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Trade defence | Brussels, 5 October 2017

The EU is changing its anti-dumping and anti-subsidy legislation to address state induced market distortions

The European Parliament and the Council have agreed to change the EU’s anti-dumping and anti-subsidy legislation following a proposal from the European Commission from November 2016.

The main change to the anti-dumping legislation is the introduction of a new way to calculate dumping in anti-dumping investigations on imports from members of the World Trade Organization (WTO) in case prices and costs are distorted because of state intervention. The changes do not target any particular country. In addition to a new methodology for calculating dumping, there will be transitional arrangements for trade defence measures which already exist as well as for ongoing investigations. A change to the EU's anti-subsidy legislation has also been agreed regarding the way the EU investigates subsidies provided by governments outside the EU which give their exporting producers an unfair advantage, causing damage to manufacturers in the EU.

What are anti-dumping duties and how are they calculated?

Under WTO rules, the EU can impose anti-dumping duties on products from countries outside the EU if an investigation demonstrates that these products enter the EU at dumped prices (prices that are below normal value) and that have a negative economic impact (cause injury) on EU industry.

Under standard rules for normal market circumstances, dumping is calculated by comparing the export price of a product to the EU with the domestic prices, or costs, of the product in the exporting country.

What will be the new methodology for calculating dumping margins, and what countries will be affected?

For WTO members, the dumping margin is normally calculated under the standard rules mentioned above.However, domestic prices and costs can be distorted owing to state interference. In this case, they do not provide a proper basis to determine the comparison with the export price. Under the new methodology when it is not appropriate to use domestic prices or costs due to these distortions, other benchmarks reflecting undistorted costs of production and sale will be used. These could include benchmarks, or corresponding costs of production and sale including in an appropriate representative country with a similar level of economic development as the exporting country. This new methodology will allow the Commission to establish the actual magnitude of dumping where distortions exist.

There is no list of countries to which the new methodology applies – it will be used in dumping cases if significant distortions are found in the exporting country concerned which impact on prices and costs.

What type of state interference affects the reliability of prices and costs in an exporting country?

State interference can occur, for instance, when a market contains a large number of firms operating under the ownership, control or guidance of the authorities of the exporting country. It could also occur where there is a state presence in firms allowing for interference in prices or costs or pursuing policy objectives. Other examples are public policies discriminating in favour of domestic suppliers, or exporters' access to financing pursuing public policy objectives.

Under the new methodology can costs in the exporting country be used to calculate dumping?

Domestic costs in the exporting country are used where they are undistorted by state interference. The legislation ensures that there is no ambiguity: distorted costs will not be used in the new methodology. This was a primary concern in the drafting of the legislation.

How would the Commission decide if the economy of a country is distorted?

The Commission intends to prepare and issue reports describing the specific circumstances of the market in any given country or sector. These reports and the evidence on which they are based would become part of any anti-dumping investigation into that country or sector, and would be publicly available. EU industry could also use information from these reports when lodging a complaint or a request for review.

Will poor social and environmental standards be taken into account in the new methodology?

For the first time, social and environmental standards will play a role in the context of trade defence. Notably, where the Commission has a choice between a number of appropriate representative countries with a similar level of economic development as the exporting country under investigation, the level of social and environmental protection in the representative source country will be taken into account in the selection.

When will the changes become effective and will they apply to all anti-dumping cases?

The agreement was reached in a 'trilogue' meeting between the Parliament, the Council and the Commission on 3 October 2017. Before the changes can come into effect, certain institutional procedures must be followed by the Parliament and the Council. Once all these necessary steps by each co-legislator have been taken, the legislation will be published in the Official Journal of the EU. This is expected to happen before the end of the year.

The changes will be introduced in an orderly and transparent manner and without disruption to ongoing trade defence cases. The new methodology wil only apply to cases initiated following the entry into force of the amended provisions. Any ongoing anti-dumping investigations at the time of entry into force would remain governed by the existing rules.

In interim reviews of existing trade defence measures in place, the new methodology will only be applied as from the time of the next scheduled expiry review of those measures. In addition, the legislation makes clear that without other changes in circumstances existing measures should not be reviewed just because a new calculation methodology is adopted.

Do the changes grant 'market economy status' to any country?

These changes will not lead to any country being granted 'market economy status'. The proposal is about introducing a dumping methodology which can take into account the changes in the global trading environment, as well as changes in the legal framework of the WTO.

What is the relationship between the changes agreed and the modernisation package adopted by the Commission in 2013?

These are separate issues and the changes agreed now do not replace the proposal on the modernisation of trade defence instruments (TDIs) which was adopted by the Commission in April 2013.

The modernisation proposal does not cover any changes to the methodology for calculating dumping. The modernisation proposal deals with improved transparency, faster procedures, more effective enforcement and proposes changes to the application of the lesser duty rule in certain well-defined circumstances.

The modernisation proposal is currently the subject of ongoing trilogue discussions . In line with the conclusions of the June European Council, the Commission urges the Parliament and the Council to swiftly adopt these changes to modernise our trade defence instruments.

What will change in the EU's anti-subsidy legislation?

Experience has shown that the actual level of subsidies is not always clear when anti-subsidy investigations are launched. Exporters are often found to benefit from subsidies that could not have been known before carrying out the investigation. Yet, those subsidies clearly provide an unfair benefit, which allows exporters to sell products at prices that damage EU industry. The changes proposed would ensure that any additional subsidies found during the investigation can be properly reflected in the calculation of the anti-subsidy measure.

Will the burden of proof be shifted from the Commission to EU industry?

No. The changes do not impose any additional burden on EU industry when using the instruments. It is the Commission who will have the additional work to establish that significant distortions exist in a particular country. When lodging a request for the initiation of an anti-dumping investigation EU industry will be able to rely on the Commission's detailed country and sector level reports as evidence that distortions exist.

For more information

Press release

EU Trade defence policy