TWN Info Service on WTO and Trade Issues (May18/01)
2 May 2018
Third World Network
       
New EU anti-dumping methodology comes under criticism
Published in SUNS #8672 dated 30 April 2018

Geneva, 27 Apr (Kanaga Raja) - A number of Members voiced deep concerns at the World Trade Organisation (WTO) this week over a revised European Union regulation on protection against dumped and subsidised imports from countries not members of the EU.

These concerns were voiced at a meeting of the Committee on Anti-Dumping Practices on 25 April, where the EU introduced its new Regulation, (EU) 2017/2321 of the European Parliament and the Council of the European Union of 12 December 2017, which establishes a new methodology for determining "normal value" where "significant distortions" exist.

According to trade officials, a number of Members who had expressed concern s over the draft EU legislation at past meetings of the Anti-Dumping Committee said that they considered the final version, which entered into force last December, to be in violation of WTO rules.

Meanwhile, the Committee also heard concerns over recent anti-dumping actions taken by China, Indonesia, Israel, Pakistan, Ukraine, the United States and Brazil.

In Regulation (EU) 2017/2321, published in the Official Journal of the European Union on 19 December 2017 (L 338/1), the European Parliament and the Council of the European Union said: "This Regulation is without prejudice to establishing whether or not any WTO Member is a market economy or to the terms and conditions set out in protocols and other instruments in accordance with which countries have acceded to the Marrakesh Agreement Establishing the World Trade Organization done on 15 April 1994."

"In light of experience gained in past proceedings, it is appropriate to clarify the circumstances in which significant distortions affecting to a considerable extent free market forces may be deemed to exist. In particular, it is appropriate to clarify that this is the case when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention.

"It is further appropriate to clarify that when assessing the existence of significant distortions regard should be had, inter alia, to the potential impact of on e or more of the following elements: the market in question being to a significant ex tent served by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country; state presence in firms allowing the state to interfere with respect to prices or costs; public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces; the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws; wage costs being distorted; access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state.

"The Commission should produce, make public and regularly update reports on significant distortions, which could potentially result in an anti-dumping investigation, describing the market circumstances concerning those instances in a certain country or a certain sector. Such reports and the evidence on which they are based should be placed on the file of any investigation relating to that country or sector. In such investigations, interested parties should have ample opportunity to comment on the reports and the evidence on which they are based. When assessing the existence of significant distortions, relevant international standards, including core conventions of the International Labour Organisation (ILO) and relevant multilateral environmental conventions, should be taken into account, where appropriate.

"Costs are normally calculated on the basis of records kept by the exporter and producer under investigation. However, where there are direct or indirect significant distortions in the exporting country with the consequence that costs reflected in the records of the party concerned are artificially low, such costs may be adjusted or established on any reasonable basis, including information from other representative markets or from international prices or benchmarks. Domestic costs may also be used, but only to the extent that they are positively established not to be distorted, on the basis of accurate and appropriate evidence.

"When data are sourced in representative countries and the Commission has to establish whether the level of social and environmental protection in such countries is adequate, it is necessary for the Commission to examine whether those countries comply with core ILO and relevant multilateral environmental conventions".

The EU's notification of the new Regulation to the Anti-Dumping Committee is in document: G/ADP/N/1/EU/ 3/Suppl.2.

At the Committee meeting on 25 April, the EU delivered a long statement introducing its new Regulation (EU) 2017/2321 on protection against dumped and subsidized imports from non-EU countries.

According to trade officials, the EU statement addressed a number of questions posed by Saudi Arabia, Mexico and Russia regarding the new Regulation, namely, how it will be applied; how the EU will determine "significant distortion"; how it will calculate normal value in such circumstances; how the EU will apply "social and environmental protection" factors in selecting appropriate representative countries in determining normal value; and the preparation of EU Commission reports on significant distortions.

The EU said that the actual application of the new methodology will depend to a large extent on the particular circumstances of a country where the exported good originates and the extent of government intervention.

According to trade officials, Saudi Arabia said that the answers provided by the EU raised further questions. It added that the amendments to the earlier EU legislation were of serious concern.

According to Saudi Arabia, the concept of "significant distortion" is a clear departure from the disciplines established under the WTO's Anti-Dumping Agreement (ADA).

It argued that the Anti-Dumping Agreement only spells out three circumstances under which investigating authorities may depart from the rule of using reported domestic prices for the calculation of normal value, and "significant distortion" is not one of the three permitted exceptions.

Saudi Arabia further said that the Appellate Body had clarified in EU - Anti-Dumping Measures on Biodiesel from Argentina (DS473) that reliable data supplied by the domestic producer cannot be rejected in favour of third country prices simply because the domestic prices are too low.

The lack of clarity and the concepts upon which the new EU methodology is based is very concerning, Saudi Arabia said.

It wanted the EU to explain how it would ensure a fair and objective assessment by its authorities.

The Russian Federation said that it continues to believe that the EU amendments were in violation of WTO rules, especially in the context of evolving WTO jurisprudence.

According to Russia, certain aspects of the amended legislation are unclear and create great uncertainty for exporters.

It also asked why the EU Commission had decided to make Russia the focus of its second report on significant distortions and what other countries would be subject to these reports.

It said the EU could still stop short of breaching its WTO obligations by never applying the amended normal value methodology.

China said it had deep concerns about the EU's new Regulation. It pointed out that the "significant distortion" methodology for calculating normal value would damage the WTO's anti-dumping legal system and increase uncertainty for exporters.

The concept of "significant distortion" does not exist under WTO rules, China argued, saying that both the Anti-Dumping Agreement as well as Article VI of the General Agreement on Tariffs and Trade (GATT) do not provide any legal basis for members to establish normal value outside a strict comparison with the domestic prices in the country of origin.

China called on the EU to respect its WTO obligations and apply a non-discriminatory approach to all members.

Similar concerns over the new EU Regulation were also expressed by Bahrain, Argentina, Kazakhstan and Oman.

Kazakhstan said it had serious concerns regarding the compatibility of the Regulation with WTO rules.

Argentina argued that both the Anti-Dumping Agreement and GATT rules as well as WTO rulings in DS473 (EU - Anti-Dumping Measures on Biodiesel from Argentina) confirmed the need to use domestic prices as the basis for deter mining normal value.

The United States said that the discussion on the EU Regulation highlights that appropriate tools are available to members under WTO rules, including under the Anti-Dumping Agreement, to address certain distortions which impact international trade.

OTHER ANTI-DUMPING MATTERS

At the Committee meeting, Japan reiterated its concerns over longstanding U S AD duty orders on imported Japanese goods, pointing out that eighteen US measures are still in place, with the longest measure being in place for more than 39 years and 13 of them in force for more than five years.

It called on the US to swiftly revoke these measures.

The US said it did not agree with Japan that, just because a measure was old, it was no longer justified.

In any case, the US maintained, of the 64 measures applied to Japanese products that have been reviewed, 51 - or 80% of the total - were terminated.

For the rest, Japanese firms failed to meaningfully participate in the reviews, it claimed.

The US asked Japan to ask its firms why they have declined to participate.

According to trade officials, Indonesia expressed concerns about the use by US Department of Commerce of the practice of "particular market situation" (PM S) in its AD investigations.

Under Section 504 of the Trade Preferences Extension Act of 2015, the US Commerce Department has the authority to address market distortions in the production of foreign merchandise as part of its calculation of dumping mar gins in anti-dumping proceedings.

Indonesia said that the US used PMS in its investigation on Indonesian biodiesel and made a subsidy finding, rejecting the costs reported by exporters and u sing costs in a surrogate country.

Indonesia underlined that this practice has been found to be inconsistent i n two WTO rulings, namely DS473 (EU - Anti-Dumping Measures on Biodiesel from Argentina) and in DS480 (EU - Anti-Dumping Measures on Biodiesel from Indonesia).

Indonesia also argued that the US "double counting" had led to higher combined AD and countervailing duties.

In response, the US said that this methodology was first applied in April 2 017. It was applied in Commerce's investigation on alleged dumped biodiesel from Indonesia, where it found that particular market situations existed with regards to home market sales as well as reported costs of palm oil used in biodiesel production.

The US asked Indonesia to refer to Commerce's memorandum on the matter to address its questions.

Korea again took issue with the US use of "adverse facts available" in its AD investigations, a practice which gives the US Commerce Department discretion to apply higher rates of duties without reflecting the actual margin of dumping.

In a case involving oil country tubular goods (OCTG) from Korea, Commerce applied total "adverse facts available" which resulted in much higher duties than those in the preliminary determination.

Korea said that it had serious concerns about the US practice and that it was planning to take action based on relevant rules and procedures.

The US said that this issue had been discussed at previous meetings, and that it was engaging on the issue with Korea bilaterally.

The US said since the matter was currently in litigation, it would be inappropriate to comment further at this time.

Meanwhile, Japan voiced concerns over a Chinese AD investigation initiated on acrylonitrile-butadiene rubber last November.

It argued that the Chinese authorities failed to demonstrate a significant increase in imports and presented no facts showing a link between the alleged dumped imports and injury to the domestic industry which would justify the initiation of an investigation.

China said that the investigation is still ongoing and that it would proceed in a reasonable and objective manner strictly in line with requirements under the Anti-Dumping Agreement.

Brazil voiced concerns over a decision by China last August to initiate an investigation on imports of Brazilian broiler (chicken) products.

According to Brazil, Chinese producers were not suffering any injury from the alleged dumped imports and that China failed to analyse all other factors which must be analysed for a finding of injury.

China said it understood the importance of the Chinese broiler market for Brazilian exporters and that the two countries were enjoying very good economic relations.

However, there has been a significant decline in domestic prices coupled with an increase in Brazil's share of the overall market which has injured domestic producers. China said it would seek a win-win solution to the problem.

Meanwhile, Kazakhstan expressed concerns over Indonesia's decision to extend an AD order on imports of hot- rolled coil from Kazakhstan, Russia and Belarus, all of whom are members of the Eurasian Economic Union (EAEU).

According to trade officials, Indonesia said that it only learned of the creation of the EAEU after the initiation of its sunset review and decided to apply the measure to all EAEU customs union members to ensure the effectiveness of the AD measure and avoid circumvention of the duties.

Turkey expressed concerns over the decision by Israeli authorities to issue a preliminary AD determination on imports of Portland cement.

It argued that most of the information in the domestic industry's petition for relief was not supplied by the complainant.

Turkey pointed out that non-petitioning producers accounting for 90% of tot al domestic production didn't supply data, so the authorities cannot source in jury.

It further said that it expects Israel to terminate the investigation without any measure.

Israel said that it has not applied any provisional measure and that it would respond to Turkey's concerns in writing.

Brazil voiced objections to Pakistan's decision in February to impose AD du ties on uncoated writing and printing paper from Brazil. It said that Pakistan failed to comply with deadlines under the Anti-Dumping Agreement for completing its investigation.

Pakistan said that the investigation was suspended due to a domestic court challenge. It was of the view that the investigation met the 18-month limit under the Anti-Dumping Agreement for completing an investigation if this suspension period was exempted.

Meanwhile, Russia voiced concerns over Ukraine's decision to extend an AD order on imports of ammonium nitrate from Russia. It argued that Ukraine actually broadened the scope of the dumping measure to cover products not subject to the original investigation, including fertilizers.

Russia also voiced concerns over Ukraine's decision to initiate an AD investigation on carbamide-formaldehyde from Russia.

It said that there was insufficient evidence of dumping as well as a causal link between dumping and injury to domestic producers to justify the investigation.

Meanwhile, the Anti-Dumping Committee's Informal Group on Anti-Circumvention heard a presentation from India on its experiences in conducting anti-circumvention investigations.

According to trade officials, India explained that under its legal provisions, circumvention covers cases where an article is imported unassembled or incomplete and then completed or assembled in India; exported to another country unassembled or incomplete and then imported and assembled in India; altered in description or name and subject to a dumping duty: where the country of origin or export is changed; and other manners of circumvention.

According to trade officials, the US, the EU, Pakistan, Australia, Argentina, South Africa, Morocco, Thailand and Paraguay posed questions to India about its anti-circumvention practices.

Canada also informed that it would be making a presentation on its new anti-circumvention regulations at the Committee's meeting this October.

The Committee confirmed the appointment of Ms Karine Mahjoubi Erikstein of Norway as its chair for 2018, replacing Mr. Faisal Saud Sulaiman Al-Nabhani of Oman.