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EU Continues High-Level Talks on Modernising Trade Defence Instruments

The EU is – as reported by multiple sources – determined to see through its long-standing efforts to overhaul its trade defence instruments. Often faced with criticisms over its anti-dumping and anti-subsidy investigations being too slow and opaque and granting EU officials broad discretion in their final decisions, the EU is now actively seeking to modernise its trade defence rules. The envisaged results should result in faster trade investigations which are more open to scrutiny.

In order to achieve such modernisation, the European Commission’s Directorate General for Trade (DG Trade) is currently analysing the feasibility of different options to make its trade defence proceedings more transparent. Some of these initiatives, such as granting access to the confidential file, would require changing the basic anti-dumping Regulation.

As reported by a Member of the European Parliament (MEP) Christofer Fjellner on 23 February, the starting date for the trade talks between the European Parliament, the Commission and the Council on the modernisation of the EU trade defence rules has been set for 21 March 2017.

In addition, the Committee on International Trade of the European Parliament (INTA) held a public hearing on the EU’s trade defence instruments on 28 February 2017. The public hearing – which brought together different stakeholders
representing businesses, trade unions, the European Commission and academics – discussed, on the one hand, the modernisation of the EU’s trade defence instruments and, on the other hand, the options for implementing new anti-dumping and anti-subsidy calculation methodologies for imports coming from countries with significant market distortions or where the state has a pervasive influence over the economy.

With regard to the latter, business representatives and the European Commission agreed that something needs to be changed with regard to the EU’s trade defence methodology to make it compliant with the currently applicable WTO accession protocol of mainland China. While certain provisions of mainland China's WTO accession protocol expired on 11 December 2016, the EU failed to modify its domestic legislation so as to incorporate this change of status by the 11 December deadline. As a result, mainland China launched a WTO case against the EU on 12 December 2016 over the EU’s perceived intransigence concerning mainland China’s market economy rules.

There is, however, disagreement with regard to the timeline of the amendments to be made in relation to the market economy status (MES) of mainland China. On the one hand, Joost Korte, Deputy Director General in charge of the new methodology file, said that “speed is quite essential and we should try to bring this legislation into force this year,” before the WTO rules that the EU’s current approach is illegal. Luisa Santos from BusinessEurope agreed that the new methodology should be approved quickly in order to avoid legal uncertainty. On the other hand, other participants stated that there were good reasons to wait for the WTO to report on this issue.

The EU’s ambition to increase the efficiency and transparency of its trade investigations dates from 2013, when the European Commission issued its proposal for modernisation. This ambition was also included in the European Commission’s “Trade for All” trade and investment strategy, published in 2015. In November 2016, the European Commission presented a proposal for a new method for calculating dumping on imports from countries where significant market distortions exist, in particular where the state has a pervasive influence over the economy. This proposal should be seen in the context of the expiry of certain provisions of mainland China's WTO accession protocol on 11 December 2016.

More recently, this aim of modernisation was recalled in DG Trade’s “Management Plan for 2017”. Indeed, specifically objective 3 of the “Management Plan for 2017”, entitled “Tackling Unfair Trade” states that the EU is seeking to “maintain and improve a transparent, efficient and effective system to combat distortions and unfair trade practices in international trade”.

Amendments to the current trade rules could, amongst others, make it possible to impose provisional anti-dumping measures more quickly, allow the EU to deviate from the lesser-duty rule when the exporting country distorts raw material prices (for instance by introducing export restrictions) and maintain a rigid application of trade defence measures on exporting countries which do not have a sufficient level of social and environmental standards.

In addition to the talks on the modernisation of the EU’s trade defence rules, EU trade officials also want to move forward on the bilateral EU-mainland China Investment Agreement, which is being negotiated since 2014. The EU’s main objective is to obtain broader and easier market access for European companies to the Chinese market. For the time being, the majority of EU businesses can only invest in mainland China as part of a joint venture with a Chinese counterpart. While Beijing has already stated that it does not rule out granting the EU enhanced market access, the EU is now looking to pin down mainland China on this.

In this regard, EU trade officials want to push mainland China to swap offers on market access for each other's companies this autumn. The EU’s updated timetable, however, has not yet been formally discussed with mainland China.

Despite the ongoing trade negotiations at both multilateral and bilateral levels, the EU continues – on the basis of its currently (yet unchanged) applicable trade defence rules and calculation methodologies – to impose anti-dumping and anti-subsidy measures on imports originating in mainland China.

On 28 February 2017, the European Commission imposed definitive anti-dumping duties on heavy plate non-alloy or other alloy steel from mainland China, ranging from 65.1% to 73.7%. Moreover, on 3 March 2017, the European Commission’s Regulation extending the anti-dumping and anti-subsidy measures on solar cells and solar panels from mainland China for another 18 months was published in the Official Journal. The European Commission simultaneously opened an interim review, which is intended to lead to a gradual reduction in the level of the duties, in line with cost reductions in the solar industry. Together, the extension of the measures and the revision of their level will lead to a gradual “phase-out” of the current regime.

Content provided by Picture: HKTDC Research
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