November 19, 2017

EU Future Anti-dumping Rules, China Claims WTO Obligations

EU Pushes Forward with Future Anti-dumping Rules, While Mainland China Claims that Rules Still Breach EU’s WTO Obligations

Subsequent to the informal agreement on the EU’s new anti-dumping methodology which was struck between negotiators from the European Parliament and EU ministers on 3 October 2017, mainland China claims that the EU will continue to breach its WTO obligations after the introduction of its revised anti-dumping rules.

While on 12 October 2017 a spokesman for the Ministry of Commerce of mainland China  urged the EU “to strictly abide by the rules of the WTO, in good faith and comprehensively fulfil its international treaty obligations”, it nevertheless appears that mainland China will not be taking any immediate action. As stated by the spokesman, mainland China “will pay close attention to the relevant trends in the EU and, if necessary, take appropriate measures to resolutely safeguard the legitimate rights and interests of China”.

The new EU anti-dumping methodology will be formulated in a country-neutral manner, abolishing the current distinction between market and non-market economies. Instead, a new methodology for calculating dumping margins for imports from third countries where significant market distortions exist will be introduced. This will particularly be the case where the State has a pervasive influence on the economy.

Pursuant to the future changes, EU investigators will be able to construct the normal value of exporting producers on the basis of costs of production and sale reflecting undistorted prices or benchmarks, including undistorted international prices and costs, in case it is determined “that it is not appropriate to use domestic prices and costs in the exporting country due to the existence of significant distortions”.

Under the new anti-dumping methodology, when the European Commission has well-founded indications of the possible existence of significant distortions, the Commission will produce (and regularly update) special reports describing the market circumstances in a certain country or a certain sector. When filing anti-dumping complaints, EU companies will be able to use these reports and the evidence contained therein to support their case.

In addition, the new EU anti-dumping rules will take into account international labour and environmental standards and will not place an additional burden of proof on EU companies in anti‑dumping cases.

Urve Palo, Estonia’s Trade Minister, stated that the new EU anti-dumping methodology provides “effective tools to fight dumping in important sectors such as steel”, while stating that the rules are “fair, fully in line with WTO requirements, and … will apply in the same way to all countries with whom the EU is trading”. Estonia currently holds the rotating Presidency of the Council of the EU.

The EU claims that it will treat all exporting countries with “significant market distortions” in the same manner, without discriminating against mainland China. However, in reality, it appears that the Commission is – for the time being – only planning to provide a report on the market distortions in mainland China. Except for the report on mainland China, there are apparently no other reports in the pipeline. The report on mainland China is expected to be available to EU companies on the day of the entry into force of the new EU anti-dumping rules.

As is well known by now in trade law circles, the reform of the EU’s anti-dumping legislation is necessary to bring EU law into line with the change in mainland China’s WTO Accession Protocol. Due to the expiry of certain provisions of the WTO Accession Protocol on 11 December 2016, Beijing insists that it should be treated as a market economy in EU anti-dumping investigations as of 12 December 2016. Mainland China challenged the EU’s current anti-dumping rules at the WTO on 12 December 2016.

The European Commission’s proposal on the EU’s new methodology to combat dumping from third countries was presented on 9 November 2016. The negotiating position of the Council was approved on 3 May 2017, and the European Parliament determined its definitive negotiating position on 5 July 2017. The trilogue talks on a final text for the EU’s new anti-dumping regulation started on 12 July 2017.

Following the informal agreement on the EU’s new anti-dumping methodology, which was struck between negotiators from the European Parliament and EU ministers on 3 October 2017, EU ambassadors endorsed the agreement on behalf of the EU Member States on 11 October 2017. One day later, on 12 October 2017, the International Trade Committee of the European Parliament approved the same political agreement, without amendments. The informal agreement was approved by 31 votes to 2 with 5 abstentions.

EU governments are expected to approve the political compromise at the meeting of the trade ministers, which is scheduled for 10 November 2017. The full-blown vote at the European Parliament’s plenary has been scheduled for the November session in Strasbourg, which will be held between 13 and 16 November 2017. Thereafter, the new dumping legislation is scheduled to enter into force on the day following its publication in the Official Journal of the EU. While some sources say that the new rules are expected to come into force before the end of the year, during the second half of December, other sources say that that rules will enter into force on 1 January 2018.

Hong Kong traders should note that, besides this new EU methodology, trilogue negotiations are also taking place with a view to the modernisation of the EU’s trade defence instruments. It is, however, unlikely that an agreement on the modernisation of the EU’s trade defence rules will be reached before the end of the year. National governments and EU lawmakers continue to disagree on two fundamental issues, namely, the dumping tariff limits (the lesser-duty rule) and the notice period before imposing anti-dumping duties.

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