Revamp of EU Trade Defence Rules Takes Effect

14 June 2018

New EU trade defence rules are now in place as of 8 June, completing what officials called a significant and long-awaited “overhaul” of the bloc’s trade defence instruments (TDIs). The changes are meant to modernise the set of trade defence tools at the EU’s disposal, including its anti-dumping and anti-subsidy rules, in light of an evolving global economy. 

The new legislation complements an updated anti-dumping methodology that went into effect in December 2017 and focused on tackling alleged “market distortions,” including with industrial overcapacity situations. (See Bridges Weekly, 12 October 2017

The TDI modernisation package now in force covers a suite of trade defence issues, with the objective of improving trade rule enforcement while curbing the length of trade remedy probes, along with making it easier for smaller companies and other stakeholders to get involved in the process. Officials say these changes could have benefits for business planning, reducing uncertainty along with making it easier for investigators to account for sustainability issues in trade remedy probes. 

European Trade Commissioner Cecilia Malmström said, “I am very confident that this provides us with the necessary tools to efficiently defend our industries from unfair trade practices.” 

“We believe in open, rules-based trade. Now, we are better equipped to stand up for our companies if other countries don't stick to the rules,” she added. 

Years in the making

The new rules reflect several years of negotiations and technical discussions with various stakeholders. Officials say that the changes are designed to benefit not only European manufacturing, but also importers, downstream users, and other actors of varying size across value chains. 

According to the European Commission, the updates were necessary to ensure continued effectiveness of the EU’s trade defence in light of new global challenges, along with domestic concerns such as the ability of companies of varying sizes to use the EU trade remedy tools at their disposal. 

For example, new policies include setting up better systems to support smaller companies when navigating the trade remedy process. Another innovation, officials say, are provisions to give trade unions a specific role in trade defence investigations, including the option of pairing up with companies to lodge petitions for remedy and otherwise being involved in cases, though with some limitations. 

Streamlining and curtailing the length of EU trade remedy probes are also among the main changes now in force, allowing for the EU executive to put provisional anti-dumping measures in place sooner and requiring that trade remedy probes be closed within 14 months. 

Another change is focused on allowing European industry more time to prepare for “provisional” measures being imposed on imports from abroad, and thus adjusting their own practices accordingly. This includes, for example, giving the parties involved or affected by a case advance warning. To head off the concern that some importers may use that extra time to “stockpile” imports within this period, officials say that specific preventative measures will be adopted, and the EU executive will review the effects of this policy in 2021 to judge whether it is working as intended. 

Other changes include compensation to businesses when the Commission decides to terminate a measure, such as anti-dumping or countervailing duties, with some conditions. The latter are also sometimes known as anti-subsidy duties.

The TDI package also improves the accuracy of calculations of injuries by incorporating a more complete set of costs, according to Brussels officials. This should allow the Commission to impose higher duties than under previous rules, officials say, better accounting for certain conditions in exporting countries. The new rules also aim to close a loophole for offshore dumping, expanding the reach of TDIs to activities on the “continental shelf,” with Brussels officials citing offshore wind farms or oil rigs as examples where these instruments can now be applied.

Incorporating a greater sustainability dimension

Proponents of the updated TDI package have also highlighted its new mechanisms aimed at supporting European sustainable development objectives, and has also pledged to track and report on these mechanisms’ progress regularly. The 28-nation bloc has repeatedly noted the importance of building its trade rules and international trade agreements around shared values, including under its current “Trade for All” strategy. (See Bridges Weekly, 15 October 2015

Most of the changes involve incorporating the costs of sustainability standards or objectives, while also taking into account how these costs may evolve over the duration of a trade remedy measure. Examples where this could prove especially useful, the Commission says, include for instance in the context of carbon pricing mechanisms, which are an essential aspect of the bloc’s climate action policy. 

Other changes involve both the adoption and interim review of “price undertaking” agreements, which the EU’s executive arm can now drop in cases when an exporting country has not ratified important international environmental or labour agreements, or has changed its involvement with these agreements or other sustainability standards during the application of a trade remedy measure. 

A price undertaking agreement is where an exporting producer commits to meeting a “minimum import price” as an alternative to paying duties, where the price floor is meant to eliminate the potential effects caused by alleged dumping or subsidies. Among the most notable use of price undertaking deals in recent years was the one in place between the EU and China on certain imported solar products. (See Bridges Weekly, 5 September 2013

ICTSD reporting.

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