The European Commission proposes a new method to calculate dumping

On 9 November 2016, the European Commission, in order to ensure Europe adequate trade defence instruments able to deal with realities like industrial overcapacity in international trade, proposes a new method for calculating dumping on imports from countries where there are significant market distortions, or where the State has a pervasive influence on the economy.

The proposal is compliant with EU’s international obligations in the legal framework of the World Trade Organization (WTO). In that regard Cecilia Malmström, EU Trade Commissioner, said that “… This method is country neutral and does not grant ‘market economy status’ to any country. The proposal, once adopted by the European Parliament and the Council, will ensure that the EU’s Trade Defence Instruments are adapted to face new challenges as well as our legal and economic realities. We also maintain an equivalent level of protection …”.

Moreover, the proposal, which makes modifications to the EU’s anti-dumping and anti-subsidy legislation, has been preceded by a public consultation and is accompanied by an impact assessment.

EU Commission Vice-President, Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, said: “… Trade is Europe’s best growth lever. But free trade must be fair, and only fair trade can be free. Today we are presenting a proposal to adapt our trade defence instruments to deal with the new realities of over-capacity and a changing international legal framework. More than 30 million jobs in Europe, including 6 million jobs in SMEs, depend on free and fair trade which remains at the heart of EU strategy for jobs and growth …”.

Market distortions could lead to industrial overcapacity, which encourages exporters to dump their products on the EU market. This damages European industries and could result in job losses and factory closures, as has happened in the EU steel sector.

In October, the European Council called for an urgent and balanced agreement on the Council position on the comprehensive modernization of all trade defence instruments by the end of 2016. The proposal in object represents an important part of the reforms needed and a part of the modernization of all TDIs proposed by the Commission in 2013.

The proposed method would apply to cases initiated once the amended rules are in force. It provides a transition period during which all anti-dumping measures currently in place as well as ongoing investigations would remain subject to the existing regulations, which provides for calculating dumping by comparing the export price of a product to the EU with the domestic prices or costs of the product in the exporting country. The new method, instead, will be country-neutral, will apply the same way to all WTO members and will take into consideration significant distortions in certain countries, due to state influence in the economy.

Several criteria will be considered in determining distortions, such as state policies and influence, the widespread presence of state-owned enterprises, discrimination in favour of domestic companies and the independence of the financial sector.

The proposal in question has been preceded by orientation debates held by the College in January and July and, moreover, it is based on a public consultation and on extensive stakeholders and social partner contacts. In addition, an Impact Assessment was conducted to assess the implications of any decision on each Member State and economic sector.

This proposal does not replace the 2013 one which concerns the modernization of the EU’s Trade Defence Instruments and which aims to allow the EU to impose higher duties.