Antidumping enforcement – Good for Jamaica
Unfettered free trade does not assure a country's economic growth and development goals. Profitable trade flows are required. To succeed
in international trade, countries must apply trade rules in their national interest with accuracy and dexterity.
On May 3, 2015, the Sunday Gleaner published an opinion piece from guest columnist Dr Kevin Harriott, economist and competition bureau chief at the Fair Trading Commission (FTC), titled "Anti-dumping enforcement bad for consumers". The article was riddled with inaccuracies and is a markedly deficient assessment of the impact of anti-dumping enforcement actions in the Jamaican marketplace. Some of the inaccuracies are addressed here.
Dr Harriott suggests that anti-dumping is a component of competition policy which is not consistently applied in Jamaica. This is not borne out in practice. Competition policy and anti-dumping law are distinct.
International trade remedies fall within the ambit of the World Trade Organization (WTO). The 161 WTO member countries agree on rules to discipline dumping, subsidies and unexpected surges in imports. On the other hand, interaction between trade and competition policy was removed from the WTO work programme in 2004.
Unchecked imports can decimate even a promising domestic industry. Simplistic application of domestic competition policy to international trade fails to address this. The interest of the Jamaican consumer in the long term is best served by a balance that includes the health of domestic industries.
The policy of Jamaica strikes that balance. Many of the most successful trading economies have exercised their prerogative to defend their industries using trade remedies.
The Anti-dumping and Sub-sidies Commission (ADSC), a portfolio agency of the Ministry of Industry, Investment and Commerce, is the investigative authority for international trade remedies in Jamaica. International trade remedies are border measures, by which countries can defend their industries for a prescribed period, forcing imports to compete fairly with domestic industries.
Consider this simple illustration adapted from an unknown author:
Jago Williams started the day early, having set his alarm clock (made in Japan). While his coffeepot (China) was perking, he shaved with his electric razor (Hong Kong). He put on a shirt (Sri Lanka), designer jeans (Singapore) and tennis shoes (Korea). After cooking his breakfast in his electric skillet (India), he sets his watch (Taiwan) to the radio (India), picked up his portfolio, (Italy), got into his car (Germany), filled it with gas (Venezuela) and continued his search for a good paying Jamaican job.
Consumers derive their ability to purchase goods and services from employment. Imports can represent a leakage of income from the economy.
According to Ministry of Labour statistics, manufacturers were the leading creator of jobs, by percentage, in Jamaica in 2014. If domestic industries dwindle, the economy's ability to grow and create jobs is stymied; resulting in a reduction in consumer welfare.
Conversely, thriving businesses save and engender employment and contribute to economic stability and growth. Domestic industries that remain in the market help to keep prices in check.
Dumping is the practice of selling a like good to an overseas market at a price below which it is sold in the market of origin. Dumping is considered to be unfair and can be disciplined when it causes or threatens material injury to the Jamaican industry making like goods. The comparison is between the price of the imported product in its home market (normal value) and the price of the product when destined for the Jamaican market.
The mere fact that the price to the consumer of an imported good is lower than the Jamaican-made good does not mean that there is dumping.
Examples used in Dr Harriott's article - airfares and barber shops - are inapposite for the analysis he has undertaken. Anti-dumping disciplines do not apply to services. The assertion that, "characteristics of the product are assumed to be comparable across consumer groupings" is wrong. Trade
remedy investigations require adjustments to prices according to real world data.
On two occasions, the com-mission was not persuaded that injury had resulted from dumping of imported cement. Where dumping does not cause or threaten injury, no measure is applied. An affirmative final determination results in a duty equal to or less than the percentage dumping margin for a specified period up to five years. The result is never: "measures to discontinue importation of the product in question."
A safeguard is used when an industry in Jamaica is seriously injured or threatened with serious injury by an unexpected surge in volume of imports of a good. It is distinct from anti-dumping. By mistakenly referring to an "anti-dumping safeguard", Harriott misses the distinction and incorrectly treats the determinations of the ADSC as though they were all the same.
Consumer welfare is not only about the lowest possible price for a particular good. An appropriate balance must be struck between the welfare of consumers and producers.
Examinations by the com-mission have often unearthed the curious fact that the lion's share of gains from dumped prices are not transferred to the consumer, but enrich the importer. It is therefore, frequently a fallacy that dumping increases the welfare of consumers by transferring the savings to them. Where dumping succeeds in driving a domestic industry out of operation, prices go unchecked by competition from that industry, leaving the consumer worse off.
Harriott's article demonstrates a lack of familiarity with the relevant facts. A glaring example is his assertion that "the measures resulted in an acute shortage of cement." This is manifestly not so. The record of several organisations would bear this out.
The determinations involving the cement industry stand on volumes of well-analysed records over many years and several cases. They involve issues that were resolved both in favour of and not in favour of the domestic producer, Caribbean Cement Company Limited; and the decisions have contributed to the welfare of the company.
Harriott refers to an FTC "independent investigation". FTC did not perform the same analysis as the ADSC.
ADSC uses business confidential information obtained from the parties in an investigation to perform a rigorous assessment of injury to the domestic industry. ADSC makes public its methodology in its Statements of Reasons; withholding business confidential information. It is not apparent that the FTC analyses complete information and its methods are unknown.
ADSC has gained international recognition for being a model of excellence in its field. It boasts a formidable multi-disciplinary team and the only trade professional in the Caribbean to adjudicate on Dispute Settlement panels in Geneva, Switzerland.
Jamaica must grow its way into a future of prosperity. Rigorous trade defence mechanisms are integral to the solution, especially as Jamaica courts a full-fledged logistics economy.
n Andrew Mighty is senior economist at the