The point and purpose of having a government is to make the population, the citizenry, richer. There’s some things that simply have to be done and which can only be done by government: defence of the realm, the creation of a criminal justice system, these sorts of things. There’s also things that might be useful to do and which government can do reasonably well: say, as in this case, the regulation of foreign trade. But it is still increasing the wealth and income of the citizenry which is the underlying aim: and by imposing anti-dumping tariffs upon foreign steel India is making its own citizens poorer. This really isn’t the point and purpose of having a government at all. Therefore, it’s not something a government should do.

The news itself is here:

The finance ministry on Saturday imposed anti-dumping duty for certain stainless steel products imported from China, Malaysia and South Korea, which marks the first decisive move to stem the inflow of such products amid a hue and cry by the domestic steel industry battling sluggish market sentiments and strained margins. N C Mathur, President Indian Stainless Steel Development Associaton (ISSDA) said the duty on has been imposed on hot rolled (HR) flat products of stainless steel grade with all its variants originating from China at $309 per tonne $316 a tonne from Malaysia and from Korea at $180 a tonne. “Actually it is a move long overdue. We have been struggling to survive. This measure will definitely give some respite to the industry,” Mathur said. The commerce ministry had earlier this year said that the home-grown stainless steel industry has sustained “material injury due to such dumped imports” and that definite measure was required to stop it.

It was Frederic Bastiat (although we can also derive it from Adam Smith) who pointed out that we should always examine economic questions from the point of view of consumption. This action, this activity, does it enable the people to consume more? Or less? Taxing imports enables them to consume less: therefore we shouldn’t do it. And this is true even if those imports are being “dumped”. In fact it’s especially true if they are being dumped.

Jindal Stainless had filed an application before the authority for initiation of an anti-dumping investigation concerning alleged dumping of certain “Hot Rolled Flat Products of Stainless Steel of ASTM Grade 304 with all its variants” originating in or exported from China, Korea and Malaysia.

In its probe, the DGAD had concluded that the goods have been exported to India from these countries below its associated normal value, thus, resulting in dumping of the product.

Think through what the allegation is here. Let us simply assume that the findings are correct. This steel has cost some amount to produce. And it is then being sold below that production price to consumers of steel in India. Whoever is making and selling it must therefore be making a loss. It might be the taxpayers of China that are paying for that loss (for example, if the Chinese mills are state owned). It might be the private sector shareholders of those companies, could be the banks whose loans are about to go sour. But the allegation is indeed that those foreign producers are making a loss.

OK: now look at it from the viewpoint of the Indian consumer. They’re being offered free money. Instead of having to pay $600 a tonne for hot rolled steel (or whatever the price actually is) they’re being offered it at $300 a tonne. They get their tonne of steel and also have $300 left over. They are richer by that $300. And they are obviously richer by whatever amount it is that the producers are losing per tonne of steel.

At which point, what should the Indian Government be doing? Well, if we accept the original contention that the Indian Government should be concerning itself with making the Indian citizenry richer then that government should be welcoming the subsidisation of Indian consumption by those foreigners. That is, the correct reaction to accusations of “dumping” is “Great! Hey, Guys! Come and dump some more, you’re making us richer!”

What is actually happening is that the government is looking at the losses of the Indian steel producers. And then conspiring with them to make Indian consumers worse off by banning this subsidy to consumers by foreigners. This really isn’t how it is supposed to work. Government is to make the native citizenry richer, not poorer. Thus there should not be anti-dumping tariffs, nor should there even be a method or a law by which they can be imposed.

Another way to put this is that the entire point and purpose of trade is the imports that we get to enjoy. And why on Earth would we tax imports, the very aim of the entire process? It’s the imports that make us richer, the cheaper they are the richer we become. And as for those poor producers who lose out: OK, but we don’t care about them, it’s the consumers we do and should care about.