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European Commission Increases Transparency in Trade Defence Procedures, but Threat of Increased EU Anti-dumping Duties Remains

Hong Kong traders exporting to the EU will not have failed to notice, especially recently, that much is happening in the international trade arena.

Together with the question of whether or not to grant mainland China market economy status (MES) in trade defence investigations as of 11 December 2016, the European Commission is striving for the modernisation of existing EU trade defence instruments and the strengthening of the EU’s transparency commitments.

On 19 May 2016, the European Commission took two measures to further increase transparency in its trade defence armory and facilitate communication with stakeholders. The measures will likely be beneficial to Hong Kong companies with export interests in the Chinese mainland. 

First, in order to improve access to information in trade defence cases, the Commission will systematically publish executive summaries of all requests for new investigations or reviews of existing anti-dumping or anti-subsidy measures.

Such publication is meant to spread the news about starting investigations to the public at large, guaranteeing that all interested parties can bring their own contributions into the mix. Executive summaries have already been published with regard to the initiation of the investigations concerning hot-rolled steel and coated fine paper from mainland China.
Second, in order to improve the communication between stakeholders in on-going trade defence proceedings, the Commission will put in place a new online platform, “TRON”. “TRON” will offer involved parties instant online access to the entire non-confidential case-related file, particularly providing relief to smaller companies that will no longer need to request access to such files through a Brussels-based representative.

In the future, TRON will additionally allow interested parties to send their submissions to the Commission and vice versa.

Both novelties find their source in the Commission's ‘Trade for all’ communication of October 2015. In this document, the Commission stated that transparency is fundamental to better regulation, recognising the need to increase transparency in the area of trade defence investigations. In this respect, the Commission promised to “provide more transparency to interested parties in trade defence cases, for example by giving them access to more documents and in an easier way through a dedicated web platform” and “provide more transparency to the general public, for instance in relation to the publication of the non-confidential version of complaints and requests for reviews of existing measures, including expiry reviews”.

While the Commission has thus far implemented these two important transparency commitments, a third commitment, equally formulated in the ‘Trade for all’ communication, remains to be implemented. More precisely, the Commission committed itself to exploring initiatives to further increase transparency, “such as the possibility of improving access to anti-dumping and anti-subsidy investigation files by the legal representatives of interested parties and extending access to the non-confidential file to the general public”.

These welcome innovations towards a more coherent EU trade policy emerge at roughly the same time as renewed attempts to push through legislative changes to modernise existing EU trade defence instruments.

The European Parliament recently stressed the “imminent need” for a general reform of the EU’s trade defence instruments, urging the European Commission to advance its 2013 proposal for trade defence modernisation. Many Members of the European Parliament (MEPs) are of the opinion that the modernisation of the EU’s trade defence instruments is necessary in order to strengthen the EU’s ability to impose higher duties on unfairly priced imports.

In this connection, granting MES to mainland China would oblige the EU to resort to Chinese prices or costs in the calculation of anti-dumping duties, resulting in lower duties imposed on Chinese imports and a perceived higher need to protect the European industry. In this respect, steel products originating in mainland China are considered to be particularly bothersome. As such, the need for trade defence modernisation will become more pressing in a scenario where the EU grants mainland China MES in trade defence investigations as of 11 December 2016.

On the other hand, it could be argued that the EU would be more inclined to grant MES to mainland China if it were able, prior to the granting of MES, to strengthen its ability to impose higher duties on unfairly priced imports through the implementation of its trade defence modernisation.

Up until today, the 2013 proposal for trade defence modernisation has not succeeded, largely due to disagreements over a clause that would, in certain circumstances, remove the “lesser duty rule” in trade defence investigations. Such a rule currently prevents EU authorities from imposing anti-dumping duties above the calculated level of injury caused to domestic companies, even if the calculated margins of dumping may be higher.

The most recent suggestion, put forward by the EU industry, seeks to avoid the debate on the lesser duty rule by addressing the problem of low duties without removing the lesser duty rule. Under the proposal, which was made on 20 May 2016, when the calculated margin of dumping exceeds the level of injury, investigators would adopt a mathematical method to square the two. More in detail, the EU authorities would create a new injury margin by dividing the difference between the margin of dumping and the level of injury by two and adding this to the level of injury.

The proposal is still at an early stage of negotiations, and several EU governments are expected to oppose the proposal. If, however, policymakers were to agree on this proposed method for the calculation of duties, it would undoubtedly lead to an increase in imposed EU anti-dumping duties. After all, even without removing the lesser duty rule, the higher injury levels would lead to higher measures.

Content provided by Picture: HKTDC Research
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