International trade has become the backbone of the global economy, where products and services move across countries to meet the needs of an increasingly global market. However, international trade does not always proceed fairly and equitably. Sometimes, price imbalances and trade practices considered unfair, such as dumping, can create tensions and trigger trade disputes. A clear example of such tension is the anti-dumping protectionism policy imposed by Australia on Indonesian A4 copy paper products from 2017 to 2020.
In this context, protectionism is used as a tool to protect domestic industries from trade practices deemed harmful. But, are the reasons used by Australia to impose anti-dumping duties on Indonesian A4 paper products justified?
Dumping is a practice where companies sell their products in foreign markets at prices lower than domestic prices or even below production costs. The purpose of dumping is usually to capture market share in the target country with cheaper prices, but this often harms local producers in the importing country. Therefore, the World Trade Organization (WTO) authorizes its member countries to implement protectionist measures, such as anti-dumping duties, to protect their domestic industries from dumping practices.
Australia, as a country with strict trade policies, often implements protectionist measures against various imported products. One of the most notable examples is the imposition of anti-dumping duties on Indonesian A4 copy paper products in 2017. This anti-dumping duties imposition was based on allegations that Indonesia was dumping these paper products, causing harm to Australia’s domestic paper industry, particularly Paper Australia Pty Ltd.
Paper Australia Pty Ltd claimed that Indonesian A4 paper products were sold in the Australian market at prices much lower than the market price, causing unfair competition and harming local producers. Based on this claim, Australia decided to impose anti-dumping duties of 35.4% on PT Indah Kiat Pulp & Paper Tbk and 38.6% on PT Pindo Deli Pulp and Paper Mills, two leading paper companies from Indonesia.
This article analyzes five protectionism variables used by Australia to support the anti-dumping duties policy: National Defence, Balance of Payment, Employment, Infant Industry, and Level Playing Field.
National Defence
National defence is often cited by a country to protect strategic industries deemed important for national security. However, in this case, the A4 paper industry is not considered crucial for Australia’s defence and security. Official documents such as the 2016 Defence White Paper and the 2018 Defence Industrial Capability Plan do not mention the paper industry as important for national security. Therefore, this variable is not considered a primary reason for imposing anti-dumping duties on Indonesian A4 paper products.
Balance of Payment
The balance of payments records all economic transactions between one country and another over a certain period. Trade balance deficits often become a reason for countries to implement protectionist policies. In this case, Australia was concerned that cheaper imports of A4 paper from Indonesia would worsen their trade balance deficit. However, research shows that protectionism aimed at reducing trade deficits is often ineffective because import restrictions can also lead to a decline in exports.
In this case, Australia experienced a significant decline in the volume of its paper exports to Indonesia, while imports of A4 paper from Indonesia continued to increase. Data shows that Australia’s import value from Indonesia increased significantly from 2010 to 2020, prompting Australia to impose anti-dumping duties to protect its domestic paper industry.
Table 1. Australian Paper Domestic Sales over the investigation period. Source: Consideration Report Number 341
| Period | AP Sales | Dumped Imports | Other Imports | Total Imports |
| 2011 | 89,83 | 102,67 | 218,5 | 100,0 |
| 2012 | 82,28 | 117,0 | 86,3 | 96,1 |
| 2013 | 80,66 | 139,9 | 47,2 | 102,6 |
| 2014 | 77,45 | 143,5 | 92,6 | 104,0 |
| 2015 | 75,90 | 133,6 | 88,5 | 99,1 |
Picture 1. Australian A4 Paper Market. Source: AD Commission Australia
In the table and figure above, it can be seen that Australia’s sales have significantly declined each year, while the sales of imported goods at dumping prices have increased annually.This has caused Australia to suffer losses by losing its market share. The annual volume of the cut-sheet paper market in Australia remains relatively flat. The lack of market growth in cut-sheet paper sales has led Australia to increase sales volumes to compete for market share. Cut-sheet paper sales in Australia are primarily directed to major retailers or resellers such as Fuji Xerox, Staples, OfficeMax, Lyreco, Wesfarmers, Woolworths, Australia Post, and BPGI (Business Product Group International). Paper manufacturers will, of course, gain market share by supplying these large resellers.
It is also known that imported paper products from Brazil, Indonesia, Thailand, and China control 52% of the Australian market.
Unlike Indonesia’s cut-sheet paper production, which has grown beyond domestic demand and boasts impressive export figures, even in Asia and Australia. This overcapacity has enabled Indonesia to seek opportunities in export markets by offering nearly all prices while protecting domestic market prices to remain overall profitable. This has led to extreme capital intensity in Australia and high industry costs, driving up wholesale office paper prices in Australia and continuing to affect local Australian production. As a result, the growth of import volumes in the domestic Australian market poses a continuing threat
Employment
One of the reasons put forward by Australia in imposing anti-dumping duties is to protect jobs in the domestic paper industry. Paper Australia Pty Ltd claimed that imports of A4 paper at dumping prices from Indonesia caused a decline in their sales volume and market share, ultimately leading to a reduction in their workforce. However, further analysis shows that this workforce reduction was more due to internal company restructuring than the direct impact of cheap paper imports. Therefore, this variable is considered to have limited influence in supporting the anti-dumping duties policy.
Infant Industry
New industries often lack the production efficiency and technology to compete with more established industries, thus requiring government protection. In this case, Paper Australia Pty Ltd, although not a new industry, felt the need to be protected from competition with cheaper imported products from Indonesia. They claimed that without AD duties protection, they would not be able to compete fairly in the domestic market.
Australia argued that imposing AD duties on Indonesian A4 paper products was necessary to protect its vulnerable domestic paper industry. However, the WTO eventually ruled that Australia’s actions were not entirely in line with international trade rules, as Australia did not use data from Indonesian companies as the basis for determining normal prices.
Level Playing Field
This variable refers to efforts to ensure that competition in the domestic market is fair and equitable. Australia accused Indonesia of subsidizing its paper producers, causing Indonesian A4 paper prices to be very cheap in the international market. This accusation was based on the existence of “certain market situations” in Indonesia that Australia considered abnormal.
However, research shows that this accusation was not entirely proven. Indonesia successfully demonstrated before the WTO that they did not provide subsidies that violated international trade rules. The WTO then ruled that Australia violated several articles in the General Agreement on Tariffs and Trade (GATT) 1994 and declared Indonesia the winner in this dispute.
The imposition of AD duties by Australia on Indonesian A4 paper products had significant impacts on both countries. For Indonesia, this policy caused a sharp decline in A4 paper exports to Australia, harming Indonesian paper companies. Meanwhile, for Australia, this policy was expected to protect its domestic paper industry from unfair competition, although it was eventually declared in violation of international trade rules by the WTO.
This trade dispute also has broader implications for trade relations between Indonesia and Australia. Although the dispute was resolved in Indonesia’s favor, the tensions during the dispute process could affect future trade relations between the two countries.
The anti-dumping protectionism policy imposed by Australia on Indonesian A4 paper products was based on a combination of several factors, including concerns about the trade balance deficit, job protection, and efforts to create a level playing field in the domestic market. However, these reasons were not entirely proven and were eventually overturned by the WTO.
The trade dispute between Indonesia and Australia over the AD duties policy is a clear example of how political and economic dynamics can influence international trade policies. This research provides deep insights into how countries use protectionism as a tool to protect their domestic industries and the impacts of such policies.
The WTO’s decision in favor of Indonesia in this dispute shows that protectionism is not always the best solution, especially if the policy contradicts international trade rules. This case also illustrates that protectionist policies can have unintended consequences, such as losses for exporters in developing countries and tensions in international trade relations.
With this dispute case, it is hoped that countries can better understand the implications of protectionist policies and strive to create a fairer and more open trade environment, where all parties can enjoy the benefits of international trade without sacrificing national interests or causing unnecessary tensions.
