The Australian reports on the Coalition’s latest pro business, anti consumer policy:
TRADE measures are being prepared to defend Australian companies against cheap imports as Tony Abbott backs calls to toughen existing laws despite the risk of retaliation from other countries.
The federal government is working on the stronger regime to punish overseas suppliers who dump their products on the Australian market at below cost, sharpening measures that would push up the retail price of the imports.David Crowe
The above is an example of how the Coalition aids vested interests at the consumer’s expense. This policy may as well have come out of the Labour or Green play-book. Just as Clive Palmer only supports free and open markets when it helps his exporting business, the Coalition is more than willing to fall back on the same mercantilist ideology to gain political power at the expense of competition and consumer well-being.
I have written before on why having the support of business does not mean the policy will result in a net gain for consumers and in fact often results in the opposite. This new “anti-dumping” legislation is more of the same: it will raise prices for consumers while protecting local producers who cannot compete, creating a net loss for the Australian economy (especially once enforcement costs are included). It will also be used opportunistically by domestic firms to stifle legitimate foreign trade.
There’s a great paper by Greg Mankiw on the futility of “anti-dumping” regulation and how the costs of the unintended consequences outweigh any benefits it might confer to special interest groups. But if you believe in mercantilism, it still makes perfect sense. Domestic industry must be protected and exports must be encouraged no matter the cost, as exports are somehow more beneficial than regular, domestic sales.
What matters most for an economy to be able to deal with any such games played by foreign competitors is how efficiently they can adjust to changing market conditions. In the rare scenario of true “dumping”, flexibility in labour and capital markets will do more to assist domestic production and consumption than any “anti-dumping” regulation will.