5 Trade defence instruments
(28165)
16702/06
COM(06) 763
| Commission Communication: Global Europe Europe's trade defence instruments in a changing global economy
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Legal base | |
Document originated | 6 December 2006
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Deposited in Parliament | 15 December 2006
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Department | Trade and Industry
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Basis of consideration | EM of 9 January 2007
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Previous Committee Report | None, but see footnote
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To be discussed in Council | No date set
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Committee's assessment | Politically important
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Committee's decision | Cleared
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Background
5.1 On 7 November 2006, we drew to the attention of the House
a Commission Communication[19]
setting out the contribution which trade policy can make to stimulating
growth. This document included a reference to trade defence mechanisms,
which the Commission saw as helping to ensure that the benefits
of openness are not undermined by unfair practices, and we noted
that it intended to seek views on how to strengthen the Community's
position in this area, and then to produce a Green Paper. It has
now done so in this latest Communication.
The current document
5.2 According to the Commission, the Community, like most other
importing economies, operates a system of trade defence instruments
Anti-Dumping, Anti-Subsidy and Safeguard measures
which allow it to defend its producers against unfairly traded
or subsidised imports and against potentially harmful shifts in
trade flows. It also notes that the use of these instruments is
based on rules derived from World Trade Organisation (WTO) agreements;
that the principles on which they operate are a legitimate part
of the multilateral system of free trade; that they are crucial
to defending free trade and helping to manage the consequences
of globalisation; and that their economic rationale derives essentially
from the fact that the international economy has no mechanism
for correcting anti-competitive practice similar to those which
operate nationally.
5.3 The Commission notes that the Community has gone
further than any other WTO member in unilaterally building on
WTO rules to tighten conditions for use and focus the impact of
trade defence action in its own market, and in producing an open
and balanced system of trade defence instruments. However, it
says that, since the last major reform, there have been far-reaching
changes in the global economy and in the structure of the Community
economy, which have been an important bearing on its overall priorities,
and that a review can therefore help to ensure that the Community's
trade defence instruments remain an effective response to unfair
trading practices.
5.4 The purpose of this Green Paper is to consider
how the Community can continue to use these instruments to best
effect in the European interest. It
groups the issues concerned into the following
six themes.
The role of trade defence measures in a global
economy
5.5 The Commission notes that the Community currently
initiates significantly more Anti-Dumping investigations than
Anti-Subsidy investigations. It suggests that one reason is that
companies fear retaliation by the governments concerned, and that
it might itself initiate more Anti-Subsidy cases. It also points
out that the economic justification for trade defence instruments
remains controversial, some economists arguing that these are
needed in the absence of internationally agreed competition rules,
whilst others believe that they cannot be economically justified
from an overall perspective, and that they could potentially be
misused by sectoral interests as a means of obtaining protection.
Weighing different EU interests in trade defence
investigations
5.6 The Commission says that trade defence measures
must serve the overall economic interest of the Community, including
that of producers and workers, and that its rules must continue
to address situations in which genuine comparative advantages
are increased by unfair subsidies or other state induced distortions.
It notes that structural changes have made it more complex to
determine the Community's economic interests, and that European
companies are increasingly using production bases outside the
Community whilst maintaining significant operations and employment
in Europe. It highlights the need to consider whether the current
rules take sufficient account of outsourced production, which
might be negatively affected by trade defence measures, and says
that it is vital to strike the right balance between free trade
and fair trade
5.7 This part of the paper also identifies four key
issues relating to the Community interest the extent to
which the public interest test is too strongly weighted towards
Community producers to the exclusion of other considerations,
such as the consumer interest or development assistance; the case
for more flexibility in "fine tuning" the measures taken;
applying the Community interest test at an earlier stage in the
investigation proceedings; the weight given to assessments of
an industry's viability.
The launching and conduct of trade defence investigations
5.8 The Commission says that a number of technical
areas related to the launching and conduct of trade defence investigations
have been identified where changes could further improve their
proportionality, efficacy and fairness. These include earlier
consultations with exporting third countries; the use of anti-subsidy
instruments against individual companies in transition economies;
increasing the number of producers which must expressly support
a complaint before an investigation is launched; the de-minimis
thresholds for dumping, subsidy and injury; dumping margin calculations;
the treatment of new exporters; the case for requiring restructuring
plans where producers benefit from Anti-Dumping measures; and
the involvement of SMEs.
The form, timing and duration of trade defence
measures
5.9 The Commission says that a number of areas have
been identified relating to the imposition, form, duration and
expiry of trade defence measures which could be reviewed. These
are the quicker
adoption of provisional measures; the need for
a greater choice of possible counter-measures and the possibility
of phasing these in over time; applying measures for less than
the current five year period; and higher injury thresholds for
the renewal of measures. The Commission also points out that,
where an expiry review is initiated, the measures in question
remain in force, and it suggests that, if such a review eventually
concludes that they should not be maintained, consideration could
be given to re-paying any duties collected beyond the 'normal'
five year period. Alternatively, expiry reviews could be concluded
before the maximum lifetime of a measure ends.
Transparency in trade defence investigations
5.10 The Commission says that openness is vital to
the credibility of trade defence instruments, and it addresses
four aspects of transparency. These are the appointment of a hearing
officer to ensure that parties in trade defence investigations
can better exercise their right to be heard, and that their rights
are respected; public hearings for decisions whether a country
is awarded Market Economy Status; making the work of the advisory
Anti-Dumping Committee more transparent; and better access to
non-confidential files.
Institutional process
5.11 The Commission says that, whilst the use of
trade defence instruments can be politically sensitive, their
credibility depends on their being transparent, predictable and
subject to stringent review, and based on the results of investigations.
It points out that the current institutional structure divides
responsibilities between the Commission and the Council with decisions
being subject to review by the European Court of Justice, and
to the Community's WTO obligations. It suggests that this framework
has worked well, but that some stakeholders are concerned that
it sometimes allows decisions to be influenced by factors not
directly linked to the facts of the investigation itself.
The Government's view
5.12 In his Explanatory Memorandum of 9 January 2007,
the Minister for Trade, Investment and Foreign Affairs at the
Department of Trade and Industry (Mr Ian McCartney) says that
the document is a consultation paper which has no immediate policy
implications. He adds that the UK welcomes the opportunity to
contribute to a review of these current instruments, and the possibility
of introducing appropriate changes.
Conclusion
5.13 As the Minister has pointed out, this is
essentially a consultation document in which the Commission has
identified a number of issues arising from the Community's current
application of its trade defence measures, and in which it has
posed a large number of questions to interested parties. For that
reason, we think it right to draw it to the attention of the House,
but, as the document does not call for nor propose any specific
course of action at this stage, we are clearing it.
19 (27536) 7301/06: see HC 34-xlii (2005-06), para
14 (7 November 2006). Back
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