It’s bad because it’s very bad

Sophie Mirabella has this gem in the Australian

effective anti-dumping systems perform a crucial function in world trade by providing recourse against the insidious practice of dumping.

That’s what happens when the Liberal Party takes advice from anti-free trade activists. She is on samewhat safer ground when she writes

… a government that already has seen fit to punish manufacturers relentlessly by increasing regulations, discouraging commercialisation, slashing incentives for research and development (and, worst of all, introducing a job-destroying carbon tax) still shows no signs that it’s interested in fighting for the growth of Australian industry.

Tax incentives for R&D should be eliminated entirely – but the current government has been tardy in deregulation and good at tax and spend.

Here is the rub: she says

the Coalition will introduce an effective anti-dumping regime that ensures good Australian businesses get a fair go.

The only protection good Australian businesses need is the rule of law – the kind of pre-emptive anti-dumping regime she describes is protectionism and anti-consumer. It will be a great new tax on the household budget.

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46 Responses to It’s bad because it’s very bad

  1. hammygar says:

    Not much good giving us these links to The australian, Sinclair. They’re behind a pay wall, and I’m not paying to read this vicious newspaper

  2. JamesK says:

    They’re behind a pay wall, and I’m not paying to read this vicious newspaper

    That’s not a difficulty hammygstrung if ur interested.

    Your big problem is a raher nasty prejudice for what is far and away the best newspaper in Asutralia.

    Although, aadmittedly, that isn’t saying much.

    Unlike any of the other rags it is often included in the world’s top broadsheets lists(sometimes the SMH gets in too)

  3. Yobbo says:

    He has a good point. There’s not much point linking to posts that are behind a paywall. Presumably anyone who cares enough about the paper to pay for the online version will have read the article already.

  4. Rococo Liberal says:

    Sinclair

    DO you think Australia should go it alone and get rid of the Transfer Pricing regime? That is a sort of back-door anti-dumping regime too and a brake on free-trade, that most people don’t seem to know about.

  5. JamesK says:

    He has a good point

    No he doesn’t.

    Registration is free.

    If u are actually interested there is a very easy way around without the need to register.

    Presumably by ur rationale there should be no reference to important articles in the WSJ either although is tis the premier financial newspaer in the world.

    That paywell is also incredibly easy to circumvent for the tightfisted.

  6. michaelc58 says:

    Sinclair, I am free market, but can you please explain how ‘dumping’ is part of the level field of a free market.

    For example, as I understand it, Europe pays huge subsidies to its farmers to make cheese and if it dumps the cheese here, how are Aussie farmers meant to compete.
    Similarly, competition law already forbids large companies from underpricing goods to drive smaller competitors out of business – potentially a form of local ‘dumping’.

  7. Sean says:

    It means EU tax payers are subsidising other peoples food and squandering their own resources thus leading to lower living standards.

  8. Sinclair Davidson says:

    can you please explain how ‘dumping’ is part of the level field of a free market.

    There is no level playing field – free trade works precisely because costs and benefits are different.

  9. Jim Rose says:

    anti-dumping laws protect consumers from the scourge of lower prices.

  10. Matt says:

    anti-dumping laws protect consumers from the scourge of lower prices

    Exactly! If EU taxpayers want to subsidise Australian consumers’ cheese purchases, more power to them I say.

    Complaints about “dumping” usually add up to “they can produce it cheaper than we can and its not fair ..”

  11. Sean says:

    I think Rothbard summed it up nicely.

    When it comes to these situations it’s usually best to follow consumer instincts -> lower prices, and you can expect interest groups and the government to do the exact opposite.

    Sums up the Coles selling cheap milk situation perfectly.

  12. hammygar says:

    Sums up the Coles selling cheap milk situation perfectly

    This is an example of semimonopolistic bullying. It will ruin the dairy industry. Consumers have to realise that as soon as Coles and Woolworths force other competitors like Aldi and Franklins out of business the prices will be right back up again and not by just a little. They’ve already forced corner stores out of business. The Government needs to set up a Fair Prices Tribunal to take all parties’ needs into account, and to eliminate such market power by the big boys.

  13. Sean says:

    Please explain how it would ruin the dairy industry? Things like the GST hurt smaller businesses via economies of scale.

    Look at the history of Governments doing that hammygar.

    They protected the airlines in the US for many years and had a bunch of bureaucrats setting prices, even charging companies if their prices were too low. 20 years later:

    -No new routes had been opened up in the US
    -Prices were ridiculously high
    -Things like the prices of sandwhiches on the plane were regulated.

    Take the body away:

    -New routes open up
    -Competition drives down prices
    -flights become available to the ‘99%’
    -Consumers were actually served by allowing them to determine, at the margin, how much value they placed on different options for seating.

  14. Sean says:

    In the 1970’s the US government thought that the world would soon run out of Uranium. So what did someone suggest:

    Double the price from $40 to $80 and bingo people were falling over themselves to find Uranium, supplies were shown to be huge.

    Price fixing isn’t the way to go however it does show just how ridiculous the economic understanding of groups like the ‘Club of Rome’ were. The ‘oil shock’ is a massive example of Governments and the dodgy people at OPEC fixing prices to ‘protect’ people and acutally making things worse.

    Subsidies to US grain farmers etc. etc.

  15. JamesK says:

    The Government needs to set up a Fair Prices Tribunal

    Oh dear…… hammygstrung has jumped the shark again

  16. irving J says:

    I don’t understand this attitude that we should let trade exposed business have to face government subsidised competition because its “free trade”????

    ideological dogma over reality. where government are deliberately gaming their exchange rates and there are no automatic stabilisers there is no “free trade”.

    like a cheat in a poker game that everyone insists we should continue to play with.

  17. Sinclair Davidson says:

    The ‘cheat’ in poker is trying to take your money, the ‘cheat’ in international trade is giving you money.

  18. Sean says:

    Because the ‘free market’ has an inbuilt self regulatory mechanism such that capital seeks to exploit profitable opportunites almost immediately.

    If they stop subsidising things (i.e. ripping themselves off to provide us with cheaper goods so that we can invest more into other things) and the then raise the prices too high someone will almost overnight be there to compete with them

    AND

    their demand curve will shift. You simply cannot keep raising the price and expect to achive the same amount of sales.

    As Meger pointed out, it really depends on the demand curve that the business faces BUT ultimately economic calculation is still required even for a monopoly.

    You can’t always sell:

    4000 tomatoes for $2, and then expect to sell
    4000 tomatoes for $4, at the margin people will choose other goods, thus you lose money. You have to take into account the ‘substitutability of goods’

  19. Johno says:

    The Government needs to set up a Fair Prices Tribunal

    The only fair price is a price voluntarily agreed to by the buyer and the seller. Any price set by government is unlikely to be this price and is unfair.
    If the government price is greater than the market price, it is unfair to those consumers and providers who would have voluntarily traded at the lower price.
    If the government price is lower than the market price, it is unfair to those providers who consumers were voluntarily prepared to pay a higher price and it is unfair to those consumers who miss out because providers weren’t prepared to provide at the lower price.

  20. Sean says:

    *could lose money.

  21. irving J says:

    Because the ‘free market’ has an inbuilt self regulatory mechanism such that capital seeks to exploit profitable opportunites almost immediately

    lets be specific. where is the inbuilt self regulatory mechanism in china? there is none.

    communists control everything. there is no possibility of any form of “safe” investment in china. all figures out of china are almost guaranteed to be crap. fraud and corruption are mandatory and universal. foreigners are rapidly bilked from as much cash and intelectual property as possibly.

    china is a hostile communist government in accute self preservation mode taking the west for a “free trade” ride.

    china has accumulated what, 10%? of the US gdp, what happens when that figure is at 50%? at 100%?

  22. Sinclair Davidson says:

    all figures out of china are almost guaranteed to be crap.

    So what? As long as the products they sell to us are either not crap or correctly priced as being crap consumers make their own choice. If the Chinese government are subsidising production that becomes a wealth transfer to Australian consumers. At some point a budget constraint will limit that behaviour.

  23. Sean says:

    Peter Schiff thinks the US will start shipping second hand goods to China like it’s going out of fashion.

    2nd hand cars, tvs, fridges, bkies, computers etc. would go great in the house of a middle class Chinese familty.

    China aren’t taking anyone for a ride, loose central bank monetary policy is. Instead of saving people were spending on imports and not producing exports to pay for these, hence an imbalance.

  24. irving J says:

    If the Chinese government are subsidising production that becomes a wealth transfer to Australian consumers

    this is what I thought at first, but roll forward. lets take the US, since china buys very little from the US. at least they buy dirt from Australia and balanced trade is a possibility.

    the accumulation becomes a government debt that compounds over time. roll forward long enough and the debt becomes overwhelming to the buyers economy. either resulting in currency debasement or direct tax hikes. these cheap goods don’t look so cheap anymore. the real cost is actually infinite, only bounded by what action the buyers government takes to break the game.

    At some point a budget constraint will limit that behaviour

    what possible constraint can a totalitarian fiat money issuer have?

  25. Sean says:

    what possible constraint can a authoritariantotalitarian fiat money issuer have?

    ask the past and current US governments 🙂

  26. m0nty says:

    Those grousing about the paywall need only navigate via Google search for the headline to get the full story for free.

  27. Winston Smith says:

    Capital letters aren’t that expensive are they, Mr Irving?
    🙂

  28. Sean says:

    Irving, they you wouldn’t be averse to a policy which prevents such scenarios from occuring in the first place: cheap monetary policy.

    I’m for the best economic policy, what you seem to be purporting is how politics debauches good economics, which is essentially that same as us, only we are putting forward ideas backed by a theoretical apparatus that best explains how the system should operate.

    Unlike Friedman on monetary policy I don’t think ‘rational expectations’ applies, especially with to politicians around 🙂

  29. irving J says:

    you seem to be purporting is how politics debauches good economics

    and when has it or will it be any different??? free trade does not exist independently of the political system. and clearly the politics of china are hostile.

    lets stick to the point I made!

    at the moment the situation is the same as some kid (the american public) buying on his dads credit card (the US gov) from some shister (china) The kid sees cheap goods, the dad gets a never ending compounding bill.

    it clearly does not have a happy ending!

  30. irving J says:

    I remember reading an article by Buffett about this very point, claiming that the money coming back to the US was helping make America stronger through reinvestment. bullshit!

    The US government squanders the money on wars, handouts, and vote buying pork and I without looking at any stats can almost guarantee that there is virtually no return on money the US gov gains from selling bonds from trade imbalance.

    there are bounds to liberty as defined by rule of law!

    likewise there must be bounds to free trade entirely because of the polution from politics!

  31. David Elson says:

    How do we determine if dumping has occured?

    Lots of countries can produce products at a cost greatly lower than is possible in Australia due to labor & energy costs alone.

  32. Sean says:

    and when has it or will it be any different??? free trade does not exist independently of the political system. and clearly the politics of china are hostile.

    But it works a hell of a lot better if you reduce the influence of governments in setting interest rates.

    The beauty of free trade is that we could see the 3rd world lifted out of poverty in the next 30 years. If not for Keynes and the loopy left they would probably be 20-30 years more advanced in this journey today. This is the Utopian vision of ‘free markets’

    Such that man can solve the supply problem and therefore seek out his own path to fulfil his unique individual goals.

  33. pedro says:

    “The beauty of free trade is that we could see the 3rd world lifted out of poverty in the next 30 years.”

    There’s a lot more to it than that.

    It’s funny how this stupid debate continues. Cheaper stuff is better for everyone that gets to buy it. Jobs are “lost” all the time.

  34. David Elson says:

    By saving money through purchasing imported chinese goods (rather imported euro goods, Australia doesnt make much) I can afford to fly Qantas.

  35. Yobbo says:

    Those grousing about the paywall need only navigate via Google search for the headline to get the full story for free.

    So presumably Sinc could also do that when making the link, rather than link to an article that nobody can read? That’s all I’m saying.

  36. . says:

    as soon as Coles and Woolworths force other competitors like Aldi and Franklins out of business

    Jesus H Christ you’re a puffed up bozo.

  37. Hugh says:

    Dumping laws should be abolished in toto.

    But – and I think this is a separate issue – I do have strong objections to buying stuff that’s made by certain prisoners (eg political prisoners) in forced labour camps in (say) China or wherever. To me, it’s the moral equivalent of receiving stolen goods. Likewise, being anti-abortion, I have strong objections to using drugs/vaccines derived from the matter of aborted foetuses. I’m not sure if there’s much on the Australian market that falls into these categories, though.

    “But what about subsidised foreign goods?” will come the reply: “Taxation is theft, you say (and I do, largely), and yet you’ll advocate allowing in foreign goods that are only competitive here because that foreign government has effectively used money stolen from its taxpayers! Hypocrite!”

    A reasonable objection. But my answer is this: the key problem in all these areas is an overweening state. And I simply don’t trust our own, homegrown Aussie state to get it right in these often grey areas. They’ve demonstrated monumental incompetence and/or susceptibility to corruption so many times in the past – heck, over the last year -, why should we think they’ll get it right on all these issues? Far better for those concerned within our community to take it on themselves to document and publicise any morally dubious provenance of overseas goods, and influence the consumer that way.

    Anyway, I’m interested in others’ response to this admittedly grey area (for me anyway – and I’m a pretty avid free marketeer).

  38. Boris says:

    My head is with sinc, but looking how China prospers through these kinds of indirect subsidies, I am wondering if this may be beneficial for them.

    I ask our economics experts to please explain the economics of the artificially low exchange rate. PLEASE.

  39. Sinclair Davidson says:

    Yobbo – how do you think I get through the WSJ pay wall? Same deal with the oz. I don’t know if it can be set up to automatically pierce the pay wall.

  40. Sinclair Davidson says:

    Boris – the Chinese govt keeps the currency undervalued to keep Chinese goods cheap in world markets and international goods expensive in China.

  41. Boris says:

    “Chinese govt keeps the currency undervalued to keep Chinese goods cheap in world markets and international goods expensive in China.”

    This much I know. But does it make sense? In the short term, in the long term, etc.?

  42. Sean says:

    A final set of arguments, or rather alarms, center on the mysteries of the balance of payments. Protectionists focus on the horrors of imports being greater than exports, implying that if market forces continued unchecked, Americans might wind up buying everything from abroad, while selling foreigners nothing, so that American consumers will have engorged themselves to the permanent ruin of American business firms. But if the exports really fell to somewhere near zero, where in the world would Americans still find the money to purchase foreign products? The balance of payments, as we said earlier, is a pseudo-problem created by the existence of customs statistics.

  43. Yobbo says:

    Yobbo – how do you think I get through the WSJ pay wall? Same deal with the oz.

    I just assumed you paid for it…

    Regardless of how easy or otherwise it is to get through the paywall, my point remains that it is not good blogging practice to link to paywalled articles.

  44. Boris says:

    “But if the exports really fell to somewhere near zero, where in the world would Americans still find the money to purchase foreign products? ”

    By borrowing money from abroad.

  45. Sean says:

    Like Italy and Greece right now?

  46. Sean says:

    This worry is exactly why Keynes didn’t like the gold standard. It would punish inflation to buy imports by seeing gold outflows from a country (‘Britain, as the world’s bank, must be first to the new millenia’ so initially he thought GB should be able to keep interest rates ~0% but later used his dodgy theory to push for the gold standard to be abolished for the entire world)

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