PC inquiry into anti-dumping

In recent years, India has claimed the unlovely crown as the world’s most intensive anti-dumper in relation to its merchandise trade ranking (18th ranked importer according to WTO statistics). China is the biggest target of anti-dumping investigations worldwide: a total of 640 cases since 1995—more than twice the number of the second-ranked target country, South Korea. You can find the official WTO statistics on the WTO web site.

Overall, anti-dumping cases accepted by the authorities in WTO member countries have fallen from peaks of 360 cases in 1999 and 2001 —the depths of the last recession— down to half that level on an annual basis by 2008. But there is every reason to think that the rate of anti-dumping will pick up in the current recession.

AntiDumping cases initiatedAntiDumping cases initiated (graph)

Anti-dumping cases are typicallly counter-cyclical, rising as the business cycle declines. Anti-dumping is a ‘lagging indicator’ of trade volumes. When sales margins are tight, rational producers make sure that their fixed costs (capital) are covered and let their variable costs (labor, leases, stock) take a hit as they cut prices to maintain output volumes. This is especially true of manufacturers with large fixed capital costs (steel, concrete, chemicals etc) who pretty much have to “dump” to stay in business because they’re first into the trough of a cyclical downturn. Dumping is a rational strategy for firms and a good thing for consumers. Everyone does it, and it’s perfectly legal in domestic markets.

The best thing about this Rudd government reference to the Productivity Commission is that it is framed in the right way for a review of a policy that is about competition on the domestic market: an ‘economy-wide’ review of who gains and who loses anti-dumping. This is the only way to assess the balance that must be struck between the import-competing firm’s interest in ‘fairness’ and the interests of consumers in un-impeded competition among suppliers, whether domestic or foreign.

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