Dumping an Australia-China issue

Australia’s trade relationship with China continues to grow, driven in large part by China’s insatiable appetite for iron ore from Western Australia.

But, trade between the two nations is very much a two-way street.

China is currently Australia’s second largest export market and the third largest source of imports to Australia, which totalled $15.3 billion in 2003-04.

Last year the two nations undertook a feasibility study on the subject of an Australian-China Free Trade Agreement.

For China, a recurring issue impacting bilateral trade with Australia is Australia’s anti-dumping rules.

Dumping is the practice of exporting product to an international market at a discount to the market price available in the country receiving the goods.

Over the past decade Chinese imports to Australia have been subject to more anti-dumping action than those from any other major industrialised or developing nation.

Australian anti-dumping rules determine the normal value of goods that are to be ‘dumped’ on our market based on the exporter’s domestic price.

The issue that arises in the case of China, and other controlled markets, is that the domestic price may be subject to subsidies and other pricing policies that mean the domestic price is not a fair-market price.

This has contributed to the disproportionate number of anti-dumping cases from Chinese exports to Australia.

Dumping is a multi-faceted issue.

By ‘dumping’ product on the Australian market, local producers are undercut and they are unable to compete on equal terms with the cheaper imported product.

On the other hand, some parts of industry, particularly the resource majors, argue that Australia has some level of responsibility to buy manufactured goods from China, in part, as a reciprocating gesture to one of our largest customers of raw materials.

Sam Walsh chief executive of Rio Tinto Iron Ore said at an address to the Chartered Institute of Purchasing and Supply Australia in Perth last week that anti-dumping actions of some Australian producers had put a strain on trade relations with China and impacted the competitiveness of Australian commodities producers.

“Our authorities do not take into account the beneficial effects of imports when imposing dumping duties,” he said.

“The mining industry has witnessed duties being imposed on inputs like grinding mill liners and silicon and the result has been rising production costs that ultimately impact on our global competitiveness.

“Our argument is that they increase the cost of production and that this acts as a restriction on the capacity and competitiveness of the Australian mining industry and as a result the community suffers a net loss.”

Mr Walsh suggested Australia follow the lead of other nations, like Canada and nations of the European Union, and implement a ‘national interest’ test to ensure that the interests of all parties are taken into account when dumping incidents occur.