Don’t get dumped on

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Duties are imposed on products dumped in Australia, but the system catches some ‘good guys’ too, as Alan Johnson reports.

IT’S a no-brainer that overseas companies should not be allowed to import products into Australia at below cost, with the aim of forcing local manufacturers out of business.

For this reason, our Anti-Dumping Commission was set up to investigate alleged dumping and subsidisation of goods imported into Australia, and impose duties to address material injury to Australian companies that manufacture similar or the same goods.

However, because the anti-dumping system is such a blunt instrument, more than just the ‘bad guys’ are caught.

Louise McGrath, National Manager – Business and International Advisory Services with the Australian Industry Group, believes the system is too uncompromising and too complicated.

“For example, we have members who are concerned about dumping as a protectionist measure, then we have members who are concerned because they are being accused of dumping, and then we have members who are suing each other over dumping. We try not to take sides.”

She says the system needs to be consistent and transparent and easily accessible to everyone.

With most companies involved with anti-dumping in the steel and aluminium industries, McGrath points out that Ai Group members are huge consumers of both these products.

“The idea that most Australian manufacturers support the Anti-Dumping Commission – believing that they were being undercut by price by overseas competitors dumping products here to gain market share to force the company out of business in the long term – is not the case.

“It’s not so cut and dried. If the steel is no longer made in Australia, manufacturers have to buy it from somewhere.

“Dumpers only come to Australia because there is a customer. These products are not just bought to the country and left to sit here. Our members are buying steel because they need it as an input.”

McGrath pointed out that BlueScope and OneSteel don’t make every grade of steel anymore but because dumping is a very blunt instrument, maybe that product is not made in Australia but is very close to something that is being dumped.

“Some companies get caught on the border of having dumping duties being put on, but the product is something that is not being dumped.”

However, she admits the system is still very useful.

“We want to make sure that unfair practices aren’t being rewarded.”

Industry advice

As a first point of call, McGrath advises manufacturers with less than 200 employees, who believe an overseas competitor is dumping product in Australia, or are paying anti-dumping duties on goods they believe do not require those duties, to contact the International Trade Remedies Advisory Service (ITRA).

Originally run as pilot program by the Ai Group, ITRA is now part of the Department of Industry and is a free service to SMEs.

“ITRA will help SMEs raise a dumping claim. But first people should understand what dumping really means.

“Many people throw the word ‘dumping’ around but there are strict rules to what it means. Plus, making a dumping claim can cost a company a lot of money, around $60,000 to $100,000, which can be a big expense for SMEs.”

According to McGrath, the other thing many people forget is that it’s not about individual companies, but about the industry.

“Companies have to show injury to an entire industry. But because so much of our industry is consolidated, it looks like just one or two companies, but in fact it is for an entire industry.

“Unless you have a high percentage of the market, it means you have to get competitors in a room together and they have to share client details, sales figures and costings and things like that. The problem is very few companies can pull together,” McGrath told Manufacturers’ Monthly.

“When we started the pilot program, we thought it would be all about local manufacturers worried about dumped product from China.

But she said that wasn’t the full story.

“We found that there was so many innocent importers who got caught up in the system.

“They weren’t actually dumping, they weren’t buying dumped product, but because it’s such a blunt instrument, it’s just based on the HS code, they were getting huge dumping bills at the borders.

“We quickly had to help them do the paperwork to prove that they weren’t breaking the dumping rules.”

As well as costly, McGrath warns manufacturers that the anti-dumping process is also a long process, often taking years rather than months.

“Plus it has to be very secret, otherwise you could tip off the dumping company, who would just change its behaviour.

“Companies must also understand that a dumping claim is not per shipment. You need to show damage over time, at least six months.

“This is why it’s mainly large companies who lodge these claims. BlueScope and OneSteel do it very well, but they have whole teams working at it all the time.”

However, McGrath remains supportive of the Anti-Dumping Commission, especially following major changes at the Commission in 2014, which included moving the organisation from Canberra to Melbourne and out of Customs and into the Department of Industry, and therefore closer to manufacturing.

While stating the Commission is “doing a very good job”, McGrath admitted the organisation needs to be well resourced.

“The better resourced they are, the quicker claims can be processed, which gives companies more confidence in the system and gives them more certainty.

“If you are an importer or a manufacturer, you need to be confident that the price you are thinking of today will still be there in six months. If not, it makes it very difficult, and puts a lot of companies in limbo,” McGrath said.

Asian steel dumped

A recent report from the Anti-Dumping Commission, released in September, found Australia’s steel and aluminium industries can’t compete on a level playing field with dumped Asian exports, especially from China.

The Commission found Asian government subsidies and their support for loss-making state-owned enterprises had resulted in unsustainably low export prices.

“The ongoing significant global over-supply has depressed steel and aluminium prices, resulting in prolonged difficult trading conditions for steel and aluminium producers generally, including in Australia,” it said.

Prices for both commodities are now half pre-Global Financial Crisis peaks.

The report says the nature and extent of Chinese market interventions, coupled with the sheer size of China’s production, has made a significant contribution to current global over-capacity and persistent imbalance between production and demand.

Those interventions include subsidising the costs of raw materials and power, tax rebates, cheap finance and sustained support for unprofitable state enterprises.

The Commission said its analysis supports a finding that economically inefficient market interventions in Asia and other regions have amplified and were likely to have extended duration of very difficult operating conditions faced by the Australian industries.

The report didn’t recommend specific measures, although it said the anti-dumping system was generally effective in addressing proven cases of dumping and subsidisation

Since 2010, Australia has taken 43 trade remedy measures over steel and aluminium imports, including 21 for China.

In a bid to overcome the dumping problem, the Federal Government is facing calls to remove a special trade deal Australia has with China.

A study by the McKell Institute, a progressive think tank, has found Australia’s decision in 2004 to award China “market economy” status has backfired and Australian companies are being damaged by the predatory dumping of products below market cost.

The call to review World Trade Organisation (WTO) rules on China’s access to Australia’s market comes as big steel producers such as Bluescope and OneSteel struggle to complete in a world of too much cheap steel.

AWU National Secretary, Scott McDine, said it was time Australian politicians stood up for the national economic interest.

“Australia needs to stop being naïve about international trade and face reality. Our current trade settings are neither free nor fair. We are being gamed, and in the process, we are sending jobs offshore.”

He described dumping as cheating, “pure and simple”.

“Among advanced economies, Australia has decided to go it alone in giving China market economy status. China has reciprocated by flooding our market with cheap aluminium, sold at the less than the cost of production.

“If Canada, the US, UK and EU won’t expose their markets to this abusive practice, why should we?”

McDine says, Australia’s current recognition of China as a market economy promotes the export of jobs and hinders us in taking effective action.

“As well as reversing China’s market economy status, we need more resources for the Anti-Dumping Commission and bans on companies that are repeat offenders.

“The Canadians have figured this out. Their anti-dumping regime has supported local industry and jobs.

“Over the same period, Australia has gone in the opposite direction, and we now have one of the lowest rates of industrialisation in the OECD,” McDine said.

Australian Industry Group

1300 55 66 77

www.aigroup.com.au


International Trade Remedies Advisory Service (ITRA)

02 6213 7267

www.business.gov.au/advisory-services/international-trade-remedies-advisory-service