12 Protection against American anti-dumping
legislation
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12707/03
COM(03) 543
| Draft Council Regulation protecting against the effects of the application of the United States Anti-Dumping Act of 1916, and actions based thereon or resulting therefrom.
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| Legal base | Article 133 EC; QMV
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| Document originated | 15 September 2003
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| Deposited in Parliament | 24 September 2003
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| Department | Trade and Industry
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| Basis of consideration | EM of 17 October 2003
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Legally and politically important
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| Committee's decision | Cleared
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Background
12.1 According to the Commission, the Anti-Dumping Act of 1916
in the United States provides for civil and criminal proceedings
and penalties against dumping when conducted with an intent to
destroy, injure or prevent the establishment of an American industry.
However, the WTO Dispute Settlement Body ruled in September 2000
that the Act was incompatible with the WTO Agreements, notably
by providing domestic US companies with remedies against foreign
companies such as the imposition of triple duties, fines and imprisonment,
none of which is permitted by the General Agreement on Tariffs
and Trade.
12.2 Since the US had not repealed the Act by the
deadline of 20 December 2001 set by the WTO, the Community sought
to apply equivalent retaliatory measures against imports from
the US, but it subsequently agreed to suspend these, as a bill
was pending in Congress which would have repealed the 1916 Act
and terminated the cases which had been brought under it in the
US courts. However, that bill failed to receive Congressional
approval, and, since the WTO ruling, three new cases have been
brought under the Act against Community companies, including one
in the UK. Moreover, although the US has now brought forward
another proposal to repeal the 1916 Act, this would — even
if passed by Congress — only do so prospectively, and would
not cover existing cases. Consequently, the Commission has been
exploring further ways of bringing pressure on the US to comply
with the WTO rulings and repeal the Act, whilst also protecting
EU companies from its effects.
The current proposal
12.3 As a result, it has now brought forward this
draft Regulation, which supersedes an earlier, similar proposal
presented informally by the Commission to Member States in February
2003, but never formally submitted to the Council. The proposal
aims to provide relief to Community companies facing claims based
on the 1916 Act, the protective measures being limited to those
identified by the Commission as strictly necessary to neutralise
the effects of litigation against Community companies in the US
under the Act. They would thus:
- prohibit the recognition and
enforcement in the Community of US Court or administrative decisions
based on the Act;
- allow EU companies or individuals to counterclaim
to recover any outlays, costs, damages and expenses caused by
the application of the US Act.
The Government's view
12.4 In his Explanatory Memorandum of 17 October
2003, the Minister for Trade at the Department of Trade and Industry
(Mr Mike O'Brien) says that the Government has doubts about the
likely effectiveness of this proposal on grounds of practicality.
The Regulation could only be enforced against a US litigant if
that company had assets in the Community, and, although the proposed
Regulation allows a Community defendant to act against the US
litigant before
there is a final judgement in the US, a company wishing to continue
to trade in the US would nonetheless need to obey any US court
ruling.
12.5 The Minister also says that, when the Community
initially requested permission to take retaliatory measures against
the US, it did not inform the WTO's Dispute Settlement Body that
it would be adopting a proposal of this kind. In view of this,
he suggests that, although in reality this proposal would do no
more than provide a means of indemnifying Community companies
that are suffering from proceedings taken against them under the
Act by US companies, it might be considered that the Community
was acting unilaterally and in breach of WTO disciplines. The
UK has therefore argued that, in order to counter any allegations
of unilateralism, the Community should notify its intention to
adopt this proposal to the Dispute Settlement Body.
12.6 Despite this, the Minister says that US compliance
with the Dispute Settlement Body's ruling is long overdue, and
that Community companies are suffering real harm as a result of
new cases being brought under the 1916 Act. Thus, whilst the UK
has reservations about its likely effectiveness, the Regulation
may (if it works as the Commission intends) give some comfort
to the Community companies affected, and make the US companies
(with Community subsidiaries) think twice about bringing new actions.
The Government therefore intends to support the proposal.
12.7 The Minister also says that the Government will
wish to explore with the Commission and other Member States whether
the choice of Article 133 as the legal base for this proposal
is adequate. Although the proposal is clearly linked to the conduct
of the Community's trade relations with the US, the UK questions
whether that Article is sufficient to cover the entire subject
matter of the Regulation. In particular, it notes that, in a previous
case where the Community had provided for a right of action for
Community persons to recover damages flowing from a trade measure
adopted by a third country, the measure in question[22]
included both Articles 133 and 308 in the legal base.
Conclusion
12.8 In view of the potential importance of trade
disputes between the Community and the US, we think it right to
draw to the attention of the House the implications of the 1916
Act and the measures being considered by the Community to counter
these, in the absence of any definitive US action to abide by
the ruling of the WTO's Dispute Settlement Body. In doing so,
we also note and support the Government's views on the use of
Article 133 EC as the sole legal base.
22 Council Regulation (EC) No. 2271/96 of 22 November
1996 protecting against the effects of the extra-territorial application
of legislation adopted by a third country, and actions based thereon
or resulting therefrom. OJ L. 309, 29.11.96, p.1. Back
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