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The European Commission has published its proposal for a new method of calculating dumping on imports from countries where there are significant market distortions or state intervention.
It aims to ensure that Europe has trade defence instruments able to deal with current realities – notably overcapacities – in the international trading environment, while respecting its international obligations.
It says the EU needs to ensure that its trade defence instruments remain effective in dealing with significant market distortions in certain countries that can lead to industrial overcapacity, and that encourage exporters to dump their products on the EU market.
The Commission also proposes to strengthen EU anti-subsidy legislation so that, in future cases, any new subsidies revealed in the course of an investigation can also be investigated and included in the final duties imposed.
EU Trade Commissioner Cecilia Malmström commented: “The proposal is important because it means that the EU is living up to its WTO commitments. This method is country neutral and does not grant ''market economy status'' to any country. The proposal, once adopted by the European Parliament and the Council, will ensure that the EU''s Trade Defence Instruments are adapted to face new challenges as well as our legal and economic realities."
The Commission is evidently seeking to avoid a direct response to China’s expectations it is granted market economy status from 11th December. In contrast the United States has been adamant that China should continue to be treated as a non-market economy.
If successful the proposal means China would no longer be subject to the so-called analogue country methodology, which would only be applied to non WTO member countries. In the last carbon steel fastener investigation this mechanism contributed to initial anti-dumping duties of 85%.
The Commission plans to retain the current approach, for normal market circumstances, of calculating dumping by comparing the export price of a product to the EU with the domestic prices or costs of the product in the exporting country. It says it will complement this with new methodology that will apply the same way to all WTO members but will “take into account significant distortions in certain countries, due to state influence in the economy”.
In determining distortions, the Commission says several criteria will be considered, “such as state policies and influence, the widespread presence of state-owned enterprises, discrimination in favour of domestic companies and the independence of the financial sector”. The Commission will draft specific reports for countries or sectors where it identifies distortions. EU industry representative bodies will still need to file complaints but will be able to use the reports to support their case.
When the Commission identifies distortions, the new methodology would allow it use “benchmarks, or corresponding costs of production and sale including in an appropriate representative country with a similar level of economic development as the exporting country”. It is unclear how this methodology would differ from the analogue country mechanism. One trade law expert has already describing it as a ‘rebranding’ exercise of previously methodology found to violate international trade rules. While clearly aimed at providing the Commission greater flexibility to target alleged market distortion in any WTO member country, there are doubts, including from an MEP exert in trade law, whether it could withstand Chinese legal challenge at the WTO. China is already threatening to challenge the continuation of existing investigations under current EU rules beyond 11th December, when it expects to gain market economy status.
The Commission says its impact assessment demonstrates that the new methodology will result in a broadly equivalent level of anti-dumping duties as is currently the case. It appears to run the risk of pleasing none of the people none of the time, with both EU manufacturers and importers deeply concerned about the implications and resilience of the proposed new law.
To come into force the proposal now requires the approval of both the European Parliament and the Council of Europe.
-The 18th China(Guangzhou)Int’l Fastener
& Equipment Exhibition
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