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EU Moves Closer to Accord on Modernisation of Trade Defence Instruments

The EU is determined to see through its long-standing efforts to overhaul its trade defence instruments. At an informal EU trade ministers’ meeting of 3 March 2017, a majority of ministers supported the European Commission’s proposal for a new method to calculate anti-dumping duties, which had been presented on 9 November 2016.

The Maltese Presidency reported that “there is a convergence among ministers towards a sound legal framework based on instruments that are fully compatible with [the EU’s] WTO commitments”. European Trade Chief Cecilia Malmström also urged EU trade ministers to swiftly agree on the proposal to amend how the EU treats mainland China and other non-market economies in anti-dumping investigations, hoping that all EU trade ministers may arrive at a compromise on the proposal at their next meeting set for 11 May 2017.

In such a scenario, the three-way negotiations between the European Parliament, the European Commission and the EU Council of Ministers could be initiated before the summer of 2017.

The commitment from EU leaders to modernise the EU’s trade defence instruments was further confirmed at the European Council summit of 10 March 2017. At German Chancellor Angela Merkel’s initiative, other Member State leaders urged their trade ministers and the European Parliament to swiftly adopt new anti-dumping  
methodology. EU leaders stated that the EU remains strongly committed to a robust trade policy and an open and rules-based multilateral trading system, with – despite the protectionist-hype emerging from the US – a central role for the WTO.

Regardless of the ongoing trade negotiations and the confirmed commitment to quickly amend the EU’s trade defence instruments, this modernisation process is running late. Albeit for different reasons, urgency is being called for by many EU Member States.

First, the EU fears a large stream of redirected cheap Chinese goods to the EU, as the US is – in the context of its emerging protectionism – expected to impose high tariffs on imports from mainland China.

Second, mainland China is pursuing a WTO investigation into the manner in which the EU calculates its anti-dumping duties against Chinese exporters, and several EU Member States fear the damage that could be caused by a negative WTO ruling against the EU’s current anti-dumping methodology.

Even though certain provisions of mainland China's WTO accession protocol expired on 11 December 2016, the EU failed to modify its anti-dumping 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 latter’s perceived intransigence concerning its market economy rules.

Mainland China’s request for the establishment of a WTO panel was circulated to the WTO Members on 10 March 2017, and the request will be discussed at the meeting of the WTO Dispute Settlement Body later in March. While the EU is expected to reject the establishment of a panel, the Dispute Settlement Body is expected to agree to the establishment of a panel at its meeting of 19 April 2017.

As the panel proceedings before the WTO will soon be initiated, the EU has limited time in which to put its new anti-dumping legislation into place. Well aware that amendments are necessary to bring the EU’s anti-dumping methodology into conformity with the currently applicable WTO accession protocol of mainland China, the European Commission has called for a quick approval of its proposal.

At the same time, however, it has been argued that the EU is exploring how to best retain the possibility of imposing protectionist measures against Chinese imports, predominantly focussing its attention on the steel industry.

The European Commission’s proposal on the reform of the EU’s trade defence instruments sets forth a new methodology for the calculation of anti-dumping duties on imports from countries where significant market distortions exist, in particular where the State has a pervasive influence on the economy. The proposal, more precisely, eliminates the distinction between market and non-market economies that are subject to the EU’s “analogue” country methodology.

The European Commission contends that its proposal strikes the right balance, ensuring compliance with its WTO obligations on the one hand, while still allowing for the same level of anti-dumping duties against products from mainland China on the other hand. Under the new approach, however, whether or not the EU qualifies mainland China as a market economy country will have no meaning.

Whether the European Commission’s proposed methodology effectively complies with the global trade rules thus remains to be seen. In this regard, it should be mentioned that the WTO consistency of the EU proposal has even been questioned by lawyers within the Commission’s own Legal Service. Lawyers there have reiterated that the new anti-dumping methodology must be non-discriminatory, expressing uncertainty over whether the application of the proposed methodology will always achieve such a result.

Content provided by Picture: HKTDC Research
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