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International Internet Magazine. Baltic States news & analytics Thursday, 16.08.2018, 13:06

EU’s trade defence policy: protecting member states’ industries

Eugene Eteris, RSU/BC, Riga, 21.12.2017.Print version
New EU trade defence legislation is aimed at changing the way the member states deal with the dumped and subsidised imports from countries outside EU with significant state-induced market distortions. The first “cases” would include some China’s industries, followed by Russia’s.

The purpose of this new legislation is to make sure that the EU has trade defence instruments that are able to deal with current realities (e.g. state-induced distortions which too often lead to overcapacities) in the international trading environment, while fully respecting the EU's international obligations in the legal framework of the World Trade Organisation (WTO).

 

The EU is one of the most open markets in the world; the states are defending open, fair and rules-based trade. However, the EU’s conviction that trade brings prosperity doesn’t prevent it from defending European industries and companies when other states do not play by the rules. New set of EU modernised tools will be able to deal more effectively with the ever changing realities of the international trading environment.  

 

Commissioner for Trade, Cecilia Malmström, underlined that the entry into force of the EU's new anti-dumping and anti-subsidy legislation has been an important step in the Union’s trade defence policy. It signals the EU's commitment to protect industries from unfair competition in imported goods, particularly from countries whose economies are significantly distorted owing to state interference. The publication of country reports will help to put the new methodology into practice and will give the EU industries a basis on which to make complaints concerning countries where distortions exist.


The new methodology will also strengthen the EU anti-subsidy legislation so that, in future cases, any new subsidies revealed in the course of an investigation can be investigated and included in the final duties imposed.

 

Short history

In November 2016, the European Commission presented a proposal for a new method for calculating dumping on imports from countries where there are significant market distortions*). The European Parliament and the Council reached agreement with the Commission's proposal after three-way negotiations in October 2017.

*) EU legislation implementing the internationally agreed provisions for dealing with dumped imports is set out in Council Regulation (EC) No 2016/10361. Published in OJ “L”, 176, 30.6.2016, in: 

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016R1036&from=EN

Commission’s brochure “How to make an anti-dumping complaint: a guide”, see at:

http://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156473.12.12.17_final.pdf

 

Significant distortions: definition

Following its publication in the EU's Official Journal, the revised legislation introduces a new way of calculating whether dumping has occurred in imports into the EU from countries where the economy is distorted owing to state interference.


Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union. In: 

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L:2017:338:TOC

Note: Regulation (Art.2 b) points out that “significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements: 


 the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country;

 

state presence in firms allowing the state to interfere with respect to prices or costs;

 

  public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces;

 

 the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws;

 

—  wage costs being distorted;

 

  access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state.

http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=OJ:L:2017:338:FULL&from=EN

 

Calculating dumping: China’s case

The standard way of calculating dumping is to compare export prices with domestic prices or costs in the exporting country (see also art.2 above). If, due to state intervention in the economy, domestic prices or costs are distorted, the Commission will disregard these when calculating domestic value. Instead, it will use other benchmarks reflecting undistorted costs of production and sale.


The new methodology can apply to any WTO member. Before applying the new methodology, it will be necessary to show that significant distortions exist in the economy of the exporting country as a result of state interference.


To do this the Commission will examine all the evidence presented in the course of an investigation by the EU industrial sectors. The Commission may also prepare reports describing the economies of certain countries or sectors in this context.


In parallel with the publication of changes to the EU's anti-dumping legislation, the Commission has released the first country report envisaged by the new legislation. The Commission selected China for the first report because the bulk of the EU's anti-dumping activity concerns imports from that country.


The report (published on 20th of December 2017) describes factually certain aspects of the Chinese economy, focusing on the country's macro-economy; the main production factors used in all manufacturing processes (e.g. labour, energy, etc.); and certain sectors of the economy, including steel and ceramics.


Other reports will be prepared on the basis of the same criteria: their relative importance in the EU's anti-dumping activity, as well as indications that there may be distortions related to government interventions in the economy. The next country report will concern Russia.


Thus, the EU industries may rely on the country reports as evidence to request the use of the new methodology in anti-dumping investigations. In the course of each investigation, the Commission will examine if the use of the new methodology should be applied based on all the evidence in the file. All parties concerned by an investigation, including the government of the country concerned as well as exporting producers, will have the opportunity to comment on and disprove any findings made in the reports in the course of the relevant investigations.  


Social and environmental standards can play a role under the new methodology. When selecting the appropriate representative third country for the purpose of replacing costs, besides the per capita gross national income or other relevant economic indicators, the Commission would also take into account the level of social and environmental protection in the representative source country.

 

More information on the following websites: = MEMO/17/5377; = Regulation; = The report; = Procedure guide for companies.

Source: Commission press release “EU puts in place new trade defence rules”, 20.xii.2017, in:

http://europa.eu/rapid/press-release_IP-17-5346_en.htm; Latvian version at:  http://europa.eu/rapid/press-release_IP-17-5346_lv.htm  






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