The aim of trade defence proceedings is to impose additional duties, or – in some cases – price or quantitative limitations – on imports of goods into the European Union. The official purpose of these proceedings is to protect EU producers of competing goods from injury or threat of injury from these imports. In most cases, these imported goods must be traded “unfairly”, i.e., at dumped or subsidized prices. Special rules apply in determining when goods are dumped or subsidized. When imports are increasing at particularly high rates, the conditions may be met for a “safeguard” proceeding, which does not require proof of unfair trade; huge import volumes may be sufficient. However, safeguards are extremely rare in EU practice.
ANTI-DUMPING / ANTI-SUBSIDY
The proceedings are run by the European Commission, DG Trade, at the request of EU producers. Special rules apply to determining when EU producers may request protection, and representativeness of EU producers asking for protection vs. the entire EU industry, their relationship with foreign exporters and whether or not they import themselves, are all considered.
At key stages of the proceedings, the European Commission must consult – or even get approval from – EU Member States, acting through the so-called Advisory Committee. If the European Commission proposes the imposition of measures at the end of the proceeding, these are imposed by a simple majority of EU Member States. EU producers, foreign exporters and EU users, importers, distributors and retailers of the imported merchandise, as well as various associations may register to participate in the proceedings.
The European Commission collects data on the proceeding through questionnaires issued to various parties, which are analyzed by the European Commission and verified on-spot during verifications. While confidential data is protected and not shared among the parties, the participating parties have access to each other’s’ non-confidential submissions and may comment thereon.
Duties are imposed at the rate of dumping, or subsidization, unless a lower duty is sufficient to offset the injury caused by imports. In practice, European Commission calculates a dumping or subsidy margin to determine the rate of dumping or subsidization of the product, and an injury margin to determine what price increase of imports is sufficient to offset injury. The lower of the two margins is imposed as an additional customs duty on the imports of the product. In most cases, the duties are ad valorem, i.e., a percentage of import value. In special cases, a specific duty (certain amount of money per unit of weight may be imposed). In other cases, a minimal import price may be available (i.e., no duties are imposed, as long as the import price is higher than a minimal price calculated during the proceedings).
EFFECT ON COMPANIES
The rationale for trade defence duties is that they provide EU producers with protection from cheap imports, which offers them some breathing space to increase prices and profitability and/or regain market EU market share. Ideally, such measures also allow these companies to restructure to face competition once duties are gone. In this respect, they are very positive. However, they may also have many negative impacts on other players.
First, they clearly create trade barriers for foreign exporters of goods subject to the proceedings. While this may be perceived to be good, since imports are “unfair”, complicated and questionable methods by which dumping is determined to exist often results in finding of dumping when foreign companies play by market rules and are simply more competitive. This is particularly the case with respect to imports from the so-called “non-market economy” countries, such as China. Thus foreign companies that are simply more competitive than some of the EU producers asking for protection may be unnecessarily affected.
Second, trade remedy measures may artificially protect uncompetitive EU companies, which – while may help these companies – may negatively affect other EU companies that are more competitive. In short, such duties may prevent the restructuring of EU industry by providing unnecessary aid to uncompetitive EU companies and prevent competitive EU companies from getting higher market share and acquiring the less competitive ones.
Third, EU companies importing goods subject to the measures – particularly in the raw materials and semi-processed products sectors – may have higher raw material costs, which in turn may increase the cost of production of their higher added-value goods, adversely affecting their profitability. This would be unwelcome, as the overall policy of the EU is to move manufacturing up the value.
The EU decision-making process in trade defence proceedings aims to consider and weight all the above factors before an ultimate decision whether to impose the duties is made.