Trade & Customs - European Union

Businesses interested in trading with the European Union will have to wait at least another two months before they find out what EU Trade Commissioner Peter Mandelson has planned for the future of the EU trade defence instruments (TDI), including the basic anti-dumping regulation. A long-anticipated reform proposal had initially been scheduled for release in October 2007, but Mandelson recently told the European Parliamentary Committee on International Trade that the proposal will be delayed until late November or early December 2007.

Plans for TDI reform have been in place since the December 2006 publication of a green paper requesting stakeholder input on several potential areas for change. The paper suggested that changes might be appropriate in several key areas of importance for traders, as follows:

• It considered whether the anti-subsidy instrument should be extended to apply to transition economies where individual companies qualify for market economy status. As the United States recently decided to extend its countervailing duty policy to cover certain non-market economies, the European Union is apparently under pressure from European manufacturers to follow suit. This would mean that in addition to anti-dumping actions, Chinese exporters could be subject to EU anti-subsidy investigations.
• It suggested that greater flexibility to fine tune trade defence measures to avoid harm to European consumers may be appropriate in the form of downward adjustments. The EU Directorate General of Trade has suggested that the impact of anti-dumping duties on European consumers should be a key factor in the determination of definitive duties. This would mean that in future, duties on consumer goods could be lower.
• It proposed amending the Community interest test to take account of the trend among European companies to outsource manufacturing processes to transition economies. Potentially this could lead to fewer investigations being opened as the impact of anti-dumping duties to European companies manufacturing abroad would be balanced against the harm to European companies caused by the products dumped on the EU market.

Businesses may find it reassuring that the only changes suggested to the calculation of definitive duties may result in lower tariffs - the paper makes it clear that, in Mandelson's view, consumers' desire for lower-priced goods should be a larger factor in determining the outcome of anti-dumping cases than has previously been the case.

However, the suggested extension of the anti-subsidy instrument to cover transition economies is less reassuring. The extension would follow recent similar changes to US trade defence practices, but would be more limited in that it might apply only to individual undertakings that qualify for market economy status, rather than to whole industries under investigation.

Although Mandelson has taken a largely liberal stance during his tenure, the extension of the anti-subsidy instrument may be an area where pressure from EU trade groups will force the commissioner to move towards stricter protectionist measures. It remains to be seen whether applying anti-subsidy rules to undertakings which qualify for market economy status will affect the criteria for being granted such status in anti-dumping investigations.

While Mandelson has repeatedly stated that the proposed reform will not weaken current TDI legislation, recently he has stressed that changes are needed to ensure that when TDIs are used, they are used effectively. This means that changes are needed to the Community interest test in order to avoid the kinds of conflict between member states which occurred during both the Chinese footwear and energy-saving lamps investigations.

If the Directorate General of Trade's goal in rewriting the Community interest test is to avoid this type of in-fighting between member states, the result could well be fewer overall investigations in the future.

One reason for the current delay seems to be Mandelson's decision to forgo issuing a white paper responding to the more than 540 stakeholder responses to the green paper and instead proceed directly to presenting the proposal in a communication to the European Parliament and the European Council (the first step in initiating new legislation). This suggests that the commissioner believes that some legislative changes are all but imminent.

Mandelson had previously indicated that while some changes to the TDI practice were appropriate, he did not envision a radical departure from the current system. The decision to proceed directly to communicating the proposal, however, could signal that the changes are perhaps bigger than Mandelson had previously indicated.

ILO