What the global proliferation of anti-dumping duties means for businesses

Over the last four years, a lot of attention has been paid to various “trade wars” and their potential impacts on the global and New Zealand economies.  While international trade tensions are nothing new, what has been different over the last four years is the preferred types of trade weaponry being used, and the frequency of their use.

Anti-dumping duties are, by some margin, the most frequently used trade remedy available today.  This article examines their recent proliferation and considers the various implications for businesses, and most notably for participants in New Zealand’s residential construction sector.

What are AD investigations and ADDs?

An anti-dumping duty (ADD) is a protectionist tariff that a domestic government imposes on foreign imports following an anti-dumping (AD) investigation that determines those goods have been priced in its market below fair market value (i.e. ‘dumped’).  Simply put, dumping is the sale of goods abroad for less than the price the goods would have commanded in the home market.

While the primary intention of ADDs is to protect local companies from unfair competition and save domestic jobs, these tariffs can also lead to supply shortages and higher prices for domestic consumers.  With the global average ADD now adding more than 26% to the cost of importing a targeted product, it is not hard to see why the proliferation of their use is so controversial.[1]  In many cases, cost increases at this level render imports commercially unviable.

Based on our experience of representing clients in AD investigations conducted by the New Zealand, European Union (EU), United States (US) and Australian governments, there is a very significant difference between the laws, procedures, rigour and deference to World Trade Organisation rules applied by national investigating authorities.

ADDs are proliferating worldwide

Before the 1990s, the US, the EU, Canada, and Australia were responsible for more than 95% of all AD investigations.  Figure 1 illustrates that as more countries have adopted AD regimes, the total number of ADDs in force has increased by more than 600%, jumping from 264 measures in force in 1994 to 1,860 in 2018.

Figure 1. Total number of ADDs in force worldwide, 1994 – 2018 [2]

What countries and sectors are the primary targets?

China, the US and India are the top users of AD investigations and ADDs and are, likewise, the top targets of others’ AD investigations and ADDs.

As Figure 2 demonstrates, ADDs are imposed primarily on heavy industrial products from the base-metal and chemical industries.  Of that, steel exports are the number one target by quite some margin, which is hardly surprising given the significant market distortions that exist in that sector.

Figure 2. Total number of ADDs introduced by sector, 1995 – 2020 [3]

What is the New Zealand perspective?

New Zealand currently imposes ADDs on imports of galvanised wire from China and Malaysia, canned peaches from Greece and South Africa, and preserved peaches from Spain.

New Zealand’s application of ADDs on imports of residential building materials was suspended until 30 June 2019, in the interests of: promoting competition in the residential construction sector; lifting sector productivity; and reducing the cost of residential construction.  Since 1 July 2019, residential building materials have been treated the same as all other goods under New Zealand’s AD regime and therefore can be subject to an AD investigation, the Public Interest Test, and the application of ADDs.

The New Zealand Government is currently investigating whether to impose ADDs on imports of aluminium-zinc coated steel from Korea and Taiwan.  A flowchart MinterEllisonRuddWatts produced that details all of the key steps and deadlines in this investigation is available upon request. This is New Zealand’s 67th investigation since 1995, with the principal targets of those investigations being exports from China, Korea, Thailand, Indonesia and Malaysia.[4]

While New Zealand exports have only been the official target of another country’s AD investigation on 11 occasions in the recent past, New Zealand businesses are often impacted by foreign investigations that, at first blush, have nothing to do with them.[5] For example:

  • We are currently representing a New Zealand business and its Chinese contract manufacturer in US Government AD and countervailing duty investigations targeting their Chinese-manufactured exports to the US.
  • On occasion, ADDs imposed by foreign governments on third country exports can create new commercial opportunities for New Zealand exporters.  For example, last year, China imposed ADDs of up to 218% on Australian wine, which arguably created a significant opportunity in China for New Zealand wine exporters.

How we can help?

MinterEllisonRuddWatts represents manufacturers, exporters, importers and retailers throughout all stages of New Zealand Government AD investigations.  Members of our team have represented clients in more than 20 AD investigations concerning imports of canned peaches, compact fluorescent lamps, diaries, frozen potato fries and wedges, frozen strawberries, lawnmowers, modems, polyethylene terephthalate plastic, stationery, various steel products, and wind towers.  We most recently assisted a Dutch exporter to secure the successful termination of New Zealand’s AD investigation into frozen potato fries and wedges from Belgium and the Netherlands.

Footnotes:

[1] WTO Secretariat data on tariff rates, illustrated by Figure 5 available here.

[2] WTO Secretariat data on AD measures in force, reproduced here.

[3] Pie chart compiled using WTO Secretariat data on anti-dumping measures by sector, available here.

[4] WTO Secretariat data on anti-dumping Initiations by reporting Member vs exporter, available here.

[5] WTO Secretariat data on AD investigations by reporting Member vs exporter, available here.

Who can help