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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