EU Institutions Sign Off on Draft Changes to Anti-Dumping Legislation

12 October 2017

EU negotiators have clinched a draft deal on a set of proposed changes to the bloc’s trade remedy laws, officials announced last week, with the revisions expected to take effect later this year.

The accord between officials from the EU institutions was confirmed on 3 October, following meetings in Strasbourg. The European Commission put forward the proposed changes last November, and these have been under discussion by the other EU bodies in the year since.

The new methodology involves calculating dumping margins for imports from countries outside the bloc based on “significant market distortions,” among other provisions. Also among the changes is a requirement to consider global standards on environment and labour when conducting these probes. (See Bridges Weekly, 10 November 2016)

“We believe that the changes agreed today to the legislation strengthen EU’s trade defence instruments and will ensure that our European industry will be well equipped to deal with the unfair competition they face from dumped and subsidised imports now and in the future,” said EU Trade Commissioner Cecilia Malmström.

“With today’s successful outcome, the EU will have an anti-dumping methodology in place which will deal head-on with the market distortions which may exist in exporting economies,” she added.

The push to finalise this new methodology came under the spotlight given the ongoing debate over how to address China’s status as a “non-market economy” in anti-dumping investigations. (See Bridges Weekly, 24 March 2016)

When the Asian giant joined the WTO in 2001, Article 15 of its accession protocol addressed the issue of price comparability when calculating dumping margins and determining subsidies. The wording of the section sparked a debate as to whether the methodology used on cases involving China should automatically change once Beijing hit its fifteenth anniversary as a WTO member in late 2016.

“This is not about any country in particular, simply about making sure that we have the means to take action against unfair competition and the dumping of products in the EU market that leads to the destruction of jobs,” said European Commission President Jean-Claude Juncker after the meeting in Strasbourg last week.

How this change will be received by Beijing is not yet clear. Earlier this year, a spokesperson of the Chinese Ministry of Commerce Sun Jiwen said that the proposed amendments still use an approach which is “discriminatory, unfair, and against the WTO regulations.” China has filed two WTO disputes against the EU (DS516) and the US (DS515) on their price comparison methodologies, the former of which is at the panel stage. (See Bridges Weekly, 11 May 2017)

Mechanics of the new proposal

Under the current anti-dumping regulation, the EU separates countries into lists depending on whether they meet certain market economy criteria, which in turn determines how dumping margins are calculated.

Dumping margins are usually derived from the difference between “normal value” and export prices in the country under scrutiny, with domestic prices and costs used to calculate the normal value. For non-market economies, however, investigative authorities instead use data from a market economy country when calculating this normal value.

The new legislation drops the list system in favour of calculating dumping margins in response to “market distortions” or an outsized role of the state in the national economy.

China is not the only country facing a “surrogate” approach in anti-dumping investigations. Other WTO members also featured on the previous non-market economy list include Albania, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Tajikistan, and Vietnam. Some non-WTO members are also on the list, namely Belarus, North Korea, Turkmenistan, and Uzbekistan.

According to a European Parliament briefing note, “unfair” trade practices affect only 0.21 percent of the EU’s imports. However, “protection against dumped and subsidised imports from China has been vital for a range of EU industries,” the report says.

The European Commission stresses that the new legislation will help to deal with the “current realities – notably overcapacities – in the international trading environment.” The overcapacity debate has grown in prominence in recent years, particularly given the ongoing crisis in the steel sector.

As the largest global producer of the metal, China’s role in the sector has drawn interest from its trading partners, and the two sides have repeatedly discussed how to address the crisis without exacerbating trade tensions further. (See Bridges Weekly, 15 September 2016)

Votes coming up

The deal still needs to finish going through the bloc’s legislative approval process before going into force.

The package will be voted on this Thursday, 12 October, at the European Parliament’s International Trade (INTA) Committee. Assuming it goes through, the entire legislature will vote on it next month.

ICTSD reporting; “Spotlight: EU heightens its protectionism wall by passing new anti-dumping draft law,” XINHUA NEWS, 4 October 2017.

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