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Economics Legislation Committee
04/05/2015

GIBBS, Mr Alan, Secretary, Manufacturers Trade Alliance

LEE, Mr Bernard Daniel, Manager, Industry and Government Affairs, Nufarm Limited

CONDON, Mr Matt, Representative of Arrium, Manufacturers Trade Alliance

[10:12]

ACTING CHAIR: I welcome representatives from the Manufacturers Trade Alliance. Do you have anything to say about the capacity in which you appear today?

Mr Gibbs : I work for BlueScope Steel, so I am BlueScope Steel's representative on the Manufacturers Trade Alliance.

Mr Lee : I am the industry and government affairs manager for Nufarm Limited, a member of the Manufacturers Trade Alliance.

Mr Condon : I am Arrium OneSteel's representative on the Manufacturers Trade Alliance.

ACTING CHAIR: Thank you very much for appearing today. We have received your submission and your supplementary submission as well. We have marked them as submission No. 5. Do you wish to make any adjustments to those submissions?

Mr Lee : No, we do not.

ACTING CHAIR: If you would like to, you now have the chance to make a short opening statement to the committee.

Mr Lee : I will ask the committee. We can table our statement if preferred, to save time. I can give you basically a quick precis, I suppose.

ACTING CHAIR: We have about half an hour for questions. I am happy to ask other committee members. Would you prefer to go straight to questions or have an opening statement?

Senator XENOPHON: Sure, but if there is a statement—

Mr Lee : I will just introduce us and basically—

Senator XENOPHON: Is there a copy of the statement that we can quickly photocopy and refer to?

Mr Lee : There is, yes.

Senator XENOPHON: Could you pass it to the secretariat, thank you.

Mr Lee : Firstly, I would just like to thank you for the opportunity to appear before the committee today representing the Manufacturers Trade Alliance, with my fellow members. The alliance—we will refer to it as the MTA—brings together large and small Australian manufacturers and producers from the chemical, paper, agricultural, food, steel and cement industries in an informal forum to give feedback to government on the effectiveness and efficiency of the antidumping system. Our feedback is based on our experience and our members' experience of direct involvement in the antidumping system as Australian industry applicants under that system.

Basically, the bills before the Senate at the moment are aimed at improving the antidumping system to be consistent with Australia's trading obligations. In introducing the bill, the government has stated its commitment to ensuring that our antidumping system allows Australian industry to compete on a level playing field with companies from around the world, so we welcome that.

In terms of our submission, there are five or six issues that we really wanted to address. The first is the change to the deadline for submissions by interested parties. We support the change to 37 days from 40 days. We would like to see one further clarification on that, though. We think that that requirement should be for what we call a fully compliant submission, being a submission that contains both the confidential aspects of the questionnaire that the ADC has asked for and also a public file version of it. We have had some discussions with the department about the concept of having extensions to that 37-day period. We can see scope for some very small increases in that period, of seven days, but not wholesale exemptions or extensions. We are concerned about that.

We also have some concerns about the changes to the definition of subsidy, which the unions referred to earlier. We probably share very similar concerns. We are not quite sure why the changes are being made and we think they place an additional burden on Australian industry and on the Anti-Dumping Commission. We also share their concerns about the issues of notification of subsidies. The amendments potentially allow noncompliance with WTO obligations by extending the period over which people have not notified subsidies.

In terms of the antidumping review panel, we support the changes to the review panel to raise the threshold and raise the bar for reviews. At the moment reviews are very simple to get and we think there should be some hurdle in that regard. In terms of fees for the antidumping review panel, we do not support those. We see them being manipulated to the disadvantage of Australian industry. Because the fees have a tiered structure, a higher fee will be imposed the more people you employ. On that basis, Australian manufacturers will be paying the highest fees.

In terms of the lesser duty rule, we do not think the lesser duty rule should exist at all. We are not quite sure why there is a lesser duty rule. We realise that there is provision for it under the agreement, but we would prefer to see it not applied at all. We can go into more detail on that.

In closing my opening statement, which has been a little bit longer than brief, we welcome the changes and we welcome the government's, the opposition's and the parliament's commitment to strengthening the antidumping system for Australian industry. We think it is crucial that we have fair and open trade. Fair and open trade is vital to the future of Australian manufacturing, Australian agriculture and Australian food production. Australian manufacturing makes a vital contribution to the prosperity of our economy and to our nation and it is very important that it be supported.

CHAIR: Thank you very much. I have a couple of quick questions on the fees you mentioned. What sorts of fees are we talking about there? Do you have ballpark figures for us on the costs for Australian manufacturers to go through this process?

Mr Lee : I think the fee that we have heard mooted was a $1,000 fee and up to a $10,000 fee.

Mr Gibbs : Up to $10,000.

Mr Lee : A $10,000 fee would be for companies that have large bodies of employees, which generally speaking would be Australian manufacturers.

Mr Gibbs : We think very large exporters should pay that fee, but what will happen in a practical sense is they will lodge an application on behalf of the very small mum and dad importers that they use. So essentially you will have a small business in Australia that is an importer acting on behalf of a larger exporter and only paying a small fee.

Senator XENOPHON: A Trojan Horse.

Mr Gibbs : Correct.

Senator XENOPHON: In this case it would be a Trojan pony.

Mr Gibbs : So that is what would happen. It is probably not intended—I think the intent is correct—but I think in practical terms it would be difficult to apply it equally.

ACTING CHAIR: So is the concern not so much the size of the fee itself but the distribution of it or the potential gaming of it by exporters?

Mr Lee : In a sense, you are right. The point is that the antidumping systems aim to address unfairness, and arguably this fee structure would impose some degree of unfairness.

ACTING CHAIR: Could you explain the lesser duty rule and your concerns about it?

Mr Lee : On the issue about the lesser duty rule, I will just go to a very basic concept: that the system has a lack of symmetry. That is how I would explain it. What we do with the lesser duty rule is that we basically allow a government body to determine what price an individual company or a series of companies of complainants should be allowed to sell their goods for in the Australian market, and as a result there is, I suppose, price control, in a sense. The problem with that is this. Even with antidumping measures imposed, parties that import goods and pay antidumping measures go through final duty assessments, and they are entitled to get a refund of any excess dumping duty that they have paid. The problem is that, if the right dumping duty has not been paid up-front, Australian industry has no ability to go back and get any greater duty. So, if the wrong duty is collected at the start, the damage is done and Australian industry cannot get an increased measure, but importers can get a refund of any excess measure.

Senator XENOPHON: As a question supplementary to yours, Chair: what do you say, Mr Lee, should be done?

Mr Lee : We would prefer to see Australia do what other countries tend to do, and that is: not apply a lesser duty rule—that is, apply the duty at the full extent of the margin that is established in an inquiry—and if, through the course of a duty assessment, that provisional or interim duty is seen to be too high, there is scope for some form of refund. So that is the problem we have: in essence, we established that there is dumping, we established that there is injury, we established that there is a measure required, and then, basically, the commission determines what that measure ought to be. In determining what that measure ought to be, the commission is actually working out what Australian manufacturers should be allowed to sell their products for, and we think that that is not a desirable outcome.

ACTING CHAIR: Thanks, Mr Lee; that is a lot clearer to me. Senator Carr, did you have questions?

Senator KIM CARR: Yes, thank you. How long has the Manufacturers Trade Alliance been around?

Mr Gibbs : We have had two meetings. We are in our infancy.

Senator KIM CARR: Why was it formed?

Mr Gibbs : Essentially, a group of manufacturers like us that are applicants to the antidumping system felt that it would be a good initiative to actually take charge of communications from industry applicants, to be able to communicate with government.

Senator KIM CARR: Why would you not be able to rely on the normal, established trade organisations to do that?

Mr Gibbs : The antidumping system as a whole is a very complex system. The AiG and others have a range of things they have to manage. We just decided, after having discussions, that we wanted to be a one-show pony—

Senator KIM CARR: Fair enough.

Mr Gibbs : with a single focus.

Senator KIM CARR: There have been a number of groups formed to defend manufacturing, from the employer's side, in recent times, and I am very pleased to see that you are actually taking these steps, because government often hears a very narrow range of voices on these issues. How do you think the International Trade Remedies Forum should function?

Mr Lee : We were members of the International Trade Remedies Forum. I was a participant in it through PACIA, because PACIA was a member—that is the Plastics and Chemicals Industries Association. We think that the forum was an effective voice. It did some very effective work—some of the work around some of the working committees that it had—and made some positive changes. As we heard earlier today in the evidence from the unions, there are still issues around particular market circumstances and how normal values are established in that circumstance. As a group, we are quite comfortable with having the International Trade Remedies Forum or any other forum of consultation. The most important thing to us is that there is an effective mechanism for communicating, that it is transparent and open, and that we have a voice and a place to be heard.

Senator KIM CARR: Where you opposed to the unions being involved in a forum?

Mr Lee : Not at all.

Senator KIM CARR: Were they a useful contributor?

Mr Lee : Absolutely.

Senator KIM CARR: As far as you were concerned, the forum overall was an effective mechanism to hear industry views on trade dumping issues?

Mr Lee : The forum was a very effective mechanism for airing situations and views. One of the problems, I suppose, with the forum was that it generally tended to run on a consensus model. So when you have disparate views in a room it is very hard to get consensus on everything. But having said that, certainly many of the major issues confronting industry, unions and importers were tabled at the forum.

Senator KIM CARR: But surely if you are at a forum and even if there are divergent views, that is useful too—the department and the minister would hear of the fact that they are different points of view.

Mr Lee : Absolutely.

Senator KIM CARR: It does not change the validity of the forum itself, though, does it?

Mr Lee : No.

Senator KIM CARR: You mentioned the question of the Anti-Dumping Review Panel. I take it there is nothing further to be said on that matter as far as you are concerned?

Mr Condon : One point of clarification would be that the size of the fee for Australian industry being nominated by the department is $10,000 per application. In the current format as it is proposed, Australian industry is unclear as to what the hurdles will be. So it is quite possible you could pay your $10,000 fee and then have it rejected without the ability for the review to progress.

Senator KIM CARR: So is there a question about having to pay for access to justice here?

Mr Condon : I guess it is the equality of it, as we have mentioned before. So the way it is currently proposed there is potential for it to be gained but then there is also, too, the size of the fee, the potential that you could pay it, and then the review panel would not proceed to an investigation.

Mr Gibbs : If I could jump in for a minute, if the intent is to remove frivolous claims and extend out the measures, so any move to raising the bar so that any review is on a fair dinkum basis, for want of a better word, that is certainly supported and I think that is the way to go.

Senator KIM CARR: So you support the idea of a fee to prevent frivolous—

Mr Lee : No, we support the idea of a threshold series of questions to get to a review process.

Senator KIM CARR: I want to clarify that issue. You are obviously concerned about the high procedural illegal threshold for reviews. Is there a need to prevent frivolous applications?

Mr Lee : Yes.

Senator KIM CARR: What is the best way of achieving that?

Mr Lee : Basically I think requiring more from an applicant in terms of articulating the case as to why there should be a review.

Senator KIM CARR: So this is in the initial application process?

Mr Lee : Yes, as opposed to what we would describe as 'a postage stamp process'—send a letter in and you have the review, which obviously costs the government money in time and extending the investigations. In terms of seeking a review, we support the notion that a person seeking a review should be required to make a more substantial case for a review and probably identify where the errors are and how, if those areas were corrected, a different finding may result.

Senator KIM CARR: Can I turn to the question you raised in your briefing from the department on 21 April. You said you were seeking further clarification of the definition of a subsidy. Do you mind advising the committee as to any update on that briefing and can you outline any concerns that you think have been brought to light as a result of that process?

Mr Condon : What Australian industry was concerned about in relation to clarification of clarification of the definition of a subsidy is why it appears to impose an additional burden on both the commission and Australian industry to validate a government payment, so where a government is giving a grant to an organisation, how that confers a benefit. Currently our understanding is that Australia's definition of a subsidy is WTO compliant and this amendment will impose a further burden during investigation of both Australian industry and the commission. We had a briefing with the department and, following that briefing, it was not any clearer as to why it was needed. What we are not aware of is how the interests of any Australian industry have been compromised based on the current wording of our legislation and, therefore, why this change needs to be made and why it strengthens the system.

Senator KIM CARR: What do you make of the proposition that has been put to us today that this is another trade-off for the free trade agreement?

Mr Condon : We have not yet seen the text of the China free trade agreement.

Senator KIM CARR: That is a very good answer.

Senator XENOPHON: Neither have we.

Mr Condon : So we are unable to see how that would play out based on the new wording and, for that reason, we remain nervous.

Senator KIM CARR: So it is plausible that there has been a trade-off here?

Mr Condon : Until we see the text, we really cannot answer that question.

Senator KIM CARR: You have asked for a few amendments. What happens if you do not get the amendments? Would you still support the legislation?

Mr Gibbs : Yes.

Mr Lee : The answer is yes.

Senator XENOPHON: Begrudgingly, in some respects?

Mr Condon : I think the subsidy one is where there is potential danger, given the impact of China not only in the steel industry but in other industries. If it were to compromise our ability to take effective measures against countries that are heavily subsidised, then it would be very difficult for us to sign off on something we are unaware of.

Mr Gibbs : In general, all the rest of the package—

Senator KIM CARR: This is the nature of our everyday challenge: at what point do you say that it is a bridge too far on this exercise? Your general view, though, would be that you would support the legislation, even if you cannot get these amendments? Is that what you are saying?

Mr Condon : We would be supportive of anything that strengthens the antidumping framework.

Senator XENOPHON: Through you, Acting Chair, can I ask a supplementary question to Senator Carr's question?

ACTING CHAIR: As long as Senator Carr is comfortable, that is fine.

Senator KIM CARR: Yes, I am finished. It is your call.

Senator XENOPHON: It is a supplementary because Senator Ketter may want to ask some questions. Further to Senator Carr's line of questioning, you are saying that, yes, on balance this bill should go through, but you are making some assumptions. Firstly, you are making assumptions that the fine details of the China FTA will not be detrimental to a particular extent, because that would throw your calculus out a bit, wouldn't it?

Mr Condon : Correct.

Senator XENOPHON: Also, there is the issue that was raised about the normal cost of goods that the CFMEU and other unions put in their submissions. I think we have until close of business tomorrow. That is at page 23, about determining a normal value when costs are unreliable. On page 24 is a very good discussion about what the Australian Industry Group has said. It makes reference to Commissioner Seymour, in terms of what his views are in relation to that. Could you elaborate—maybe not now, because of time constraints—on notice as to whether there ought to be some clarity around determining normal value?

Mr Lee : That is in a particular market circumstances situation?

Senator XENOPHON: Yes.

Mr Lee : That is some of the work that the ITRF was doing. We have a view on that.

Senator XENOPHON: Perhaps you could put it in writing.

ACTING CHAIR: Senator Xenophon, if you would like to ask additional questions, you are welcome to.

Senator XENOPHON: Perhaps you could look at the issue of the normal value and make suggestions with respect to that. There is a broader issue that cannot be covered by legislation, but you may wish to comment on it, in terms of levels of expertise and resources for the commission. Again, this is not a criticism of the commission per se, but it is an issue. You could have a beautiful framework, but it needs to have the resources to do its job. One of the amendments which concerns me is the need to take into account two industry participants that could be affected. In other words, an industry view takes into account more than one industry participant that is affected. Are you familiar with that? No. Okay. I might put that on notice while I look for my notes in respect of that. With the mandatory application of a lesser duty rule, would you consider that the criterion that Australian industry comprise of two or more small or medium sized Australian industry members unnecessary and should be reconsidered?

Mr Lee : Obviously, we made comments that we would prefer not to have a lesser duty rule at all.

Senator XENOPHON: You see the lesser duty rule as having the potential to cut against the grain of having an effective antidumping regime.

Mr Lee : Absolutely.

Senator XENOPHON: And it does have potential to weaken what we already have.

Mr Gibbs : It does. One of our members did have a case where he was the single SME within the industry.

Senator XENOPHON: Was this to do with solar?

Mr Gibbs : No, this was to do with steel. They were subjected to the fact of a lesser duty rule because they were the only SME in the industry, whereas the rules currently say that you have to have at least two SMEs not to consider the lesser duty rule. Because there was only one company, the ADC were then beholden by the current rules to consider the lesser duty rule, and they actually applied it.

Senator XENOPHON: It is not a criticism of ADC.

Mr Gibbs : No; it is just the way that it has been written and they are required to then consider it, which they did.

Senator XENOPHON: How did that affect Tindo Solar, which is involved in a battle at the moment over duties? They are the only manufacturer, basically.

Mr Gibbs : With the way it is currently written, the administration has to take consideration of whether they will apply a lesser duty rule or not. They do not get a choice not to.

CHAIR: My reading of the changes in this bill is that they just clarify the application of the lesser duty rule. Are there any substantive changes to the rule in this bill, or is it something that is a longstanding principle in Australia's antidumping framework?

Mr Lee : Do you mean the application of the lesser duty rule?

CHAIR: Yes. Are there any substantive changes to that rule in its detail, application and extent? In the explanatory memorandum, as I read it, it clarifies the rule. I am trying to understand what action is going to change or could change.

Mr Lee : I do not think it is substantially changing the application of the rule.

CHAIR: Your evidence to this committee is that it is a longstanding issue. Your alliance has only been around for a couple of months, but this rule is a longstanding issue for your members and you would like to see changes to it to make it similar to what other countries apply. Is that the evidence you are providing?

Mr Lee : That is correct.

CHAIR: Do other senators have any other questions?

Senator XENOPHON: Is it possible for you, on notice, to elaborate on those matters raised? And, if so, could we can get them back from you by close of business tomorrow. Is that correct, Chair?

CHAIR: That is correct. We are on a tight time frame for this committee. Is that okay for the witnesses?

Mr Lee : Yes, that should be okay.

Senator KIM CARR: Good luck with the new alliance.

CHAIR: Senator Carr, do you have further questions?

Senator KIM CARR: I am just saying: good luck with the new organisation.

CHAIR: Thank you, Mr Gibbs and your colleagues. We appreciate your evidence and the submissions you have made to this committee. And good luck with your new organisation. Thank you.