties to prevent injury to Australian producers, imposed by the relevant Minister based on advice from the Anti-Dumping Commissioner. A minimum price on the imports may also be applied.

The Minister must be satisfied that goods exported to Australia have been dumped or subsidised, and that the dumping or subsidies have caused, or are threatening, material injury to an Australian industry producing the same goods.

Australia has anti-dumping measures currently applied to steel, power transformers, heavy machinery, food products, plastics, paper and other metals.

A recent anti-dumping investigation involved galvanised steel, a product produced by Australia's steel manufacturers. Between July 2015 and June 2016, the period during which the investigation took place, the price of galvanised steel dropped around 15 per cent from its previous value. At the conclusion of the investigation the price rose, reaching 35 per cent above its low point.

The obvious conclusion is that the price was deliberately supressed in order to encourage a favourable anti-dumping decision and to highlight material injury. Once the investigation was over, the price returned to its normal level.

In March this year I used Senate Estimates to ask the Anti-Dumping Commissioner, Mr Dale Seymour, about the increased number of determinations relating to steel. Mr Seymour explained that most of these determinations have arisen because of global oversupply.

However, he also confirmed that his role only requires him to consider injury to Australian producers. In other words, he takes no account of consumers of the products in question.

There are two potential victims here; one is the domestic manufacturer competing with the 'dumped' imports. If additional duties are imposed, they are better able to compete with the imports by maintaining higher prices. The other is the consumers of those products, who pay the higher prices whether they buy local or imported.

The price hike normally increases the cost to the final consumer too, although manufacturers can't always increase their price sufficiently to recover their increased costs because the market they are selling into is freer than the one that they buy from.

Consumers of steel products have found a remarkable correlation between the price of steel and the recommendations of the Commissioner. They have also found the share prices of local steel producers Liberty Onesteel and Bluescope are positively aligned with actions taken by the Commissioner. The anti-dumping process is being used for a lot more than its original purpose.

In addition to that, it appears duties have been applied to imports of steel products despite the fact that they are not even being made in Australia; a clear breach of the necessity for them to be likeproducts. This simply harms manufacturers whilst protecting nobody.

The company in question became so frustrated by the process of arguing against the imposition of anti-dumping charges (which they claim are designed to discourage appeals) that they chose to move their business out of Australia altogether. As they put it, they have left in search of 'other export markets where fair trade values are pursued'.

The World Trade Organisation agreement on anti-dumping requires a determination of injury to be based on positive evidence and involve an objective examination of the volume and price effects that constitute injury and the consequent impact on the domestic industry. However, it allows for a high degree of interpretation.

If our approach to anti-dumping is open to manipulation as well as interpretation, more companies will cease to invest in Australia. If that costs profits and jobs, who exactly does it protect?

We are in no position to criticise Trump for his steel tariffs.