David Leyonhjelm guest post. 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 like products. 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.

David Leyonhjelm is a senator for the Liberal Demo

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15 Responses to David Leyonhjelm guest post. Dumping on industry

  1. max

    by Gary North:

    “The logic of economics applies across borders: county, state, and national. Deny this, and you deny economics.
    Conservatives deny economics. They promote tariffs and import quotas across national borders, but not state and county borders.
    Ludwig von Mises had a word for this: polylogism. This means multiple systems of logic.

    One of the most popular arguments among America’s anti-free trade non-economists is this one: free trade destroys American jobs.

    We need to think through the implications of this argument.

    The case for voluntary exchange has nothing to do with the question of the number of jobs that voluntary trade is supposed to create, or not create, or even destroy. The case for voluntary exchange is based on the case for economic liberty. It is based on the idea that two individuals who want to better their condition have a legal right to make an exchange that each of them believes will improve his situation.

    When two Americans, or two residents of any nation, get together to make an exchange, neither of them is thinking this: “Is my decision going to increase the number of jobs in the nation?”
    Buyers do not worry about how many people will still be employed by the seller tomorrow, next week, or next year. Buyers want a good deal, and a particular seller offers the best deal available. Buyers do not care that the seller has fired half his workforce and has bought a robot in order to get his costs down, thereby being able to make better offers to buyers. Anyone who thinks that buyers should care about how many workers are employed by the seller does not understand economics, and clearly does not understand human nature.”

  2. Rob MW

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

    Your anecdotal equivalence stinks, Australia does not and probably will never domestically manufacture its own defense hardware, or in any way be self sufficient in doing so. Free trade zealots in Australia are too stupid to assimilate the notion of conflict induced import trade interruption.

    The point being, for example: How many days in fuel stock does Australia have on hand ?

    “There are identified supply chain vulnerabilities in the fuel sector in Australia and the Committee is concerned that these risks are actively managed in the most appropriate manner,” the report, which had bipartisan support, said.”

    “Australia now has the lowest reserves of the member countries of the IEA which mandates that all countries should hold 90 days in reserve as a minimum. Australia has just 43 days of supply.”

  3. Boris

    Conservatives deny economics

    Not all of them but many.

  4. max

    Boris, Gary North is Conservative

    I am a conservative.
    I am a conservative by way of three phenomena that have linked together American conservatives since about 1920: (1) anti-Communism; (2) free market economics; (3) conservative social theory.

    https://www.garynorth.com/public/14821.cfm

  5. max

    I was brought into the conservative movement by a one-hour presentation by Frederick Schwarz, an Australian immigrant who ran the Christian Anti-Communism Crusade. That was in 1956.

    https://www.garynorth.com/public/14821.cfm

  6. Jimf

    Anti dumping laws are just another govt intervention designed to artificially protect Aust’s uncompetitive cost base,and as an outcome make end users pay more. You know “for the National good!” As long as protectionism is in place, we’ll remain in our “she’ll be right mate” bubble .

  7. Mother Lode

    I don’t entirely buy into the tariffs protecting a vital industry thing. All that would demand is that America maintains a certain capacity for that purpose. Let the government pay a premium be demanding US steel and even prop up producers doing it tough – it would still be cheaper than the government paying full US price AND making it so everyone else must too.

    But the thing that stands out about the tariff legislation is that he was tossing around exemptions like confetti so it was hardly a tariff regime at all. It looked more like using an old tactic in a new strategy – tariffs as a way to put nations on notice.

    I would expect the that tariffs require legislation but exemptions being granted or withdrawn does not – so he can in effect slap a tariff on a nation overnight now.

  8. Cutting tariffs in the 1990s helped deliver Australia the highest consistent growth rate of any OECD country for over 25 years.

    Maybe, maybe not.
    There were huge productivity increases due to widespread use of personal and office computers in the 90’s (remember the monochrome screens and 5″ floppies?).
    It was also in the 90’s that China began to open it’s economy in preparation to joining the WTO in 2001. Those two things probably were much more consequential than reducing tariffs.

    Mother Lode
    #2697424, posted on April 28, 2018 at 12:57 am
    But the thing that stands out about the tariff legislation is that he was tossing around exemptions like confetti so it was hardly a tariff regime at all. It looked more like using an old tactic in a new strategy – tariffs as a way to put nations on notice.

    Exactly. Trump has never been a protectionist. There are videos of him talking about trade going back 25 years.
    Being an international businessman, it doesn’t make sense that Trump would be a protectionist.
    He has consistently said he believes in fair and reciprocal trade and lots of it.

    It is true that buyers don’t care how many people are employed or how many are rendered unemployed when they make buying decisions, but there is a reason why we have the ACCC and anti-monopoly laws (yes, they are very badly administered).
    When Colesworths puts all the local butchers, green grocers and bakers out of business with predatory practices, we the buyers get cheaper goods more conveniently for a while, but we also pay for the downstream economic and social consequences of those predatory practices by way of taxes that are more than double what they should be, and the added problems of a significant portion of the workforce being unemployed or under employed. (family breakdowns, crime, drug use etc).
    It’s not accurate enough to just compare the retail prices paid by the consumer. Who counts the downstream costs?

    I’m in no doubt that the best decisions made are by the people who trade, with minimal government interference. We do however need a framework of clear and concise rules to operate in. All human interactions need these frameworks of rules, that’s also human nature and indispensable to a cohesive society.

  9. BorisG

    There are videos of him talking about trade going back 25 years.

    when he was a Democrat.

  10. BorisG

    but there is a reason why we have the ACCC and anti-monopoly laws (yes, they are very badly administered).

    this is a feature not a bug. They can’t be administered well because… it is government.

  11. sdfc

    There seems to be a belief that exports are good and imports are bad. When really exports are good and imports are good.

  12. Egor

    The only thing a Libertarian ever cared about is the efficacious flow of money. All other ‘beliefs’ are coincidental.
    Who hates the nation state most, a Libert or the EU bureaucracy? Hard to say.

  13. bAA hUMBUG;

    When Colesworths puts all the local butchers, green grocers and bakers out of business with predatory practices, we the buyers get cheaper goods more conveniently for a while, but we also pay for the downstream economic and social consequences of those predatory practices by way of taxes that are more than double what they should be, and the added problems of a significant portion of the workforce being unemployed or under employed. (family breakdowns, crime, drug use etc).
    It’s not accurate enough to just compare the retail prices paid by the consumer. Who counts the downstream costs?

    By the time the downstream costs are taken into consideration, the unemployed butcher/baker/candlestick maker, the drug use etc, you’ve built the control room of a socialist economy. The government will then use it.
    We’re better off getting the government and its crony deal making mates to piss off and just leave the market to deal with itself.

  14. Bugger the caps lock.
    I blame the damn cat who strolls across the keyboard.
    Bastard cat.

  15. Tel

    It’s not accurate enough to just compare the retail prices paid by the consumer. Who counts the downstream costs?

    In theory those people go on to do other jobs, in practice they often don’t but probably it’s worth asking why the Australian economy is so inflexible that people cannot change vocation:
    * Strong license protection keeps newcomers out of almost every industry.
    * Education is much more expensive than it needs to be (you can learn a trade on YouTube, but you won’t get a fancy certificate with that).
    * Business is regulated up the whazoo, expecially w.r.t. employment conditions.
    * Minimum wage and Award wage laws make it risky to hire an older person seeking to re-skill.
    * Hostile business environment for new investment in startups (government will regularly change the rules and possibly just outright take your assets, ask farmers about this).

    Now I understand it is difficult for a 40 year old bank teller to suddenly convert into a computer programmer after the bank branch was replaced by an ATM… but if automation and business streamlining becomes outlawed then we will all be back to making everything by hand. I don’t think there’s any validity to the claim that supermarkets just popped up overnight, so the small grocery shops had plenty of opportunity to see where the industry was going.

    Other industries had it much worse … show me a shop doing television repairs, if you can still find one. They used to be everywhere.

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