Trump’s sweeping new tariffs have left global markets in turmoil and Norfolk Islanders scratching their heads. Politicians, economists, and everyday people around the world have been scrambling to understand what it all means and what happens next.
While officials in Canada, Europe and China talk tough, the response in Australia has been more muted.
That tells us two things.
First, that we don’t export a huge amount to the US, and there is a rare consensus that trying to retaliate would only hurt us more.
Second, that with the new tax on Australian goods exported to the US of “only” 10%, we have escaped relatively lightly – especially as pharmaceuticals have so far been exempted.
But our leaders must be seen to be doing something.
So it was that Anthony Albanese on Thursday immediately announced a range of measures designed to soften the blow to those local exporters who might get hurt by US trade aggression – either indirectly, or directly.
And first cab off the rank from the PM was this pledge: “We will strengthen our anti-dumping regime to safeguard key sectors like steel, aluminium and manufacturing against unfair competition.”
What is dumping, and why are we so worried?
The fear is that countries who have now been slapped with much higher US tariffs, such as China and Vietnam, could struggle to sell their products in America and choose instead to dump them at below cost in other markets – such as Australia.
That could hurt local manufacturers who can’t compete with imported goods being sold at unfairly low prices. In the worst-case scenario, they could be forced out of business.
How likely is that?
A flood of cheap imports at fire sale prices is not in the immediate future.
But it’s hard to know how worried we should be, and the risk of a rise in dumping cases is higher than it was on Wednesday.
For now, talk of beefed-up anti-dumping measures is mostly just that – talk. Behind the scenes, diplomats and trade representatives will be talking with their overseas counterparts to stop an unruly rush to dump unwanted goods in each others’ markets.
The government plans to spend an extra $5m to boost the capacity of the Anti-Dumping Commission to deal with a potential increase in the number of cases.
The commission, which sits in the Department of Industry, investigates claims by local producers who say they are the victim of unfair trading practices by overseas competitors.
Is dumping always bad?
Not if there isn’t a local producer who is being unfairly disadvantaged.
For example, China could choose to “dump” cut-price electric vehicles on our shores. With no local car manufacturers, that would just mean cheaper cars for us.
Who decides whether goods have been dumped?
The industry minister of the day will make the call, based on the recommendation in a final report presented by the Anti-Dumping Commissioner.
The final report is supposed to be produced within 155 days of the complaint being lodged, although cases can start, stop and restart.
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The process to lodge a complaint is long and arduous, though, and the paperwork is hideous, says Louise McGrath, the head of industry development and policy at Ai Group. That puts off a lot of would-be complaints, especially by smaller firms.
Some companies, however, are practised complainants.
In fact there is the risk that anti-dumping rules can be exploited by local firms trying to shield themselves from offshore competitors who are simply more efficient.
Jenny Gordon, a non-resident fellow at the Lowy Institute, uses the example of the steel manufacturer, Bluescope, which she says “excessively used antidumping to limit competition”.
“As a result Australians pay more, and that raises building costs,” Gordon says.
So which products are already on the naughty list?
The Anti-Dumping Commission’s website lists 24 imported products or commodities that have been found to be sold in Australia at unfairly low prices and are paying the penalty.
They are almost all manufactured metal products, and predominantly from China and other Asian countries. For example: aluminium extrusions from China, Malaysia and Vietnam; chrome bars from Romania; and quenched and tempered steel plate from Finland, Japan and Sweden. There’s clear float glass from Indonesia, and pineapples from the Philippines.
So-called “countervailing duties” are applied to these products to lift their prices to reflect the commission’s estimate of a fair price.
These extra taxes are applied to individual manufacturers, and they can be very high.
For example, aluminium extrusions imported from four Thai firms have an effective duty rate of 64.4%, according to the Anti-Dumping Commission’s website.
On the other hand, the same product from three Vietnamese manufacturers of the same commodity is 5.2%.
So what’s next?
Great question.
Trump’s “reciprocal” tariffs are due to come into effect just past midnight on 9 April, Washington DC time.
Between now and then countries may be able to negotiate a lower rate by offering Trump what he wants – assuming they know what that is.
For now, we will have to wait and see.