INDUSTRIES with a legitimate case for receiving anti-dumping protection should be denied assistance if downstream costs are too large, the Productivity Commission says.

In a draft report released today, the commission has called for the anti-dumping system to be retained but with new safeguards to minimise wider economic costs and prevent continuing import protection.

The report says a small number of import-competing companies benefited from access to anti-dumping duties to protect them against cut-price imports, while other firms and consumers in Australia shouldered the costs.

However, the cost to the economy was low, and the availability of anti-dumping duties probably lowered resistance to broader trade liberalisation, it says.

"A few key reforms to the system would further reduce the costs and strengthen the case for the system's retention,'' the commission's Philip Weickhardt says.

The main change should be a new "bounded'' public interest test which would quickly knock out an industry applying for dumping duties if the downstream costs to other firms and consumers were large relative to the benefits for the applicants.

This would happen "even if the applicant industry has been injured by dumped or subsidised imports'', the report says.

Other changes to "better balance'' the system's benefits and costs included limiting an extension of dumping duties to one three-year period beyond the initial five-year term, with a two-year freeze on re-applications after that.

There should also be a time limit on ministerial decisions, annual adjustments to the size of dumping duties, a more robust appeals system and more public reporting of the basis for decisions.

The commission will hold public meetings next month to get feedback on its draft report and will take written submissions until November 6.

Its final report will then be prepared and handed to the Federal Government by December 24 this year.