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European Parliament Endorses Tougher EU Trade Defence Instruments

On 23 January 2018, the European Parliament's international trade committee (INTA) endorsed the provisional agreement on the modernisation of the EU’s trade defence instruments (TDIs). The agreement builds on the proposal presented by the Commission in 2013 and was, after long and difficult negotiations, reached between the Commission, the Council and the European Parliament on 5 December 2017.

Together with the EU’s new anti-dumping methodology, which entered into force on 20 December 2017 (see: New EU Anti-dumping Methodology Enters into Force, Together with Publication of Commission’s Report on Mainland China), this is the first major overhaul of the EU’s anti-dumping and anti-subsidy instruments since 1995. The most important “modernisation” amendments contained in the provisional agreement are the following:

  • Conditional removal of the LDR, leading to the imposition of higher duties: the lesser-duty rule (LDR), which currently prevents the Commission from imposing duties above the calculated level of injury, will be abolished in certain circumstances. When these exist, the EU will be able to apply the duty rates at the full dumping or subsidisation level, provided that this is in the interests of the EU as a whole.
  • In anti-dumping investigations, when examining whether a duty lower than the margin of dumping would be sufficient to remove injury, the Commission will take into account whether there are “raw material distortions” with regard to the product concerned. Raw materials for which a distortion is found must account, taken individually, for not less than 17% of the cost of production of the product concerned. For the purpose of this calculation, a non-distorted price of the raw material as established in representative international markets shall be used.
  • In anti-subsidy investigations, the amount of countervailing duties will, in principle, correspond to the amount of countervailable subsidies established. However, where the Commission, on the basis of all the information submitted, can clearly conclude that it is not in the Union's interest to determine the amount of measures at that amount, the amount of the countervailing duty will be less if such lesser duty would be adequate to remove the injury to the Union industry.
  • Injury calculation: the new rules provide for the possibility of calculating the injury margin on the basis of a “target price”, i.e. the price that the industry is expected to have charged under normal circumstances. This target price is established taking into account factors such as the level of profitability before the increase of imports from the country under investigation, the level of profitability needed to cover full costs and investments, R&D and innovation, and the level of profitability to be expected under normal conditions of competition. The target price assumes a minimum profit margin of 6%, with a higher profit margin possible on a case-by-case basis.
  • Pre-disclosure and registration: an early warning mechanism will be put in place, informing interested parties about provisional duties at least three weeks before the imposition thereof. This three-week notice period will be reviewed by the Commission after two years and can be adjusted to two or four weeks. Moreover, Union producers, importers and exporters and their representative associations, and representatives of the exporting country, may request information on the planned imposition of provisional duties. Such information shall be provided three weeks before the imposition of provisional duties.
  • In order to limit the risk of a substantial rise in imports in the period of pre-disclosure, the Commission is  obliged to register imports where possible. Where registration is not possible, and further substantial rise in imports takes place during the period of pre-disclosure, the Commission will reflect the injury resulting from such increase in the determination of the injury margin.
  • Social and environmental considerations: the new rules ensure that the EU’s social and environmental standards do not disadvantage the EU during trade defence investigations. The EU will, for example, duly reflect the cost of compliance by the Union industry with the higher social and environmental standards, and will, in principle, not accept price undertakings from third countries that do not comply with the principles and obligations set out in multilateral environmental agreements and the International Labour Organisation (ILO) conventions.
  • In addition, the Commission will initiate interim reviews, where appropriate, in cases where the EU industry faces increased costs resulting from higher social and environmental standards, and in cases of changed circumstances in exporting countries relating to social and environmental standards. The Commission's annual report on trade defence instruments will also include a section on how social and environmental standards have been considered and taken into account in the investigations.
  • Expiry review: if an expiry review concludes with the termination of measures, the duties collected as of the date of the initiation of the investigation will be reimbursed.
  • Faster investigations: provisional anti-dumping measures will be imposed within seven to eight months from the initiation of the proceedings (in comparison to the previously allowed nine months) and anti-dumping investigations will, in all cases, be concluded within 14 months of initiation (in comparison to the previously allowed 15 months).
  • Closing the “maritime loophole”: the new rules also foresee the possibility of imposing anti-dumping and countervailing duties on dumped or subsidised products brought in significant quantities to an artificial island, fixed or floating installations or any other structures in the Continental Shelf of a Member State or the Exclusive Economic Zone declared by a Member State pursuant to the United Nations Convention on the Law of the Sea (UNCLOS), where this would cause injury to the Union industry. The Commission will adopt an implementing act laying down the conditions for the incurrence of such duties.
  • Support for SMEs: the Commission will facilitate access to the EU’s TDIs for diverse and fragmented industry sectors, largely composed of small and medium-sized enterprises (SMEs) through an SME Help Desk.
  • Trade unions: trade unions representing EU workers will henceforth be able to fully participate in trade defence investigations.

According to the Commission, “[t]he changes to the EU's anti-dumping and anti-subsidy regulations represent a balanced result, taking into account the interests of EU producers, users and importers alike. They will make the EU's trade defence instruments faster, more effective and more transparent. They make the EU better equipped to deal with the challenges of the global economy and unfair competition from imports. At the same time, they bring the EU trade defence system closer to the needs of smaller companies.

The vote at the European Parliament's international trade committee on 23 January 2018 endorsed the provisional agreement with a broad majority (29 votes in favour, 5 votes against and 3 abstentions). The new rules will enter into force once the respective approval procedures within the European Parliament and the Council are finalised and once the agreement is published in the Official Journal. This is foreseen for the end of May 2018.

Content provided by Picture: HKTDC Research
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