Steel tariffs show Australia isn’t fair dinkum when it comes to fair trade

It is said all is fair in love and war. It is, or should be, in trade too. The idea of fair trade, which ­motivates new US steel and aluminium tariffs, doesn’t stand up to scrutiny.

If countries can produce goods and services more cheaply, that’s not unfair — it’s just a fact of economic life. If others want to erect trade barriers, that’s their right too. They only hurt themselves. You won’t find any rich countries with high average tariffs.

“If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!” President ­Donald Trump tweeted yesterday, capping a series of tweets that included demands for Japan to curb its $US100 billion trade surplus with the US — “not fair or sustainable”.

“Horrific” is a stretch: the ­European Union imposes a 10 per cent tariff on US cars, while the US puts a 2.5 per cent tariff on ­European cars. It’s not clear, by the way, that eradicating that difference would make big US cars a hit in pokey Roman and Parisian streets.

In any case, average customs duties on goods moving between the EU and the US area hover about 2 per cent, according to the European Commission.

Local producers are worried cheap steel could end up in Australia should there be a glut driving down steel prices and encouraging dumping, for which Labor has already said it would “triple” penalties. Cheaper steel would hardly be a bad thing for us at a time when state governments are forking out on an ­unprecedented infrastructure building boom.

Dumping, in theory selling something below cost, is a silly concept in principle, encompassing quite normal business behaviour such as selling at discount to clear stock. I doubt the Labor Party would want to fine hotels for offering rooms at a discount, or airlines for last-minute bookings? They are clear examples of dumping. Good bye end-of-season sales.

The idea of a “fair” price has a whiff of Marxism about it, actually, which has its roots in the old labour theory of value — the idea the price of something could be logically worked.

The government has mounted the moral high horse on trade in recent weeks. Yet at the same time its own obscure Anti-Dumping Commission, a branch of the federal Department of ­Industry, has been slapping new tariffs on steel.

In January an anti-dumping investigation concerning steel ­reinforcing bars imported from Greece, Spain, Indonesia, Thailand and Taiwan concluded that anti-dumping duties ranging from 4 per cent to 42 per cent would be required. They came into effect last Wednesday.

Consistent with global trade rules, the law says anti-dumping duties shouldn’t be set at a level more than necessary to prevent financial harm to the relevant local industry. If an exporter sells a product in its home market for 100, but the Australian industry would not be injured if the product were sold here for 90, then the exporter should be permitted to sell at 90.

The anti-dumping commission appears to have become a law unto itself. “Different price offers in the market from the subject countries found to be dumping have caused injury to OneSteel during the injury per­iod, not just the lowest price offer ... The Commissioner considers that the NIP (non-injurious ­import price) should be established at the level that ‘corrects’ these prices so that they are not dumped prices in order to prevent the recurrence of the injury to One Steel,” it concluded.

If you understand that, you’ve done well. Have anti-dumping rules reached peak stupidity? It seems the ADC is no longer there to redress material injury caused by dumping — even if that were easy to work out — it is now there to “correct” low prices.

In any case, the very idea of a non-injurious import price is a legal absurdity. Prices are set ­dynamically with regard to costs and prevailing demand, which businesses are in the best place to judge.

I couldn’t find the present cost of running the anti-dumping commission, but in 2009 it was ­reportedly $9 million. On top of that the investigations themselves can cost up to $1 million, costs in part imposed on import firms trying to go about their business. At least upfront tariffs are clear and cheaper to administer.

Two years ago the Productivity Commission was scathing about the growing use of anti-dumping duties, especially on steel, to protect local industries. The overall share of imports covered by anti-dumping rules had quadrupled to 0.4 per cent from 2004 to 2011, it found.

Duties tended to last for at least five years, and were overwhelmingly being used to bolster the local steel sector. The commission also has duties on tomatoes, kitchen sinks and A4 copy paper, among other things.

“There is little to distinguish anti-dumping protection from other trade restrictions,” it concluded. “As such, the benefits for recipients of protection are outweighed by the costs for industries using the protected goods, consumers and the broader economy … Arguments that the system provides other benefits to the community that would eliminate this net cost are not credible,” it said. These words have clearly fallen on deaf ears.

Nostalgia for the industrial structures of the 1950s is deeply embedded in the political psyche of Western countries. While the disruption of technological change and freer trade are real and the costs fall relatively more on people from lower socio-economic groups, trade and development can’t be frozen or reversed.

Where is the Australian Competition and Consumer Commission in all this? It’s purpose is to “make markets work for consumers, now and in the future”. It’s far from fair that the steel market ­appears rigged in favour of local steel producers. The ACCC should consider a few emails to the Anti-Dumping Commission and the Department of Industry, seeking a cost-benefit analysis for their decisions.