Anti-Dumping Measures in Merchandise Trade

Recommendations

▪ Because Chinese end users can hardly be differentiated by civilian or military end uses, Beijing's behavior poses a challenge to international export controls. China's behavior compels an international response. Multilateral approaches to a solution should be at the forefront. These are effective and allow economic operators to adapt their operations efficiently and effectively.

▪ The Transatlantic partners should intensify to pursue common interests in security policy. German industry recognizes that the states of the liberal-democratic West must adapt to the changed security situation brought about by China’s party-state capitalism. The Transatlantic partners should agree to cooperate closely on controls in the future. A coordinated export control practice could also provide important momentum in multilateral export controls.

▪ In order to retain influence and to increase its power to shape European economic interests, European export controls should urgently be adapted to the changed geopolitical climate. Specifically,

German industry therefore calls for a qualification of EU-autonomous controls equivalent to the 0Y521-ECCN Series in the United States. This would ensure a temporary mechanism by which

European export controls would remain linked to the processes in the Wassenaar Arrangement.

▪ Qualified EU-autonomous controls would not be uncharted legal territory. As in the United States,

European special interventions should include a voluntary commitment to bring such listed items into the Wassenaar process. In this way, political conflicts over EU export controls could be avoided in the future. In addition, it would limit the proliferation of unilateral controls.

Anti-Dumping Measures in Merchandise Trade17

In recent years, increasing numbers of anti-dumping cases have been observed both in the EU and globally. Between October 2008 and October 2020, the EU initiated 146 anti-dumping investigations against 29 countries, an average of twelve investigations per year. The EU is the sixth largest user of anti-dumping investigations within the G20, behind India (544 investigations) and the United States (383). Most of the EU’s investigations (59, or 40 %) were targeted against China. Investigations were also initiated against India (11), Russia (9), Turkey (7), and Indonesia (6); five each against the United States, South Korea, and Taiwan; four each against Thailand and Ukraine. In 75 cases, or 51 percent of cases, definitive anti-dumping measures were imposed on the basis of investigations initiated by the EU. Within the G20, measures were taken in 60 percent of cases.

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17 BDI has published a more detailed position on the anti-dumping measures of the European Union. The paper is available via the following link: https://english.bdi.eu/media/publications/#/publication/news/anti-dumping-measures-of-the-european-union/. 18 Methodology: Each investigation against N countries is counted as N investigations. Russian investigations include all investigations of the Euro-Asian Economic Union (EEU), South African investigations include those of the South African Customs Union (SECU), and Saudi Arabian investigations include those of the Gulf Cooperation Council (GCC). Only definitive measures were counted.

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Number of newly Initiated Anti-Dumping Investigations

(October 2008 - October 2020) Diagrammtitel

300

250

200

150

160

137 130 166 238

208

176

EU G20

227

215

168 181 244

100

77

50

0 4 16 15 17 13 4 14 12 14 9 8 11 9

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: WTO, G20 Trade Monitoring Report, <https://www.wto.org/english/news_e/news20_e/g20_annex_bis_okt20_e.xls>, BDI Analysis. .

Number of newly Imposed Anti (October 2008 - October 2020*) DiagrammtitelDumping Measures

200

180

160

140

120

100

80 115

95

78 131 168

153 EU G20 175

129 135

119

60

40

20

0 42 47

0 7 10 8 7 2 10 7 11 2 3 8

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: WTO, G20 Trade Monitoring Report, <https://www.wto.org/english/news_e/news20_e/g20_annex_b is_okt20_e.xls>, BDI Analysis. *As only definitive anti-dumping measures were counted here and no definitive measures were taken in 2020, there is no column for 2020.

Status quo

The EU's basic anti-dumping regulation (AD regulation) has been in force since 1995 and has been continuously improved in the subsequent years. Revisions are necessary in order to adapt the defense instruments to the changing trade policy framework. To ensure fair competition, German and European industry is dependent on effective and balanced trade defense instruments.

In 2016, the AD regulation and its numerous amendments were consolidated in a vertical codification process to ensure clarity in the upcoming reforms. Following proposals from the Commission, the actual renewal of the trade defense instruments was then addressed separately by the European

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Parliament and the European Council in a methodology section (determination of normal price as a basis for anti-dumping proceedings) and a modernization section (conduct of anti-dumping proceedings). The EU completed the reform of its trade defense instruments on 7 July 2018. As a result, the anti-dumping procedure has also been modernized.

The reform was prompted by the expiration of a key article in China's WTO accession protocol in midDecember 2016. According to this article, Chinese producers had to prove that the prices of their products were achieved under market economy conditions. Without this evidence, importing countries were not allowed to base their determination of dumping on domestic market prices, but on cost structures that existed for the product in question in market economy countries. In order to avoid criticism of treating China as a country without market economy structures, the EU members agreed on a more differentiated methodology for determining the actual domestic price in China. Additionally, several other adjustments were introduced.

An important innovation in the basic EU anti-dumping regulation is that the EU no longer makes a distinction between a market economy and a state-trading country. Instead, the components of full costs are systematically examined to determine whether they are complete and reasonably priced. The Commission provides market reports for potential complainants, which facilitate the substantiation of the anti-dumping complaint and thus the initiation of an anti-dumping investigation.

Recommendations

▪ The anti-dumping measures (AD measures) of the European Union (EU) are an important instrument to protect European producers from unfair competition from abroad. It must be ensured that their application is in accordance with World Trade Organization (WTO) rules and reflects the Union interest.

▪ In principle, the AD instrument is effective. German industry welcomes the latest reform. However, individual sectors report that existing anti-dumping duties are being circumvented by various measures (channeling through the use of preferential TARIC codes, transshipment, incorrect classifications, and so on). This undermines the effectiveness of the duties and contributes to the fact that a level playing field is not being established. Measures are therefore necessary to limit the possibilities of circumvention. As a general rule, the concerns of importing economic operators must be taken into account as well.

▪ Before once again reforming the AD toolkit, a detailed analysis of its effectiveness should be undergone, including consultations with the manufacturing, processing, exporting, and importing industries.

▪ In the case of further reform, it should be considered that

– changes in AD law are not unilaterally to the detriment of one of the parties involved (complainant/defendant);

– a far-reaching tightening of anti-dumping and anti-subsidy legislation in the EU may lead to retaliatory measures in third countries, for example by making national anti-dumping legislation more stringent or initiating anti-dumping proceedings against EU-based companies.

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▪ The European Commission's introduction of the mandatory reporting requirement in the case of

China was just and in order. Nevertheless, the burden of proof remains very high in individual cases.

The EU should publish further reports on market distortions.

▪ Parallel anti-dumping and anti-subsidy proceedings are a welcome development. In principle, however, it remains difficult to provide the necessary evidence regarding subsidies. A key objective should therefore be to create more transparency about subsidies in third countries in the future.

– As concurrence makes the procedures as a whole much more expensive and complex than individual proceedings, proceedings should only take place where a significant increase in protective duties can be expected. Nevertheless, anti-subsidy proceedings in particular send an important political signal.

– Concurrent proceedings must not lead to double counting and excessive duties.

▪ The reduction in the length of AD procedures is positive for most economic operators. Despite the

SME Helpdesk 19 , many small businesses in particular are still reluctant to initiate AD procedures due to the high administrative burden, so a further streamlining and optimization of procedures would be welcomed. The Commission must ensure that applicants and interested parties alike continue to be given sufficient time to represent their interests and to prepare for any duties that may be imposed.

▪ Trade defense measures should be subject to review prior to their expiry at the request of any Union producer or, if necessary, ex officio, and should be extended if warranted by the continued existence of global market distortions.

▪ An extension of the anti-dumping instrument to services should be examined without prejudice to the outcome.

▪ It would be desirable to examine whether environmental and social costs can also be taken into account in the determination of normal value, also with respect to WTO conformity. If the European

Commission recognizes future costs, especially from emissions trading and the upcoming CO2 avoidance costs, the damage margin is likely to be larger.

▪ Restricting the application of the Lesser Duty Rule where there are distortions of competition due to low energy and raw material prices is mainly seen as sensible and as a contribution to creating fairer conditions of competition. The Union interest must be taken into account.

▪ Further standardization of the individual stages of the proceedings would be desirable, for example in the preparation of an AD claim in the sense of providing checklists, questionnaires, or decision guidance with explanations on the websites of DG Trade or of the Member States. The same level of assistance should be provided for all economic operators.

▪ The general aim should be to provide companies with sufficient information to constructively counteract any possible uncertainties.

19 A helpdesk provides support for small and medium-sized enterprises and has been expanded with the reform of the antidumping regulation.

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