There is a lot of speculation about the exact content of the planned trade defence instrument overhaul the Commission will propose ahead of a December deadline to stop treating China as a non market economy in its antidumping proceedings. The proposal is expected to be sent to member states and likely made public on Wednesday (9 November 2016), ahead of a Council meeting on Friday (11 October 2016).
There is however already some indication of what the Commission wants to do.
The Commission wants a “US-style” antidumping system, its officials have consistently repeated in recent months.
But what exactly this means is still unclear. What we know is that there will be two main elements: make antidumping-decisions an administrative decision, rather than a legislative act, as is the case today, and increase the scope for imposing potentially very high duties. This means removing the so-called lesser-duty rule, which currently tempers the levels of antidumping duties in the EU. The absence of lesser duty rule in the US system allows Washington to charge antidumping duties that go into the triple digit percentage levels.
The Commission won’t probably want to move all the way on the above goals, given the sharp divisions among member states on this issue, and its own relatively liberal traditional approach to antidumping – compared notably to the US. However it needs to accommodate US system enthusiasts such as Paris.
In a briefing note sent to the press, the Commission released some rather cryptic indications of the type of compromises it is seeking: “when a threat of retaliation exists, enable investigations to be initialled without an official request from industry”, the Commission proposes. This means that Chinese cases in particular would be dealt with at the Commission’s discretion.
On the lesser duty rule, the Commission appears to be trying to broker a compromise by restricting the planned lifting of the lesser duty rule to raw material markets. In these markets, the Commission wants to “enable higher duties to be imposed on imports from countries that use unfair subsidies and create structural distortions, deviating for the EU “lesser duty rule” whereby duties must not be higher than what is necessary to prevent injury for an EU industry”.
The second pillar of the EU’s trade defence instrument overhaul is introducing changes to its standard methodology to calculate dumping margins.
The Commission has already announced it wants to stop targeting China – and other non-market economies such as Vietnam or Mongolia – in separate discriminatory legislation as it does today with its current list of non market economies to which it applies a WTO-inconsistent ‘analogue country’ methodology. Instead it basically wants to be able to discriminate at will against anyone.
Lawyers Borderlex has talked to expect the Commission to develop a rather fuzzy methodology that leaves it a lot of room for discretion. In its latest statement, the Commission said that the new methodology aims to capture various market distortions. In this, “several criteria would be considered, including state policies and influence, the widespread presence of state-owned enterprises, discrimination in favour of domestic companies and the independence of the financial sector”. This, the Commission believes, would allow it to tackle situations such as the current overcapacity in China’s steel sector, which is – at least partly – attributable to government subsidies to the sector in China.
Some observers say this new methodology could fall afoul of WTO rules. However, observers say, most member states – except the Nordics and the UK – the European Parliament, and major industry and business groups (steel, Business Europe) seem to demand a solution to the China MES conundrum that precisely involves violating WTO rules: the Commission would have no choice but to go down that path. Its new proposal would be a way to gaining time vis-à-vis the WTO. Greater Commission discretion in making antidumping moves and in its methodology would allow it to apply WTO-inconsistent moves in a more selective way, making it harder to move against the EU in the WTO’s dispute settlement system.
