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EU Lawmakers Adopt Negotiating Position on New Trade Defence Methodology, Agreeing to Further Toughen Anti-dumping Rules

On 20 June 2017, EU lawmakers arrived at a decision on the position of the European Parliament for negotiating with all EU governments on the new rules concerning the calculation of anti-dumping duties. The International Trade Committee of the European Parliament (INTA) approved a report to toughen the EU’s body of anti-dumping legislation, which will make it easier to impose higher tariffs on dumped imports from countries that the EU does not regard as free economies, such as mainland China.

INTA voted on the European Parliament’s legislative resolution, which contains amendments to its negotiating position as prepared by Rapporteur Salvatore Cicu. The resolution sets out the European Parliament’s amendments to the proposal of the European Commission for a new anti-dumping methodology, and was approved by 33 votes to 3 with 2 abstentions. In total, INTA approved nine compromise amendments, including positions from all major political groups.

Most notably, the European Parliament elaborated on the interpretation of “significant distortions” that would allow the European Commission to disregard a country’s domestic costs and prices in favour of international costs and prices in the course of anti-dumping investigations. INTA opines that an exporting country’s compliance with fiscal, social and environmental standards needs to be taken into account, describing significant distortions as “those distortions which occur when reported prices or costs, including the costs of raw materials, energy and other factors of production, are not the result of free market forces as they are affected by government intervention, or in case of lack of compliance with core ILO Conventions, environmental and tax multilateral agreements leading to a distortion of competition.”

The definition of “significant” distortions is likely to be one of the most contentious issues in the negotiations between the European Parliament and the EU Member States. Member State officials do not agree with the far-reaching position put forth by the European Parliament, indicating that South Africa is the only country apart from the EU which would meet the test.

In addition, the European Parliament reiterates its position that there should not, in any event, be any additional burden of proof on EU companies in the determination of the existence of significant distortions in a third country, on top of the current procedure to be followed when asking the European Commission to launch an anti-dumping investigation.

Regarding the issue of “pre-disclosure”, the European Parliament disagrees with the proposal of the EU Member States to oblige the European Commission to grant a guaranteed notice period of four weeks to interested parties before being able to impose provisional duties. The European Parliament intends to shorten the notice period, stating that “the parties to the investigation shall be informed shortly after initiation about the relevant sources that the Commission intends to use […] including a preliminary determination as the existence of significant distortions and shall be given 10 working days to comment.”

The adoption of the European Parliament’s negotiating position was broadly welcomed by the EU business community, which believes that it has been provided with stronger reassurances that the new rules will shield them from unfair trading practices. Aegis Europe – an umbrella organisation of nearly 30 industrial associations – had urged the European Parliament to agree on toughened anti-dumping rules, in order to protect EU companies from unfair trade practices used by mainland Chinese exporters. Aegis asked for “clear definitions, formalised due process, and an unambiguously effective standard anti-dumping methodology”. The Director General of BusinessEurope stated that the vote “is a good sign because European business needs effective trade defence instruments that are workable for the industry and that restore a level playing field” and emphasised that “the level of protection for EU economic operators should not fall below the level of protection of the current methodology”. The European steel association EUROFER also welcomed the voting result.

The EU has been striving to reform its trade defence instruments since 2013. This reform became urgent at the end of 2016, due to the expiry of certain provisions of mainland China’s WTO Accession Protocol on 11 December 2016. Since 12 December 2016, Beijing insists that it should be treated as a market economy in EU anti-dumping investigations. While many EU officials deny that mainland China acts as a market economy, the EU does acknowledge that its anti-dumping methodology should be modified in order to reflect the change in mainland China’s WTO Accession Protocol.

A crucial step was taken on 9 November 2016, when the proposal of the European Commission on the EU’s new methodology to combat dumping was presented. Pursuant to the proposal, EU investigators would be able to use a different method to calculate dumping in cases where “significant” market distortions are detected. Investigators could then rely on international costs and prices instead of using the figures provided by the company under investigation, which would typically lead to higher anti-dumping duties.

On 3 May 2017, EU Member States finally managed to reach a political compromise on the EU’s new trade defence rules, approving the Council's negotiating position on a country-neutral methodology for assessing market distortions in third countries. The Council’s position, to a large extent, reflects the principles put forward in the European Commission’s proposal. The amendments put forward by the EU Member States focus on the concept of “significant” distortions and the burden of proof.

The vote of the European Parliament’s Committee on Industry, Research and Energy, which was held on 30 May 2017, demonstrated the persistence of the European Parliament to further tighten the EU’s anti-dumping rules, and its disapproval of the political compromise previously reached between EU governments. In particular, parliamentarians and national experts refused to compromise on the lesser duty rule, the concept of “significant market distortions”, and the issue of pre-disclosure of provisional duties.

Now that the European Parliament has determined its own negotiating position, the “trilogue” negotiations between the EU institutions can take place. If there are no objections at the plenary session in Strasbourg on 3 July 2017, the negotiations are expected to start on 11 July 2017. The talks could prove difficult, due to the fact that the European Parliament’s negotiating position goes far beyond the proposals put forward by the European Commission and the EU Member States.

As the proposal of the European Commission is subject to the EU’s ordinary legislative procedure, the Council and the European Parliament need to reach an agreement on a final text of the new EU anti-dumping methodology before it can enter into law. Until that moment, the old EU anti-dumping methodology continues to apply.

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