EU, Argentina File Appeals in Biodiesel WTO Dispute

2 June 2016

The EU and Argentina have each appealed the findings of a WTO dispute panel in their row over biodiesel duties, with the case now set to go to the organisation’s highest court.

Both appeal notices, circulated within the past fortnight, address different aspects of a recent ruling where they claim that the dispute panel erred.

The original case (DS473) was brought by Argentina to the WTO in late 2013, with the South American economy taking issue with anti-dumping measures imposed by the European Commission on imported biodiesel. A panel was established to hear the case in April 2014. (See Bridges Weekly, 16 January 2014, 30 May 2013, and 24 October 2013)

“Dumping” in trade jargon refers to the practice of selling goods abroad at prices below their normal value. Under WTO rules, a member may impose anti-dumping duties to counter this practice, as long as it is also proven that domestic industry has been adversely affected as a result.

Argentina is one of the world’s largest exporters of biodiesel, and has claimed that the anti-dumping measures have cost it US$1.6 billion in lost sales per year.

This past March, the panel found that the challenged provision of the EU’s basic anti-dumping regulation did not break WTO rules. However, the panel found that certain aspects of the EU investigating authorities’ determinations of dumping and of the injury caused to the EU’s domestic market were in violation of the General Agreement on Tariffs and Trade (GATT) and the Anti-Dumping Agreement. (See Bridges Weekly, 7 April 2016)

EU claims

In its appeal notice, dated 20 May and circulated six days later, the EU challenges three of the panel’s findings regarding the determination of production costs, used in calculating the normal value of imported products, as well as the resulting anti-dumping duties imposed on Argentine biodiesel.

For example, the panel said that Brussels broke trade rules by failing to base its calculation of production costs on producers’ records. EU investigators had disregarded the price actually paid by Argentine producers for soybeans – the main raw material of biodiesel – due to an alleged distortion in Argentina’s export tax system.

The Anti-Dumping Agreement sets out the preference of using producer’s records for calculating production costs, provided that the records “reasonably reflect the costs associated with the production and sale of the product under consideration,” among other requirements. For the panel, this called for an assessment of whether such records reflect “within acceptable limits – in an accurate and reliable manner” the actual costs incurred by the producer.

The panel therefore said that the EU’s disregard of certain records did not have a legally sufficient basis.

Moreover, the EU investigative authorities replaced the average actual purchase price of soybeans with international level prices, again citing the alleged distortion in Argentina’s export tax system. The panel found that the EU failed to construct the normal value of biodiesel on the basis of production costs in the country of origin as required by WTO rules.

The last point of EU’s appeal concerns the panel’s finding that Brussels imposed anti-dumping duties exceeding the dumping margins that could have been established in line with the requirements of the Anti-Dumping Agreement.

The EU is now asking the Appellate Body to reverse these findings, saying that they are based on “legally erroneous reasoning.”

Argentina’s appeal

Argentina also took issue with some elements of the panel’s findings, which it outlined in its “notice of an other appeal” published on 31 May. In particular, Buenos Aires claims that the panel wrongly assessed the relationship between the EU’s basic anti-dumping regulation and EU authorities’ decision to disregard a producer’s records, specifically when the panel was making its finding that the regulation does not violate WTO rules.

Argentina also asked the Appellate Body to reverse the panel and find that the EU failed to make a fair comparison between normal value and the export price in its determination of dumping, specifically by not making an “adjustment for differences affecting price comparability, including differences in taxation.”

At the panel stage, Argentina had also claimed that the EU violated the WTO’s Anti-Dumping Agreement in failing to ensure that the injury caused by the overcapacity of the bloc’s domestic industry was not attributed instead to the allegedly dumped imports, back when EU investigators reached their overall conclusion that the imports caused injury to domestic industry. The panel rejected this claim.

In the appeal, Argentina has asked WTO judges to reverse these findings as well, arguing that the panel failed to properly interpret and apply the Anti-Dumping Agreement’s provisions.

Under WTO rules, the Appellate Body now has 90 days from the date of appeal to issue its report, and will generally review questions relating to law or legal interpretation, rather than the panel’s factual findings.

ICTSD reporting.

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