July Webcast Q&A Wrap-up 

Presented by Yves Melin

Partner at Steptoe & Johnson LLP

 

Q: When you described the new Article 2(6a) in the Commission’s proposal to modify the EU basic anti-dumping regulation, you explained that this provision would apply only to non-market economies that are members of the WTO.  Why do you say so?

A: The Commission says its proposal to change the EU basic regulation is necessary to address changes at the WTO level concerning ‘certain’ non-market economies.  This is an indirect--albeit clear--reference to China.

Here is what the Commission writes in its proposal:

The circumstances prevailing in certain countries that are Members of the WTO and the experience gathered from the case-law make it appropriate to amend the methodology used to determine the normal value and the dumping margin for the countries concerned, in particular those currently subject to the provisions of Article 2(7)(b) and (c).

As a result, the Commission proposes to amend Article 2(7) and to introduce a new provision, namely Article 2(6) a for WTO member countries.

(2) Articles 2(7)(a) and 2(7)(b) of Regulation (EU) 2016/1036 stipulate the basis on which normal value should be determined in the case of imports from non-market economy countries. In view of developments with respect to certain countries that are Members of the WTO, it is appropriate that, for those countries, normal value should be determined on the basis of paragraphs 1 to 6a of Article 2 of Regulation (EU) 2016/1036,

Also, the impact assessment on which the Commission’s proposal is based is labeled, in non-ambiguous terms: “Impact assessment of changing the calculation of normal value in trade defense investigations against China”

 

Q.: There is an ongoing dispute between China and the EU in Geneva, concerning China’s market economy status. What impact could this dispute have on the new system proposed by the Commission, who if I am not wrong, is not proposing to grant market economy status to China?

A: The expiry of section 15(a)(ii) of China’s protocol of accession to the WTO means that the EU can no longer apply the current non-market economy (NME) methodology of Article 2(7)(b) & (c) of the basic anti-dumping Regulation, which was the provision in place in 2001 when China joined the WTO. 

Whether for the purpose of calculating the dumping margin of Chinese exporting producers, the EU could reject some Chinese domestic prices and costs when it constructs the normal value. That would be done through a new methodology justified under the remained of section 15(a) of the protocol of accession, is the core of the dispute between China and the EU that is now before the Dispute Settlement Body (DSB) of the WTO. It is also the core of a parallel dispute between China and the U.S.

The answer given to this question by the DSB will determine the latitude that the EU has, if any, to reject Chinese domestic prices and cost when calculating dumping when it finds market distortions in China.  In other words, it will constrain the ability of the European Commission to apply the new Article 2(6a) to China. 

Past practice shows that the more Chinese costs and prices are rejected, the higher the dumping margin will be.

 

Q: Concerning Brexit, do you think that the UK could extend after Brexit the anti-dumping duties measures adopted by the EU?  Would this be possible under the WTO?

A: The WTO anti-dumping agreement and the GATT 1994 underpinning it do not foresee the situation of a member leaving a customs union/trade block like the EU, and the impact that this departure may have on the trade remedies (anti-dumping, anti-subsidy duties) imposed by this customs union / trade block.

The pressure that domestic UK producers will place on the UK government to keep the EU duties protecting them should be quite significant. 

Whether it is possible under the WTO for the UK to keep the EU duties is not clear.  It probably is not. The UK will have to carefully review the rules governing the imposition of trade remedies. 

If it concludes that the WTO rules are not clear and do not obviously prevent the UK from taking over some of the EU measures, the UK will be tempted to keep the EU measures protecting UK producers until these measures are reviewed by the new UK trade remedy authority and replaced by UK trade remedies.

It is interesting that the UK may be able to review those EU measures it decides to keep before the completion of any WTO dispute settlement procedure on this point, as WTO disputes take years to resolve and the DSB’s recommendations apply only for the future.