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Start of Trilogue Talks on Final Text of New Anti-dumping Rules

On 5 July 2017, the European Parliament gave its green light to start negotiations with EU Member State ministers on the final text of the EU’s new anti-dumping regulation. The European Parliament aims for more robust EU anti-dumping rules, designed to better protect the EU industry and jobs.

The talks between the European Parliament and the EU Member States started on 12 July 2017 and are based on the following negotiating mandate of the European Parliament:

  • Anti-dumping investigations need to take into account the exporting country’s compliance with international labour, fiscal and environmental standards, potential discriminatory measures against foreign investments, effective company law, property rights and the tax and bankruptcy regime;
  • The European Commission must issue a detailed report describing the specific situation in a certain country or sector for which the calculation of duties will be applied; and
  • There should be no additional burden of proof on European companies in anti-dumping cases, on top of the current procedure to be followed when asking the European Commission to launch an investigation.

While the European Parliament thus agrees on changing the EU’s anti-dumping methodology for assessing market distortions in third countries from the current country-based method to a country-neutral method based on the concept of “significant distortions”, the European Parliament also found it necessary to add new criteria (such as low labour and environmental standards) to the definition of “significant distortions”.

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. The European Parliament has repeatedly vocalized its intention to toughen the EU’s body of anti-dumping legislation, making it easier to impose higher tariffs on dumped imports from countries that the EU does not regard as free economies, such as mainland China.

In order to facilitate the talks between the European Parliament and the EU governments, it was reported on 12 July 2017 that the European Commission will present a compromise proposal on draft anti-dumping rules. The compromise proposal will include ideas for tackling the most contentious issues (e.g., the list of “significant distortions”, the burden of proof, special country-specific or sector-specific reports) and is expected to be presented at the next negotiating round scheduled for 31 August 2017.

The reform of the EU’s anti-dumping legislation is necessary to bring EU law in line with the change in mainland China’s WTO Accession Protocol. Due to the expiry of certain provisions of the WTO Accession Protocol on 11 December 2016, Beijing insists that it should be treated as a market economy in EU anti-dumping investigations as of 12 December 2016.

Mainland China challenged the EU’s current anti-dumping rules at the WTO on 12 December 2016, and will most likely continue its legal actions once the EU adopts its new anti-dumping rules. There is consensus among the European Parliament, the Commission and the Council that an agreement on the new anti-dumping rules should be reached before the WTO rules on the complaint of mainland China. The WTO Panel was established on 3 April 2017 but has, as of now, not yet been composed.

In addition, the European Commission opened up a new battleground for mainland China to dispute the currently applicable anti-dumping rules on 23 June 2017, by initiating a new anti-dumping investigation on low carbon ferro-chrome originating in mainland China, Russia and Turkey. This is the first EU anti-dumping investigation initiated against mainland China since the expiry of certain provisions of its WTO Accession Protocol on 11 December 2016.

If the investigation leads to the imposition of anti-dumping rules on Chinese products, mainland China is likely to challenge the EU at the WTO. Mainland China could argue that the law on which the anti-dumping duties are based, which automatically treats mainland China as a non-market economy, is illegal. However, as WTO remedies are only prospective, a successful challenge of the anti-dumping duties at the WTO would only oblige the EU to lift the duties for the future.

At the same time, Chinese exporters of low carbon ferro-chrome could challenge the EU at the European courts in Luxemburg in order to obtain a refund of their (allegedly unduly) paid anti-dumping duties. However, due to the recent case law of the European Court of Justice, the chances of success of such a challenge appear rather slim. It appears that, in order for the European courts to rule on this aspect of WTO law, Chinese companies would have to prove that the EU intended to bring the WTO rules regarding mainland China’s WTO Accession Protocol into domestic law.

As previously reported, a crucial step in the reform of the EU’s trade defence instruments was taken on 9 November 2016, when the proposal of the European Commission on the EU’s new methodology to combat dumping from third countries 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.

The negotiating position of the Council was approved on 3 May 2017, and the draft negotiating position of the European Parliament was approved by the International Trade Committee on 20 June 2017. Subsequent to the determination of the European Parliament’s definitive negotiating position on 5 July 2017, the talks between the European Parliament and the EU ministers on a final text for the EU’s new anti-dumping regulation started on 12 July 2017.

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.

Content provided by Picture: HKTDC Research
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