Forget a petrol excise holiday, consider the peaches

Dr Eric Crampton
5 February, 2023

When the government says reducing living costs is its highest priority, it seems a bit crazy to impose punitive anti-dumping duties on imports.

And yet, here we are.

Last year, around the same time that the government set a rather ill-considered rebate on road user charges and petrol excise, it did something more sensible. It suspended the anti-dumping duty that applied to coated steel roofing products from a few Korean manufacturers. And it then extended the suspension through to the end of the year.

It made sense. Holidays on petrol excise require finding money elsewhere to fix flood-damaged roads. They just change who pays the bill and put more burden on poor people who drive little. But punitive tariffs on foreign goods aren’t there to raise revenue. They mainly discourage imports. Getting rid of them helps.

On the first of January, duties of up to 12.6% came back. Our new Prime Minister re-upped the petrol excise holiday but didn’t touch anti-dumping duties.

It isn’t just roofing steel. Galvanised wire from Malaysia and China, preserved peaches from Spain, and canned peaches from Greece and South Africa are also hit. Preserved peaches from China are currently under investigation for duties too.

The theory behind it all is just a little implausible.

The government sets anti-dumping duties when it thinks that a foreign company is selling products here below the price charged in its domestic market. So it isn’t a predatory pricing argument, which would come in if products were being sold below cost. But even a predatory pricing argument would be fraught.

Imagine some very large foreign company could undercut a New Zealand business, run them out of business, then jack up prices. Duties might then help protect competition.

But think about the goods attracting these duties. Steel is durable. Canned peaches can last for years. If a foreign company really were trying that one on, what would stop the Kiwi company from buying up as much of the cut-price product as possible? They could store it, then sell it at a profit when the foreign company finally gave up.

It gets worse when we remember that those foreign companies also have competitors. If one company took short-term losses in hope of setting higher prices here later, what would stop any of its thousand-odd international competitors from swooping in later?

Finally, does it seem all that likely that the governments of South Africa, Spain, Greece, and possibly also China, are running subsidy schemes for peaches aimed at cornering the New Zealand market – and have been doing so for years? Anti-dumping duties on South African peaches started in 1996 and were reviewed in 2001, 2007, 2013, and 2019.

If New Zealand canned peaches have to be protected for 27 years against South African imports, maybe the problem isn’t South African peaches – or ones from Spain, or Greece, or China. Maybe the problem is that New Zealand just isn’t all that cost-competitive in peaches. Protection should be lifted, letting Kiwi farmers and processors focus on areas where they have a comparative advantage.

Isn’t it a little incoherent for New Zealand’s trade representatives to complain about foreign tariffs aimed at protecting foreign dairy farmers against New Zealand’s pastoral advantages when we do the exact same thing every few years to protect New Zealand peaches?

Policy here seems designed to protect existing New Zealand competitors rather than competition or consumers.

You have to laugh at the absurdity, or at least I have to.

One part of government runs an investigation into why building materials are so expensive while another part of government sets a 12.6% duty on roofing steel.

At the same time as the government blames supermarkets for high grocery prices, it maintains a 34% duty on canned peaches from Greece – and other duties on peaches from other places.

This is a cross-party problem. Recall that in June 2011, when Christchurch needed an awful lot of building materials, the National government set punitive duties of up to 110% on wire nails from China. When the government should have been thanking foreign suppliers for providing materials at low cost, it instead imposed taxes that inflated the cost of the rebuild. It took until 2014 to suspend anti-dumping duties on plasterboard and other building materials.

There aren’t a lot of things that the government can do to really reduce costs in a hurry – or at least not many that make sense. Suspending petrol excise just means that taxpayers more generally wind up having to top up the National Land Transport Fund to build and fix roads.

But abandoning misguided antidumping duties could be done at the stroke of a pen. It would provide immediate benefits to consumers in areas that the government has already identified as important. And it would make New Zealand’s trade negotiation position more coherent.

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