11 March 2019
UK Bicycle Producers Set to Lose Current EU Protection Against Dumped Imports Originating in Mainland China
On 6 March 2019, the UK’s Secretary of State for International Trade, Liam Fox, announced that UK bicycle producers would lose EU protection against imports of dumped products originating in mainland China once the UK leaves the European Union and takes control of its own independent trade policy. The decision was taken after it was confirmed that the market share of UK-based bicycle producers did not meet the thresholds established by the UK’s Department for International Trade (the “DIT”) in order to maintain the trade remedy measures imposed by the European Commission. (Please also refer to Issue No. 93/2019 on the UK preparing its own independent system ahead of Brexit, to maintain anti-dumping and other trade remedy measures).
According to Liam Fox, bicycle producers in the UK account for too small a share of the domestic bicycle market to qualify for maintenance of anti-dumping measures under the UK’s upcoming new trade remedy system.
Hong Kong traders might recall that the DIT assesses whether trade remedy measures, imposed by the European Commission, should be maintained in the UK after Brexit, based on the following criteria:
1. The DIT has received an application to maintain measures from UK businesses which produce, in the UK, products subject to trade remedy measures;
2. The application is supported by UK businesses which produce a sufficient proportion of those products (this mirrors the tests required by the WTO Anti-Dumping Agreement, Article 5.4, regarding opening trade remedy investigations); and
3. The market share of the UK based producers of those products is above a certain level (that level has been confirmed as at least 1%).
The second criterion above requires that a complaint for the initiation of a trade remedy investigation must be supported by domestic producers whose collective output constitutes more than 50% of the total production of the like product produced by that portion of the domestic industry expressing either support for or opposition to the complaint. Likewise, the WTO Agreements provide that no investigation shall be initiated when domestic producers, expressly supporting the complaint, account for less than 25% of total production of the like product produced by the domestic industry.
UK companies – such as Brompton ¬– manifested their disagreement over the position taken on bicycles, arguing that the UK market will be “flooded with cheap Chinese bikes”. However, Mr. Fox explained that the decision was taken following objective standards. These apparently revealed that the UK manufacturers had failed to meet the thresholds for the EU trade remedy measures to be maintained. It was further explained that the thresholds determined by the DIT have been set at a “reasonable level” and that the UK would be unable to simply “roll over” the EU’s existing trade remedy measures regardless of thresholds, as it would then struggle to defend the measures in the framework of an eventual challenge before the Dispute Settlement Body of the WTO.
Furthermore, the DIT explained that the measures imposed by the European Commission were “originally designed to protect EU producers from unfair competition, but that they do not significantly benefit British industries and only increase costs for consumers”. UK consultations have evidenced that the application to retain anti-dumping duties on bicycles originating in mainland China did not meet the market-share test.
In addition, the DIT reported that no application was received with a view to maintaining the anti-dumping and anti-subsidy duties of up to 79% that the EU imposed in January 2019 on electric bicycles originating in mainland China. However, the consultation results show that in every other case where an application to maintain the measures was submitted by UK domestic manufacturers, both the producer support criteria and the market share threshold were met and the trade remedy measure maintained.
Mr. Fox further explained that, considering that Brompton employs around 300 personnel and produces a distinctive folding commuters bicycle, the UK Government is currently looking for other alternatives to protect and support the company.
Finally, Hong Kong traders should also keep in mind that in the event of a “deal” scenario – i.e., if the UK ratifies the Withdrawal Agreement – and during a transition period of 21 months from 29 March 2019 to 31 December 2020 – referred to as the implementation period – EU trade remedy rules and regulations would continue to apply. In such event, the UK would not operate its own independent trade policy.