On actually reading Productivity Commission reports

What I said in the Sunday Age last week:

In his ”forgotten families” speech in May, the Opposition Leader made tougher anti-dumping laws a centrepiece of his economic policy. These laws purport to prevent foreign imports being ”dumped” so cheaply in domestic markets they threaten the existence of Australian companies. The theory suggests that the foreigners will jack up prices once local companies have gone out of business. But it’s a theory that everybody from the Productivity Commission to Nobel-winning anti-free market economist Joseph Stiglitz thinks is nonsense …

Anti-dumping laws are pure protectionism. They benefit a few companies at the expense of consumers.

What Home Affairs Minister Brendan O’Connor said on the Sunday Age letters page yesterday (no link):

Berg wrote that anti-dumping measures depend on “a theory that . . . the Productivity Commission . . . thinks is nonsense”. This comes as a surprise to the government and probably to the Productivity Commission which, in its report, included a chapter entitled “Should Australia retain an anti-dumping system?” Its answer, in short, was “yes”.

Did Berg not read the report? Of course he read it, and then he misrepresented it. Berg guilefully picks the oldest and weakest argument for an anti-dumping policy to infer there is no convincing argument.

Berg brays that “anti-dumping laws are pure protectionism”. That is not merely untrue, it is the dead reverse of the truth.

What the Productivity Commission said:

The Australian anti-dumping system, which is based on agreed WTO rules and procedures, benefits a small number of import competing firms, but imposes greater costs on the rest of the economy.

However, this net economic cost is likely to be very small. And the ability for Australian industries, like those in most other countries, to use the system to address what are perceived by many to be ‘unfair’ trading practices, may have lessened resistance to more significant tariff reforms.

In other words: yes, anti-dumping laws are protectionist but the Productivity Commission thinks that they are a tolerable evil to secure support for other trade liberalisation.

In an Appendix, the Commission provides no support for the economic model on which anti-dumping laws are based.

…the Commission has concluded that Australia should retain an antidumping system. However, that conclusion is based on the presence of broader political economy benefits rather than on the grounds that anti-dumping measures can more directly enhance economic efficiency. Indeed, the Commission’s assessment is that the narrow efficiency rationales are not compelling.

To address the minister’s specific concern about foreign governments subsidising their manufacturing:

…the ‘direct’ economic case for using anti-dumping measures to respond to assistance provided by overseas governments is questionable. Especially for a small country such as Australia, such an approach could be economically costly.

Nevertheless, to Brendan O’Connnor, this translates as “Its answer, in short, was ‘yes’.”

His two words, “in short”, carry a heavy burden indeed.

(I wrote about the origins and politics of anti-dumping laws at ABC’s The Drum in February.)

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