Minority Report of Senator Cameron and Senator Pratt

1.1        This report is confined to the Committee's inquiry into the Customs Amendment (Anti-Dumping) Bill 2011 introduced into the Senate by Senator Xenophon on 2 March 2011.

Summary of recommendations

1.2        That the Government not adopt the bounded public interest test formulated by the Productivity Commission in its December 2009 report on Australia's Anti-dumping and Countervailing system.

1.3        That the Government, in considering reform of the anti-dumping and countervailing system, examine ways that will assist producers representing between 25% and 50% of production of a like product so that they can access the anti-dumping and countervailing system in a timely and cost-effective manner.

1.4        In view of the volume of submissions that the present anti-dumping framework is more restrictive in dealing with dumping and subsidies than it ought to be having regard to Australia's obligations under the GATT, the Government introduce reforms designed to be more facilitative and flexible in tackling dumping.

1.5        That notwithstanding the Committee's doubts about the effectiveness of the specific amendment proposed in Senator Xenophon's bill in relation to a rebuttable presumption of dumping, the Government in considering reform of the system, continue to give consideration to a workable rebuttable presumption of dumping or a similar mechanism that will facilitate action against dumping.

1.6        We are strongly supportive of proposals to significantly increase the resources of Customs and Border Security available for anti-dumping and countervailing investigations and we also recommend necessary changes to the system to encourage wide consultation between Customs and Border Protection and industry experts in the conduct of dumping and subsidy investigations. Further the Government should continue to monitor the adequacy of resources and the expertise that is necessary to ensure better and quicker decision making.

1.7        Australia needs an effective Anti-dumping system to prevent Australian Business and their employees from being adversely impacted by predatory international pricing of the disposal of goods on the Australian market at a price that is below the cost of production.

1.8        There have been no changes to the system for more than a decade and we believe protections against dumping in Australia have fallen behind many of our trading partners. It is critical that the anti-dumping system is strengthened at this time, as it is necessary to instil confidence in workers and businesses struggling for viability and under sustained pressure because of the GFC and more recently, the strength of the Australian dollar.

1.9        Successful engagement in world trade is critical to a strong Australian economy. Australia’s success will be diminished, if we don’t have a strong and effective anti-dumping system to ensure that trade rules are applied.

1.10      Dumping is a practice of international price discrimination, where the export price of a product is less than the price, expressed as its “normal value”, at which the product is sold in the ordinary course of trade of the exporting country and often involves export at prices less than the cost of production.

1.11      The World Trade Organisation (WTO) considers that a product has been dumped if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.

1.12      Where dumping damages industries and firms, the damage borne by the affected entity can often be very substantial and difficult to recover from, even when dumping ceases to occur. This effect is exacerbated when dumping occurs in regional areas, where affected firms are often the largest employer in the region, placing a heavy burden on communities and families. The material damage to industries and firms can include loss of market share, reduced output, job losses and in the worst cases, plant closure.

1.13      Some, however, question the merits of an anti-dumping system that they feel goes against the principles of free trade. Advocates of this view can be found dealing in derivatives in the finance industry, in parts of the legal profession and in government and academic circles where neo-liberal orthodoxy has taken a strong hold; but rarely among people who make their business or earn a living in manufacturing and for whom dumping is not merely an arcane, theoretical concept.

1.14      While occasionally acknowledging that in instances of predatory dumping, action should be taken; there is a tendency to believe that anti-dumping measures are merely protectionism by another name. On other occasions, opposition to anti-dumping and countervailing measures advocates a theoretical model of trade around comparative advantage that simply doesn't exist in the development of real economies.

1.15      The theory goes that if every country unilaterally reduces its trade barriers, including those designed to protect it from predatory trade practices, global trade will expand, economic efficiency will be maximised and everyone will benefit from competition and lower prices.

1.16      Typical of this view is the submission of Professor Martin Richardson of the Australian National University which says in part:

... [the] proposal [in the Bill] further undermines the already shaky basis we have in the world to argue credibly for freer trade. We are a founding member of the Cairns Group of agricultural exporters and, given the prevalence of agricultural protection around the globe, our overwhelming national interest lies in global free trade. To argue for free trade - a doctrine that favours production of goods by the world's most efficient producers of those goods - and have any credibility whatsoever we must be perceived to pursue free trade ourselves. Our stock in this matter is already very low ... but we cannot afford to backslide even further by increased facilitation of the naked protectionism that is anti-dumping.[1]

1.17      Dumping is not free trade. Dumping is a perversion of trade.

1.18      Australia is in many respects an easy dumping ground. Australia is geographically remote, with low or non-existent trade barriers. Contrary to the submission of Professor Richardson, our business, academic and bureaucratic elites tend to subscribe to neo-liberal free trade orthodoxy a bit too much for our own good and countries that dump goods into Australian markets tend to be protected from market retaliation by high import barriers of their own.

1.19      Australia's anti-dumping and subsidy process should be neither arcane nor secretive. It should be a straightforward process involving gathering hard, detailed evidence at an industry and firm level in order for an anti-dumping application to succeed. The problems with Australia's anti-dumping system lie with the influence of free-trade theoreticians and ideologues who see it as their duty to make the system as difficult as possible for industry to navigate.

1.20      For example, the Productivity Commission in its 2009 report on Australia's anti-dumping and Countervailing System place an unusual emphasis on the purpose of Article VI of the GATT thus:

...WTO agreements that, amongst other things, aim to discipline the use of anti-dumping measures as an alternative form of protection.[2] (Emphasis added)

1.21      While the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade[3] places limitations on the extent and application of anti-dumping and countervailing measures, its principal purpose is to facilitate nation states acting against dumping, rather than disciplining them against action. The emphasis placed on the agreement by the Productivity Commission reflects a disposition against anti-dumping measures; a general view that low cost imports, dumped or otherwise, benefit the public interest simply because they are cheap.

1.22      This view can be summarised as; if it's cheap it's good, so let it rip - and this overrides any injury that arises from market failure and distortion. Job losses, plant closures and destruction of communities can all be sacrificed for a theory with little relevance in the real world.

1.23      In our opinion, it is this view that underwrites the Productivity Commission's formulation of a bounded public interest test that is the principal recommendation in its 2009 report.[4] During the course of the inquiry into Senator Xenophon's bill, the Productivity Commission's proposal for a bounded public interest test was the subject of considerable comment. It received little or no support from inquiry participants and we reject it.

Recommendation 1

1.24      We recommend that the Government not adopt the bounded public interest test formulated by the Productivity Commission in its December 2009 report on Australia's Anti-dumping and Countervailing system.

Overview of Australia's anti-dumping system

1.25      Australia’s system is based on WTO agreements that, among other things, recognise that dumping “is to be condemned”.[5]

1.26      Australia's anti-dumping and countervailing system is administered by the Australian Customs and Border Protection Service. It investigates claims of dumping and subsidisation and makes recommendations to the Minister and oversees the anti-dumping system.

1.27      The investigation process goes through several stages and includes appeals arrangements.

1.28      Requirements that must be satisfied before measures can be imposed include:

• the goods produced by the local industry seeking relief from dumped or subsidised imported goods must be ‘like’ those imported goods;
• the application must have majority industry support;
• in dumping cases (but not subsidy cases), the export price of the goods must be below the ‘normal value’. In the first instance, this value is based on arms length sales in the exporter’s own country. However, where there are no such sales or an insufficient volume of such sales, a hierarchy of alternatives comes into play; and
• dumping or subsidisation has caused or threatens material injury to the Australian industry producing like goods. Though ‘material injury’ is not defined in the legislation, it has been taken to mean not immaterial, insubstantial or insignificant and greater than that likely to occur in the normal ebb and flow of business.

1.29      If these requirements are met, then Customs can recommend to the Minister that duties be imposed up to the level of the assessed dumping margin (or the benefit from the subsidy provided by an overseas government). However, under Australia’s ‘lesser duty rule’, a smaller duty sufficient to increase the price of the imported goods to a ‘non-injurious’ level may be applied. Alternatively, the overseas supplier can make a formal undertaking that would remove the injury.

1.30      Once in place, anti-dumping measures typically remain in force for five years, with scope for continuation for additional five-year periods, following further review.

1.31      Australia's countervailing measures regime is based on its obligations under the Agreement on Subsidies and Countervailing Measures[6] reached in the Uruguay Round of the GATT.

1.32      Australia's anti-dumping system has undergone five reviews between 1986 and 2006. The current legislative framework and arrangements were introduced following the 1996 Willett Review. The review introduced statutory time-frames for investigations which reduced the investigation period; a new system for collecting anti-dumping and countervailing duties; the abolition of the Anti-dumping Authority in 1998; and a sunset clause limiting the duration of the measures.

1.33      The Customs Act 1901 sets out the general anti-dumping inquiry process and the Customs Tariff (Anti-Dumping) Act 1975 provides the imposition of anti-dumping and countervailing duties.

1.34      Part XVB of the Customs Act reflects in substance amendments to the Act made in 1994 by the Customs Legislation (World Trade Organisation Amendments) Act 1994 and in 1998 by the Customs Legislation (Anti-Dumping Amendments) Act 1998.

Union and industry concerns

1.35      There have been long-standing industry and union concerns about the lack of effectiveness of the anti-dumping system.

1.36      On 20^th April 2011, the Australian Manufacturing Workers' Union, the Australian Workers' Union and the Construction, Forestry, Mining and Energy Union convened a 'Roundtable' discussion in Canberra on the problem of dumping.

1.37      As well as representatives of the trade unions, Members and Senators, the Roundtable was attended by representative of businesses regularly damaged by dumping including Capral, OneSteel, Gunns Ltd., Australian Paper and Kimberley Clark.

1.38      In an issues paper published in conjunction with the Roundtable, the unions make the point that many governments, including the Chinese government, intervene directly in their economies for the purpose of benefiting their own industries, many of which are dominated by state-owned enterprises.[7]

1.39      The unions' issues paper pointed to a number of flaws in Australia's anti-dumping and countervailing system.

1.40      For example, in the case of forest products, Australian producers are limited in their response to dumping by factors including tough local competition laws and sustainable management of Australia’s forests. This means that the combating of, for instance, artificially low log prices in competing countries, often relies on an effective anti-dumping and countervailing system.

1.41      Australian forest product manufacturers face the situation of competing against firms which receive support through ‘free’ forestry concessions under national legislation and access to export finance facilitation at preferential rates through quasi-autonomous non-government financial institutions.

1.42      The former Coalition government recognised China as a market economy as part of its accession to the WTO in 2004. A condition of China’s membership to the WTO was that member countries would not have to recognise China as a market economy for 15 years from the date of China's accession. As an ‘economy in transition’, China’s ability to defend dumping claims is weakened as the country accusing China of dumping has immediate recourse to surrogate (third country) pricing information to judge if goods have been dumped.

1.43      The Australian Industry Group suggested at the time that granting market economy status to China would reduce the ability of Australian industry to take action against China for the dumping of goods.[8]

1.44      Unlike Australia, the United States has still not granted China market economy status despite years of negotiations between the governments of the two countries. Non market economy (NME) status means that the country in question is not a market economy and its pricing policy is based on factors other than demand and supply. An NME is a national economy in which the government seeks to determine economic activity through mechanisms including monopoly state ownership, direct and indirect subsidies and other measures that when introduced into international trade can cause substantial injury in the markets of importing countries.

1.45      WTO members explicitly recognise that NME countries may need to be treated differently from market economies in anti-dumping cases. It also allows WTO participants to adopt a discriminatory approach while dealing with countries that have a complete or substantially complete government monopoly over international trade and where all domestic prices are fixed by the state.

1.46      By far the largest number of Australia's anti-dumping and countervailing measures is initiated against imports from China.

1.47      The ambiguous status of China's economy is a significant problem for Australia in the context of its anti-dumping regime. The global financial crisis has seen an upsurge in dumping around the world and the continued weakness of the US economy is likely to see a continuation of increased dumping activity for the foreseeable future.

1.48      Having to treat China as a market economy in dumping investigations, when there is a prospect of state intervention to provide a range of subsidies to goods imported from China, leads to a conclusion that the anti-dumping system itself requires modification to deal with the consequences of the decision to grant China market economy status.

Background to the Bill

1.49      Senator Xenophon's Bill is limited in terms of the scope of the amendments it proposes. We are mindful that the Government is already considering reform of the anti-dumping system and we look forward seeing the results of that consideration which will reflect wide consultation with stakeholders.

1.50      A number of issues raised by stakeholders about the operation of the anti-dumping system are not addressed by this bill. Many see the system as inflexible and sometimes lacking in common sense.

1.51      In his second reading speech, Senator Xenophon made the following observations:

Dumping occurs when overseas companies sell products in a country below the cost it sells it for in its own country, making it near impossible for Australian companies to compete.

Under Part XVB of the Customs Act, dumping duties can be applied against the overseas company.

These dumping duties are supposed to offset the effects of injury; however I am increasingly concerned that the current framework does not adequately protect and does not fairly act in favour of Australian manufacturers.

In fact, the burden, the cost and the process appears to be skewed very much in favour of overseas importers.

This Bill seeks to correct this and put greater focus on the unfair impact on Australian manufacturers. In this way, we can protect Australian companies and local jobs.[9]

1.52      In seeking to address these concerns, Senator Xenophon's bill contains provisions amending Part XVB of the Customs Act that can be summarised as follows:

• Provide that the importer of goods which are subject to anti-dumping applications bears the onus of proof to prove that the goods have not been dumped or subsidised for export into Australia;
• Provide a presumption that where dumping and material injury have been proven, the material injury is the result of the dumping;
• Provide for trade unions whose members are directly concerned with the production or manufacture of like goods to be included in the definitions of 'affected parties' and 'interested parties' for the purpose of applications for dumping and reviews;
• Enable new or updated information to be provided at various stages;
• Allow supporting evidence for an application for dumping to be provided 90 days prior;
• Enable preliminary affirmative decisions to be initiated once an investigation is started;
• Require consultation with industry experts as part of the investigation and review processes;
• Prohibit the CEO of Customs from providing a statement to affected parties of the amount or price of anti-dumping or countervailing duties if it is based on information provided on a confidential basis or disclosure would affect the providers business interests;
• Enable decisions to be referred to the Administrative Appeals Tribunal for appeal; and
• Require an independent review of the first two years of the operation of the amended legislation.

Cost of access to the system

1.53      A repeated criticism of the anti-dumping system as it stands is its cost to both applicants and objectors in anti-dumping and countervailing investigations.

Senator CAMERON: But what if they are not a member of an industry association and are just a small manufacturing company—they are not a member of AIG or ACCI—that sees that their product is being dumped? It is costly and it is complex. Do you think a small company without access to expert advice can actually deal with the dumping issue?

Ms Zielke: I agree that there are difficulties for SMEs in relation to putting forward those cases. Some of the feedback we have had is that the cost of putting forward a case is a key issue for them. Hence Customs currently has arrangements to try to group SMEs to put forward cases. I agree that not everybody has full or equal access in relation to the level of advice that they require.[10]

Mr Willox: To initiate a claim of dumping will often take 12 months or more to gather the evidence that is required to lodge and prosecute a claim. These are not easy claims to lodge. They are more likely than not costing companies hundreds of thousands of dollars. I am aware of cases in current times where companies have had to spend over $1 million in pursuit of claims. So they are both lengthy and costly to pursue.[11]

1.54      There are not only high costs associated with anti-dumping investigations for applicants for inquiries. JELD-WEN, who claim to be Australia's largest manufacturer of windows and doors, has opposed anti-dumping applications in relation to clear float glass.

Dr Silberberg: JELD-WEN arguably is the principal objector. I have to say that the JELD-WEN organisation has incurred expenditure of $1 million to date in opposing the anti-dumping application by CSR and Viridian in respect to clear float glass. Hopefully, that puts some perspective on the observations about the costs to applicants.[12]

1.55      We are of the view that having regard to the views of industry, access to Australia's anti-dumping and countervailing system is costly and time-consuming; effectively creating barriers to access. In its consideration of reforms to the system, we strongly encourage the government to take the costs to industry stakeholders into account and implement measures to reduce those costs as far as practicable.

1.56      In relation to the market share thresholds that must be met before an anti-dumping application can be made, Ai Group supports a reduction in the threshold, which would also tend to reduce the cost to small to medium sized enterprises.

Mr Willox: There we would say what we said in our submission, which is that we would support amendments that would open up the applications to Australian industry with a market share smaller than 50 per cent but larger than 25 per cent for individual businesses.[13]

1.57      We note the Committee's view that the amendment as drafted in Senator Xenophon's bill may fail to achieve its objective or alternatively, may not be administratively workable. In my view this is an insufficient reason to rule out the intention of the proposed amendment.

1.58      We believe that it is important that the twin objectives of reducing cost of access to the system and making it more accessible to small and medium size enterprises not be abandoned.

Recommendation 2

1.59      We therefore strongly recommend that in considering legislative reform in this area, the government examine ways that will assist producers representing between 25% and 50% of production of alike product so they can access the anti-dumping and countervailing system in a timely and cost effective manner.

Australia's attitude to its WTO obligations

1.60      While there were submitters who believe that anti-dumping measures are inconsistent with Australia's reputation as a country that supports free trade, many of the submitters among industry and trade union submitters believe that Australia's approach to dumping is overly cautious and overly concerned with free trade theory, rather than the practicalities of effectively dealing with dumped imports.

1.61      Industry stakeholders believe that Australia's anti-dumping system is unduly confined by our domestic arrangements, which are perhaps more restrictive than our WTO obligations. The question is not so much whether Australia's WTO obligations are binding, but whether the obligations we place on ourselves under domestic legislation are more restrictive than they need to be.

1.62      While, as suggested above, the restrictive view of Australia's WTO obligations tends to be more prevalent, but not exclusively, among people not directly engaged in Australian manufacturing, the views of manufacturing industry stakeholders is instructive.

Senator XENOPHON: If I can go to—you may want to take this on notice—a number of submissions from government. I cannot talk about DFAT's submission at this stage. There are submissions from JELD-WEN, the Law Institute of Victoria and the Law Council of Australia which have said that this could be in breach of our international obligations under the WTO. Could you comment on that and perhaps make reference to their submissions—I think they made reference to article 3.1 and to article 11 as well. Earlier there was a very interesting question to a previous witness from Senator Eggleston. I am sure Senator Eggleston will correct me if I am wrong but basically the question was: which status do you give these rules, these WTO rules, these GATT rules? Are they a guide? Are they almost like a code of conduct rather than black-letter law and are we taking them too literally compared to other countries?

Mr Willox: Certainly, if I may say so, I think you could take the impression away that Australia has taken a very pure view.

Senator XENOPHON: Fundamentalist, some would say, Mr Willox.

Mr Willox: Yes, some may say that, but if there is a view it has certainly been very much a black-letter law view of the WTO anti-dumping agreement. I would like to see in detail what some of the government departments have said. We have always said that we have to be broadly WTO compliant, because that will then open up the option for Australia or Australian companies or organisations to be taken to the WTO. That may be an argument that we have to have in some cases to establish exactly what is intended, basically to test this agreement. It is often a matter of interpretation. We have been very clear as we framed our response to this legislation to ensure that as broadly as possible we are compliant with what we would take to be the intent of the WTO agreement; but as far as we have made clear there is very little here that we see as being far outside the reaches of any WTO guidelines.[14]

1.63      In answer to questions put on notice to them on this issue, the Ai Group made this observation:

The relevance of WTO rules and case law to domestic legislation is clearly open to interpretation. There is great variance across approaches taken by our trading partners. There are some who take the approach that national legislation is bound within what WTO rules explicitly permit. For example, if the rules don't specify that you can hold a public hearing on a Tuesday, then you cannot. However, this interpretation is not practical or within the spirit of the Agreement. The Committee may wish to consider the approach taken by some, that is, an importing country and it administering authority can do anything except what they expressly agreed not to do under the agreement.[15]

1.64      The view of manufacturing businesses as expressed by Ai Group was reinforced by the unions that participated in the inquiry.

Senator XENOPHON: When your organisations go off to trade forums—and you heard the Taliban remark—how are we regarded? What do fellow trade unions and fellow peak bodies say about the way that we do things here compared to the way that things are done in the US, Canada or Europe?

Mr Wacey: We will take it on notice. But I will say that our members—the workers in the forestry industry in particular—note that other countries, such as the USA, Canada and those in the European Union are able to balance their responsibilities in order to protect their industries and comply with the WTO in a much more effective way than Australia. Leaving aside whether the amendments proposed are compliant or not compliant with the WTO antidumping rules, the government needs to make a commitment to do whatever is possible in order to protect Australian industry from the practices of unfair trade, in our view. That is the view of our members: that other jurisdictions are able to much more effectively balance those responsibilities.

Senator XENOPHON: Can any or all of you give examples of that? If so, that would be useful in terms of learning how they deal with it. Mr Fetter, perhaps on notice given time constraints, what fellow organisations do overseas? How do they deal with this issue?

Mr Fetter: I will do that. I can indicate that in interactions with trade unions from overseas it has been remarked that Australia seems a little bit naive in terms of our trade policy. We are a very open economy by world standards. There is a whiff of fundamentalism about it in Australia that other trade union organisations and indeed other governments find a little curious, I have to say. My own view is that other governments play a much smarter game in terms of applying WTO rules but making sure that they are applied right up to the limit of how strictly one can apply the rules and yet be compliant. The view of the Australian practice that we are not only applying the letter of the law but we are very much capture by that free market ideology that is not necessarily captured in the black letter of the text. In the way that we interpret it, we very much put ourselves at the mercy of more cunning foreign competitors.

Senator XENOPHON: What is the American term? Schmuck?[16]

Recommendation 3

1.65      In view of the volume of submissions that the present anti-dumping framework is more restrictive in dealing with dumping and subsidies than it ought to be having regard to Australia's obligations under the GATT, we recommend that the Government introduce reforms designed to be more facilitative and flexible in tackling dumping.

Trade Unions as interested and/or affected parties

1.66      As a threshold issue, it is important to understand whether there are any legal impediments to unions being included in the definitions of interested and affected parties.

Senator CAMERON: Senator Xenophon's bill has in amendments (1) and (2) the inclusion of trade unions in the definition of interested parties. I am amazed by the submission from the DIISR; I am not sure if you have seen that. What it says is:

The involvement of unions ... might lead to tensions between employees and employers or between parent and subsidiary companies, with adverse implications for investment and manufacturing in Australia.

It goes on to say:

Situations could also arise where a union representing employees of downstream users of the like goods might regard itself as an interested party, since its members could also be affected by anti-dumping measures.

DIISR goes on to talk about the need to minimise unintended consequences. Is there any legal restriction on Australia actually including the trade union movement as an interested party in the legislation?

Mr Hudson: You talked about the US experience. In the US the trade unions are quite active in this field. I was involved in some capacity-building work in Vietnam and one of their issues was catfish going into the US. A number of the parties who were initiating or interested parties were local union membership on behalf of the workers effectively who were being disadvantaged, in their view, by cheap imports or unfairly cheap imports of catfish from Vietnam. I think I might have posed this question previously. There is no reason in principle why a trade union should not be an interested party, but their ability to be the applicant is the question, I think.

Mr Percival: Their ability to be the applicant certainly would be problematic. Currently the legislation provides that trade unions actually form part of the interested parties. I think the test is that a majority of them have to be directly affected, or some words to that effect, and I think Senator Xenophon's bill actually reduces that. So it actually expands the potential number of trade unions that could be interested parties. Without having gone back to look at WTO rules, I cannot see why there would be an international legal reason against it.[17]

1.67      The unions who participated in the inquiry were able to provide some useful information in this regard.

Senator CAMERON: I am quite happy for anyone to answer this question. We had evidence from the Department of Innovation, Industry, Science and Research regarding their submission this morning. They said this is about including trade unions in the definition of 'interested party'. They said that the involvement of unions might lead to tensions between employees and employers and between parent and subsidiary companies with adverse implications for investment in manufacturing in Australia. Situations could also arise where a union representing employees of downstream users of the like goods might regard itself as an 'interested party' since its members could also be affected by anti-dumping measures. They go on to say that we should talk about this because there are unintended consequences. Did this department participate in any of the roundtables that you were involved in?

Mr Crofts: I am very disappointed to hear of that particular intervention by the department. We have been working with the department closely in developing a strategy for Australia's steel sector. We will continue to participate with the steel council as genuine partners with government and industry. We have had nothing but consensus around the table with industry which , as you can see, was also demonstrated among our unions in dealing with the dumping issue and dealing with it more effectively than hitherto. It should bespeak the fact that we are not doing it adequately currently that we had that degree of cohesion and consensus.

The concern of trade unions being a party to applications and to reviews is something that we feel is fundamental to a more effective application of our dumping and countervailing system. It is something that would be more reflective of what occurs in the US jurisdiction, where this is hard wired into legislation, and also of the more consistent approach by Canada in these issues. I would have thought that having unions at the table at a time when we are attempting to address the competitiveness challenge to Australian manufacturing with the impact of subsidies not available to local manufacturers is nothing but a positive. I regret that there is that view that trade unions would somehow be doing the process down rather than attempting to contribute to its more effective development and application. That is why we are taking such a strong stand on this issue. We feel that hitherto we have not been heard as clearly as we should have been on these issues.[18]

Mr Crofts: On America, our compatriots in the US United Steelworkers Union are at the table when it comes to bringing forward actions. They have entitlements that they can petition on. They can join in petitions under the US Tariff Act and the US Trade Act 1974. What entitlements that unions in the US are able to bring actions on are clearly prescribed? They look at us askance in terms of our approach, which Joel says appears to be far more timid when it comes to testing the boundaries of what is in and what is out when it comes to the WTO.

Mr Wacey: It is a really good point. This is a not a game. It is business. It is big money. You need to be able to go beyond economics 101 and laws and theories. With game theory, for example, you would not have an antidumping system. But it does not work like that in the real world. Our members have felt the impact of this.[19]

1.68      At the hearing on 4 May 2011, the submission of the Department of Industry, Innovation, Science and Research on the question of whether trade unions representing workers affected by dumping could be interested parties under the Customs Act required some clarification. DIISR's position was clarified in answer to questions put to it on notice.

DIISR does not oppose the involvement of unions in anti-dumping or countervailing matters. As noted in DIISR's submission, the involvement of unions whose members are directly concerned with the production or manufacture of like goods could assist SME dominated industries to access the system...

DIISR has not identified any unintended consequences of elating to union involvement in anti-dumping and countervailing matters where there is cooperation between Australian producers and unions in the development of applications and/or in the conduct of investigations...[20]

1.69      The proposition that unions should be included in the definitions of interested and affected parties was also supported by business submitters to the inquiry, including Australian Paper and Ai Group.

Dr Jones: .....Going through the other things, we would endorse the view that the unions should have an ability to be represented or to even start cases in their own right in this field. It is probably not so important for an industry like ours, which has a fairly straightforward product set and suchlike and operates on a large scale, but it is certainly so for the smaller industries that do not really have the critical mass to mount cases in their own right quite often.[21]

Senator CAMERON: Can I take you to a couple of points in it and get your comments. Before I do that, union submissions here today say that in the US the unions have standing to bring antidumping cases before the appropriate authorities. What is AiG's view about that applying here?

Mr Willox: We would support unions having that standing.

Senator CAMERON: That is good. DIISR say:

... the involvement of unions might lead to tensions between employees and employers or between parent and subsidiary companies, with adverse implications for investment in manufacturing in Australia.

Given you are one of the key manufacturing organisations in this country, you did not put that to DIISR, did you?

Mr Willox: No, we did not.

Senator CAMERON: I cannot understand this submission, and I did not get a chance to ask them about it when they were here, but can you see any validity in this submission to the Senate inquiry?

Mr Willox: I think that submission, as you describe it, would be an in extremis case. Because these cases are so costly, I think the reality is that more often than not they are brought by the companies, but they are brought by the companies in conjunction and in concert with their workforce because of the implications for their workforce. They cannot do these things in isolation, and I think any sensible viewpoint of this would say it would be unlikely that a case this large and that costs this much and is so time-consuming would be brought by a union alone without the relevant company cooperating in some way. That would be hard to envisage.[22]

1.70      We note that the Committee is recommending that the definition of interested and affected parties be amended to include trade unions. We strongly agree with the recommendation.

Rebuttable Presumption of Dumping

1.71             On the question of whether the provision in the Bill creating a rebuttable presumption that material injury is caused by dumping is consistent with Australia's WTO obligations, the DFAT submission placed some reliance on a WTO Appellate Body decision in United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan.

1.72      It was said in the submission that this decision would mitigate against a rebuttable presumption being consistent with Australia's WTO obligations.

1.73      The ACTU, on its own behalf and on behalf of the AMWU, AWU and CFMEU, in answer to questions on notice received on 6^th June 2011 considered this case and its context in some detail.

Senator Cameron has asked us about the WTO Appellate Body case of US — Hot-Rolled Steel.  In that case, the United States was investigating allegations of dumping by three Japanese companies. Two of the companies submitted a response after the deadline had passed, and so the response was disregarded by the US authorities. The third company told the US that it was unable to comply with the request for information because a daughter company was refusing to provide the information; the US ruled that the company had failed to co-operate with the investigation and proceeded to make decisions based on the information before it. Dumping duties were ultimately imposed on products exported by the three companies.

In response, Japan complained to a WTO Panel established pursuant to the Anti-Dumping Agreement. The Panel ruled that the US should have accepted the two companies’ material late, and should have assisted the third company in obtaining information from its subsidiary. These findings were upheld by the WTO Appellate Body.

This case does not, at all, stand for the proposition that a country’s laws cannot reverse the onus of proof in relation to dumping inquiries. The case turns on its own facts, which relate to late lodgement of material and also information-gathering within corporate groups. All the case does is provide an orthodox application of the rules contained in the Anti-Dumping Agreement – in particular, what article 6.8 means when it refers to a party that ‘refuses access to, or otherwise does not provide, necessary information within a reasonable period’.

With respect, those who wish to rely on this case in the present debate seem to be mixing up two different issues. It is true that this case does discuss the burden of proof – but that is the burden of proof in proceedings before the Panel. In Panel proceedings, the burden of proof rests with the complainant as a matter of law; however, as a matter of logic and evidence, if the complainant brings a prima facie case which the defendant does not ‘effective refute’, then the complainant must succeed.

However, as the Appellate Body made clear in the same case, the question of the burden of proof before the Panel is different to, and should not be confused with, the evidentiary burden which national decision-makers face when conducting dumping and/or subsidisation inquiries. The Appellate Body said:

'In considering Article 17.6(i) of the Anti-Dumping Agreement, it is important to bear in mind the different roles of panels and investigating authorities. Investigating authorities are charged, under the Anti-Dumping Agreement, with making factual determinations relevant to their overall determination of dumping and injury. Under Article 17.6(i), the task of panels is simply to review the investigating authorities' "establishment" and "evaluation" of the facts.'

Accordingly, we do not think that the US — Hot-Rolled Steel case stands in the way of passing clause 12 of the Bill.[23]

1.74      The ACTU's response continued;

Nothing in clause 12 of the Bill is inconsistent with the WTO rules set out above.

Even if passed:

• Customs will still have to notify affected foreign governments of receipt of a complaint (s.269TB(2B));
• Customs may still reject the complaint if there do not ‘appear to be reasonable grounds’ for making the complaint (s 269TC(2));
• After accepting a complaint, Customs must still provide foreign firms (and domestic importers) with an opportunity to put their case (s 269TC(7), (8));
• If foreign firms (and/or governments) provide a response, this may suffice to rebut the presumption that clause 12 of the Bill would impose, and satisfy Customs that no dumping or subsidisation has occurred;

The only change will be that if foreign firms (and/or governments) fail to provide a sufficient response, Customs will have express authority to rely on the ‘facts available’, including any material in the complaint which is safe to rely upon) in coming to conclusion that dumping and/or subsidisation has occurred.

Indeed, we note that it is arguable that this is already the position under Australian law.

Currently, the Minister may impose a dumping or countervailing duty if he or she is ‘satisfied’ that dumping or subsidisation has occurred (s.269TE, 269TG). According to rules of administrative law, the Minister does not need perfect information before he or she can come to a state of ‘satisfaction’; it suffices if they have sufficient evidence in order to form a reasonable satisfaction that the matter is established on the balance of probabilities.

Accordingly, in our view, even without the amendments proposed by clause 12 of the Bill, the Minister can act on the ‘facts available’ in cases where the foreign firm does not provide any countervailing evidence. However, we support the amendment as it puts the Minister’s powers beyond doubt.[24]

1.75      A rebuttable presumption of dumping goes to the factors causing injury. At the public hearing on 4 May 2011, the Committee heard evidence about the way causation is assessed.

Mr Percival: Certainly the test in the legislation is: is dumping occurring? If the answer to that is yes. Is the local industry incurring injury in either a price related form or a volume related form—and I can go into that in more detail? If the answer to that is yes. Then you ask if the injury is material, and that is a pretty generally subjective assessment. Then you ask: how are the dumped imports causing the injury? Normally there would be two ways in my view that it would be doing that. You look at the dumped imports. Say, they are coming in at a dumping margin of $10, so instead of $100 they are coming in at $90, and they are undercutting the Australian industry prices by $10. That can affect the sales volumes. If they are losing sales volumes then they are obviously losing profits and profitability, so that flows through the chain. The other way it can have an effect is through price depression so the Australian industry drops its price from $100 down to $90. Presuming the market still sells the same volumes it still has a price effect because it is losing profits because it is not making the extra $10 it would otherwise make. That is how you track it through. You can do it. That answers your question. That is the causal relationship. If there is something else happening in the market— [25]

Senator XENOPHON: But isn't the predominant issue whether you are selling goods in this market below what you are selling them for in your home market?

Mr Percival: No. That is only half of it. You still have to show that there is material injury caused by that low pricing. To import goods at dumped prices is not unlawful, illegal or actionable so long as it does not have an adverse effect in the form of material injury to the local industry.[26]

Senator XENOPHON: In the CSR case of float glass, with JELD-WEN on the other side, there was an initial statement of facts in relation to that, but in the end Customs decided not to proceed with it. In fact, the statement of essential facts found that dumping occurred and material injury occurred, but the decision was changed in the determination report. They could not determine material injury. Where are the flaws in the current system in determining material injury? Where does it fall down in a practical sense?

Mr Willox: That is a very good question, because often the concern is how 'material injury' is defined. What is the definition here? Is it through loss of market share? Is it through loss of employment within an operation? Is it loss of ability to compete in the future, because once a new price—a new, lower 'dumped' price—has been established, does that then become the market norm? And what is the multiplier impact on your business as a result of that? There are always fundamental, undefined answers around questions related to what material injury is. We have seen a couple of instances in which dumping was found to have occurred but material injury was not found to have taken place. It always leaves those affected more than bemused—and often downright angry—that a finding can be made that dumping has occurred but that it has not materially impacted on the business in Australia. At a time when competition is tight, that sort of finding is befuddling. The WTO agreement does not define material injury. It gives some factors that it might involve, but at no point does the definition of material injury under the WTO prohibit the impact of dumping on capital investment and jobs—among other factors—as being material to an impacted party's interests. That is where an issue for us such as the impact on an organisation's ability to employ skilled people should be very much taken into account as a material factor in determining a dumping claim.[27]

1.76      In our view, the creation of a rebuttable presumption of dumping in cases where the dumping is proved and material injury is established is a sensible development. It need not necessarily preclude Customs from investigating other factors that may cause material injury to the domestic industry in accordance with Article 3.5 of the Anti-Dumping Agreement. Indeed, a rebuttable presumption would encourage those who wish to rebut a presumption of dumping to put relevant material before Customs as part of its rebuttal.

1.77      A rebuttable presumption of dumping would also militate against injury caused by the dumped import during the investigation period which the Committee is recommending be extended in the interests of improving the system's effectiveness.

Recommendation 4

1.78      We recommend that notwithstanding the Committee's doubts about the effectiveness of the specific amendment proposed in Senator Xenophon's bill in relation to a rebuttable presumption of dumping, the Government in considering reform of the system, continue to give consideration to a workable rebuttable presumption of dumping or a similar mechanism that will facilitate action against dumping.

Customs resourcing of anti-dumping and countervailing investigations

1.79      Almost all the submitters to the inquiry were of the view that Customs and Border Security, while doing an admirable job with the resources it has at its disposal, is in need of additional resources to investigate anti-dumping and countervailing applications.

Dr Silberberg: By way of a positive observation, my recollection is that the Productivity Commission did recommend that under the new anti-dumping system that they were advocating there would be a requirement to look at the resourcing of the relevant agencies involved in the administration of the anti-dumping and countervailing system. I think it is fair to say that there is a level of unanimity of view about that proposition.[28]

Mr Hudson: ...Another thing we mentioned in our submission was perhaps working with other government bodies and with the ACCC. This is without, in any sense, suggesting that Customs and Border Protection do not do a terrific job; I think Andrew and I are both firmly of the view that they do a terrific job within the parameters of the legislation and the resources they have. They should certainly have more resources.[29]

CHAIR: There has been some criticism of the way Customs operates during anti-dumping investigations. What is your view of the way Customs operate?

Mr Willox: We start from the premise that the system in itself is not fundamentally broken but can be improved dramatically. A key component of improving the system is better staffing, resourcing and skilling of Customs to get proper and adequate skills, particularly in terms of skills in accounting and analysis, forensic accounting, language and the like so that they can address claims in a much more expeditious and timely manner. A lot of concern is around the time that it takes for claims to be investigated, which is often up to 18 months for claims to be worked through, before there is any adjudication and then there is the review process on top of that. It is a timeliness factor and the ability of Customs to get to the heart of what are, quite often, complex cases quickly. Those are the sorts of concerns that are put forward.

CHAIR: One of the bills we are dealing with, which is Senator Xenophon's bill, seeks to insert a requirement that Customs consult with independent experts. Is that your view of the way it could work or do you think it would be better to include those experts within Customs?

Mr Willox: We think that there should be the ability to consult independent experts from outside Customs. Basically, there is a strong concern at the moment that relative industry expertise in either the application of the investigation or the review process is not taken into account. We would very much support the provision or the ability for there to be consultation with outside industry experts as part of the investigation review process. This could be with people who not only are Australian but also are offshore, if they have relevant skills, expertise or knowledge to bring to the table. What we think that does is to bring forward outside views to allow Customs to maybe think much more widely and perhaps globally in how they manage these cases and these claims as they go forward and to seek other input from people who may have information to bear.[30]

Senator CAMERON: Mr Willox, the other proposition that has been put to me is that one of the weaknesses in Customs is that it does so few investigations into dumping that the expertise in the organisation is not of world standard; it is not international best practice. I am not having a go at the officers who are tasked to do this but it is a serious question as to whether Customs does have the experience, the expertise and the resources to actually do an investigation to the same level as it would be done, say, in the United States. Do you have any comments on that?

Mr Willox: Like you, Senator, I sit here and I cast absolutely no aspersions on the ability of people who operate within Customs and who work on these cases. They do as good a job as they can, given the circumstances and the constraints they face. We would argue that, with greater resourcing and better resourcing in terms of skills, these cases could be handled much more quickly and diligently. There could be greater understanding between Customs and the differing parties—the applicant and the defendant, as it were—in order to work through these cases quickly.

You go to a very clear point, Senator: we do not launch that many cases in Australia compared with elsewhere in the world. In part that is because of the cost and it is also, in part, because of a lack of confidence in the system and those who are charged with overseeing the system, and that is driven a lot by the lack of resources and skills overall within that area of Customs to handle these cases quickly.[31]

Recommendation 5

1.80      We are strongly supportive of proposals to significantly increase the resources of Customs and Border Security available for anti-dumping and countervailing investigations and we also recommend necessary changes to the system to encourage wide consultation between Customs and Border Protection and industry experts in the conduct of dumping and subsidy investigations. Further the Government should continue to monitor the adequacy of resources and the expertise that is necessary to ensure better and quicker decision making.

 

Senator Doug Cameron Senator for New South Wales

Senator Louise Pratt Senator for Western Australia

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