The European Commission made a proposal that aims at adapting the EU's rulebook to tackle unfair competition from dumped and subsidized imports to the contemporary challenges facing the EU's economy.

The proposed changes would make the EU trade defense work better for all stakeholders, including both EU producers and importers. Anti-dumping and anti-subsidy instruments will be more efficient and better enforced to shield EU producers from unfair practices of foreign firms and from any risk of retaliation. At the same time, importers will enjoy greater predictability in terms of changing duty rates, which will make their business planning easier. The entire system will become more transparent and user-friendly.

"This is a balanced package with real improvements for all stakeholders affected by trade defense duties - producers, importers and users," EU Trade Commissioner Karel De Gucht said. "We want to equip EU businesses better to tackle unfair trade practices abroad, while not negatively affecting EU consumers or companies that rely on imports."

According to the legislative proposal, the Commission will:

• Improve the predictability for businesses by informing them about any provisional anti-dumping or anti-subsidy measures two weeks before the duties are imposed;
• Offer importers reimbursement of duties collected during an expiry review in case it concludes that there is no need to maintain the trade defense measures in place after five years;
• Protect the EU industry by initiating investigations on its own ("ex officio"), without an official request from industry, when a threat of retaliation exists;
• Discourage other trading partners from engaging in certain unfair trading practices by imposing higher duties on imports from countries which use unfair subsidies and create structural distortions in their raw material markets. In such cases, the EU would deviate from its general 'lesser duty' rule that keeps the additional tariff within the limit of what is strictly necessary to prevent an injury for an EU industry.

The legislative proposal must be approved by the Council and the European Parliament and will probably not become law before 2014.

Additional non-legislative proposals will

• Facilitate cooperation with firms and trade associations involved in investigations by extending certain deadlines during the investigations;
• Improve monitoring of trade flows;
• Allow ex-officio anti-circumvention investigations to ensure faster action against illegal evasion of measures.

In parallel, a DG Trade working paper sets out 'draft guidelines' in four particularly complex areas:

• The expiry review of a trade defense measure, which is an investigation at the end of the usual five-year application of duties to determine if dumping and injury are likely to continue or recur if measures expire;
• 'The Union interest test', i.e. the way the Commission determines whether a trade defense measure would serve the overall economic interests in the EU - including interests of the domestic industry concerned, importers, industries that use the imported product and, where relevant, consumers.
• Calculation of 'injury margin', which requires an examination of the volume and prices of dumped imports and their consequent impact on the EU industry;
• Choice of an 'analogue country', which is used to determine existence of dumping for products coming from a country without "market economy status".

These draft procedural guidelines will now be subject to a three-month public consultation. Afterwards, the Commission will analyze received comments and adopt the final version in order to make it easier for EU companies and the general public to understand EU trade defense procedures.

Background

Anti-dumping and anti-subsidy duties are often the only way in which the EU can shield its producing industries from the damage caused by foreign companies' unfair trade practices. It is necessary to ensure that the EU's trade defense system - largely unchanged since 1995 - remains relevant to new challenges across the changing economic landscape.

The Commission's proposal comes after an eighteen-month reflection including a public consultation on the issues EU companies have to deal with when faced with unfair practices. The proposal also takes into account the conclusions of an independent study evaluating the current trade defense system and the Commission's experience of anti-dumping and anti-subsidy investigations.

At the end of 2012, the EU had 102 anti-dumping and 10 anti-subsidy measures in force. The European Union is a moderate user of the trade defense instruments compared to other WTO members. Anti-dumping and anti-subsidy measures impact around 0.25% of EU imports.

EU Trade Defense Instruments Must Ensure Fair Access to Raw Materials

As an ardent supporter of free trade, the European chemicals industry supports the modernization of EU trade defense instruments (TDI). Cefic is concerned, however, that the balance of the EU TDI system will be weakened at the expense of EU manufacturers by the Commission proposals recently announced. TDI modernization should not solely be geared towards more flexibility for importers, but first and foremost safeguard the ability of industry to produce jobs and growth in the European Union. The European Union already has the most liberal and non-protectionist set of instruments in the whole WTO community. 

Cefic Director General Hubert Mandery said: "The Commission's attempt to modernize trade defence instruments must keep the balance right between the needs of importers and manufacturers in Europe. If the balance gets out of kilter, Europe's real economy will be more vulnerable to unfair trade than other parts of the world."

The Commission should ensure balance when updating certain aspects of TDIs to better address pressing challenges brought by an increasingly global and intertwined marketplace. Unfair raw materials trade practices should be tackled first. Cefic is pleased to see that the Commission is addressing this issue in its proposal.

Mandery concluded: "Fair access to raw materials is the biggest challenge that our industry faces. We need a tool with sharp teeth to combat dual pricing, export duties and subsidies that unfairly hit us."