Safeguards and anti-dumping: Australia’s food processing industry seeks protection

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Safeguards and anti-dumping: Australia’s food processing industry seeks protection

Posted 15/08/2013 by Eugenia Karanikolas

In April 2013 SPC, the only tomato processor in Australia,   announced that it would cancel the contracts of around 60 fruit-growers in Victoria’s Goulburn Valley region; another 50 would have their orders reduced.

The company has been struggling since 2005 when it was bought by Coca-Cola Amatil for $500 million. The company’s management has described SPC’s performance as disappointing' , resulting in the decision to consolidate its three manufacturing plants into two and to write off more than $200 million of the company’s assets. Increased competition on the supermarket shelves from imported private labelled goods has resulted in the gradual decrease of the company’s market share, to its current level of around 30 per cent. Struggling to stay profitable and needing to restructure its operations, the company has asked the Federal government to impose duties on imported processed fruit and vegetables to give the industry some ‘breathing space’.

As a result there are currently four investigations into the processed fruit and vegetable sector. The Productivity Commission (PC) and the Anti-dumping Commission are the two agencies responsible for those investigations.

Specifically on 10 July, SPC requested that the new Anti-dumping Commission investigate whether canned tomatoes from Italy and canned peaches from South Africa have been dumped in to the Australian market. Dumping occurs when imported goods sold in Australia are sold at a price below that in the supplier’s home market. Dumping duties are imposed if the imports are found to cause or threaten to cause injury to the domestic industry.

The Anti-dumping Commission will conduct its investigation in accordance with the Customs Act which implements Australia’s obligations under the WTO’s Anti-dumping Agreement. The Commission will be looking for downward trends in such variables as the profitability of the domestic industry, its revenue, cash flow, market share and sales volumes. The final report is due by 12 December. Provisional measures can, however, be imposed before then if the Commission believes there is sufficient evidence to warrant them.

On 21 July, the PC was asked by the government to undertake concurrent public inquiries and investigate whether ‘safeguard action is warranted against imports’ of canned tomatoes and fruit. Safeguard measures are emergency measures and they take the form of tariffs, tariff-rate quotas and quota restrictions. Safeguards can only be imposed as a response to unforeseen increases in imports that have caused serious injury to industry. The PC will be guided by the requirements set out under the WTO’s Agreement on Safeguards and will be looking for ‘clear’ evidence by the industry that the increase in imports has been ‘unforeseen’. In particular, the evidence will have to show that the increase in imports has been ‘recent enough, sudden enough, sharp enough and significant enough’ to have caused or be likely to cause serious injury to the industry. The PC will publish a preliminary report by 20 September, and the final report is due by 20 December.

The key differences between safeguard measures and anti-dumping measures include:

  • safeguard measures cannot be applied to imports from a particular country or to specific suppliers. The measures are applied across the board and can affect all of Australia’s trading partners (some exceptions apply for developing countries and countries with which Australia has a free-trade agreement)
  • under the WTO rules if safeguard measures are imposed Australia must ‘give something in return’ in the form of trade concessions to affected exporting countries
  • the conditions that need to be met under a safeguard investigation are more stringent and the industry must meet a higher standard of proof
Safeguard measures are not commonly used. This is because of the higher standard of proof and the much wider impact they have on trade and therefore Australia’s trade relationships. Australia’s most recent safeguard inquiries were held in 1998 and 2008 concerning the pig and pigmeat industries. Neither resulted in the imposition of safeguard measures. In contrast, the anti-dumping system is used frequently by industry and anti-dumping duties are often imposed on imports. Australia’s food processing sector has been a heavy user of this system.

In terms of the current investigations, an initial look at the ABS import data (in value terms) shows in fact that whilst imports of the goods in question have been mostly trending upwards since 2007 the increase could not, given the data at hand, be described as sudden, sharp or even significant enough to pass the safeguard test.

Not surprisingly, Australia’s trading partners have expressed their views on these investigations. In their submission to the safeguard inquiry, the European Commission for instance said that it was ‘disappointed by the insufficient level of data’ presented to the WTO by Australia and had ‘strong doubts’ after looking at the import data that the increase in imports has been ‘significant and sharp enough to justify the imposition of safeguard measures’. The Government of Argentina argued that the conditions required by the Safeguard Agreement have not been met and asked for the investigation to be abandoned.

Furthermore, in their submission on the anti-dumping investigation, the EU and the Italian government have requested that the Commission remove all questions relating to ‘market situation’ (aimed at determining whether the price of the good in question has been artificially lowered because of government subsidies). They argue that the questionnaire breaches WTO rules, because it ‘improperly imports into an anti-dumping investigation questions concerning subsidies that can be the object only of a countervailing proceeding’. They conclude their submission by stating that the matter will be followed closely to ensure that the rights of the EU exporters under the WTO are ‘fully respected’.

Given this evidence it appears that the industry should have little trouble convincing the Anti-dumping Commission to impose duties on Italian canned tomatoes and South African canned peaches. Its chances, however, are less clear of getting the PC to recommend an increase in emergency tariffs of up to 45 per cent.

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