Business

Monday August 17, 2009

When anti-dumping defeats purpose of FTAs


YOUR report (StarBiz, Aug 10) on the acceleration of the time frame on the New Zealand and Malaysia free trade agreement (FTA) is encouraging news.

However, as indicated in the article, the signing of the FTA should herald greater trade opportunities between businesses in both countries.

For some local companies, the truth is sometimes far from it.

There is a Malaysian company that has been exporting paper stationery products such as exercise books, hard-cover books, and spiral- bound books (also known as case-bound stationery) to New Zealand for a number of years.

About three years ago, the largest stationery player in New Zealand filed a complaint of anti-dumping against the Malaysian entity. The NZ company virtually has a monopolistic position in its local market. The threat to local NZ suppliers or in this case a “monopolist” resulting in the loss of jobs was used as justification for the imposition of anti-dumping duties.

The case for anti-dumping is simply a numerical submission where the alleged export price is lower than the local prices. Allowances are supposed to be given for variations in substance or materials used, freight costs, finance costs, credit terms, and other related costs.

Another factor of contention is material injury to the local industry. In a competitive or free-market environment with many players of similar sizes, the trade impact can be seen across the board. In a monopolistic situation, price is not contingent on marginal cost but on marginal revenue. Where is the negative economic impact, if any? Does anti-dumping in this case improve net social welfare?

The irony is that the landed export price for Malaysian stationery could be higher than the export prices of suppliers from China and Indonesia. Will it be economically justifiable to call for anti-dumping protection for a “monopolist?” Where is the structural damage to NZ producers? Do Kiwi consumers have their say?

For certification of material injury, there has to be an upsurge in the exports with a corresponding sharp drop in local production. Who provides such numbers? Apparently, the aggrieved party or the complainant who stands to benefit most from the anti-dumping duties.

The discretion for adjustments to compute Normal Value (FOB prices) lies with the investigating authorities from the complainant’s government. For local small and medium enterprises (SMEs) to defend themselves against the charge of anti-dumping is no meagre task, which involves significant resource and pecuniary commitment.

Based on simple numbers, the accused “dumper” is already put in a defensive position at the onset. Evidence to extrapolate Normal Value can be accepted or rejected at the discretion of the investigating auditors. Is there impartiality in the equation? Your guess is as good as mine.

At the end of the day, it may not be worthwhile for the Malaysian SMEs to defend the charge. The irony is that the exports of the alleged dumped Malaysian products into NZ are a tiny fraction of the exports from Indonesia or China. It doesn’t matter as the guiding principle is that the so-called Normal Value is higher than the Export Price.

Who suffers? The obvious impact will be on the NZ consumers and the affected Malaysian exporters. While it is heartening to see the proliferation of FTAs, the government should raise such cases where anti-dumping is deployed as a guise for protectionism. In such instances, the spirit of the FTA evaporates.

Yeoh Seng Hooi

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