5EU Trade Defence Instruments
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Committee’s assessment |
Politically important |
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Previously cleared from scrutiny (on 28 March 2018); drawn to the attention of the International Trade Committee and the Committee on Exiting the European Union |
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Document details |
(a) Communication on Modernisation of Trade Defence Instruments: Adapting Trade Defence Instruments to the current needs of the European Economy; (b) Proposal for a Regulation amending Council Regulation (EC) No 1225/2009 on protection against dumped imports from countries not members of the European Community and Council Regulation (EC) No 597/2009 on protection against subsidised imports from countries not members of the European Community67 |
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Legal base |
(a)— (b) Article 207 TFEU; ordinary legislative procedure; QMV |
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Department |
International Trade |
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Document Numbers |
(a) (34838), 8493/13, COM(13) 191; (b) (34863), 8495/13 + ADDs 1–2, COM(13) 192 |
Summary and Committee’s conclusions
5.1In April 2018, the Council voted in favour of a Commission proposal on modernising the EU’s trade defence instruments, aimed at levelling the playing field for EU industry from unfairly dumped or subsidised imports. The most controversial amendment was to the application of the so-called ‘lesser duty rule’,68 which would enable the EU to impose higher duties on dumped or subsidised imports in cases where raw material prices have been distorted past a certain threshold. The UK was one of only three Member States to vote against the proposal, arguing that the previous lesser duty rule provided producers in the steel and other sectors with the protection they need, without placing disproportionate costs on consumers or downstream users.
5.2As the Regulation is expected to come into force at the end of May, it will impact the UK whilst a member of the EU and during the transition/implementation period (scheduled between 29 March 2019 and 31 December 2020, as the UK will abide by EU trade rules over this time). It also has implications for UK trade remedies after the end of the implementation/transition period (scheduled for 31 December 2020), to the extent that UK divergence from the EU trade defence regime impacts future trade patterns (if it deflects ‘dumped’ goods to the UK away from the EU) or influences wider trade relations (for example, potential partners whom the UK seeks to negotiate a trade agreement with may view the UK’s relatively more liberal approach to the application of trade defence rules either positively or negatively).
5.3At its meeting of 28 March 2018, the Committee cleared the documents from scrutiny, but asked the Minister of State for Trade Policy (Greg Hands) to inform the Committee of the outcome of the Council meeting on this important dossier and provide the Committee with a detailed update on the work that the Government is undertaking on the UK’s future trade remedies regime after the end of the implementation/transition period. The Minister has addressed the Committee’s questions in his letter of 17 April 2018.
5.4In response to the Committee’s question on what objectives or criteria the Government is using to determine the future UK trade remedies framework, the Minister states that “[t]he trade remedies framework that we are setting up through the Taxation (Cross-Border Trade) Bill will be designed on the following criteria: impartiality, proportionality, efficiency and transparency”.
5.5The Minister does not specify how (in addition to the application of the lesser duty rule) the UK is intending to diverge from the EU trade defence regime after 31 December 2020. He simply notes that the future UK trade remedies regime will deploy the “full suite of tools permitted under the WTO in order to tackle injury to UK industry caused by unfair trading practices”, and that it “will include many similar features to the EU”.
5.6In response to the Committee’s question on how divergence from the EU trade defence regime is expected to impact future UK trade patterns, in particular unfair trade deflection (where, for example, higher EU27 duties relative to UK duties on dumped imports leads to the deflection of ‘dumped’ goods away from the EU27 and into the UK), the Minister states that the Government has “not found evidence of significant deflection” in cases where the EU has imposed lower duties relative to the US. The Minister considers that “injury-based duties” that “will take account of the specific circumstances prevailing in the UK market” would normally be sufficient.
5.7In response to the question of what specific measures the UK’s new Trade Remedies Authority (TRA) would take to tackle unfair trade deflection, if more unfair imports do enter the UK market and the duties imposed prove to be inadequate to prevent injury to UK industry, the Minister states that the TRA would have the power to review and adjust duties “swiftly” if they were not effective. We note that the Minister does not elaborate on surveillance mechanisms or safeguard measures to tackle unfair trade diversion (as the EU is currently considering, further to the imposition of US tariffs on aluminium and steel).
5.8The Committee also raised the question of how divergence from the EU trade remedies regime might influence wider trade relations and the negotiation and conclusion of future trade agreements, including i) the future EU-UK relationship and ii) other trade agreements. The Minister considers that the UK’s divergence from the EU’s lesser duty rule will not impact wider trade negotiations, on the basis that the “[t]he UK will have a WTO compliant trade remedies framework in place on exiting the EU, which is standard and accepted practice amongst trade partners”. We consider that this statement avoids the political realities of trade negotiations, as the application of trade defence measures are highly politically sensitive (as evidenced by global reactions to the US imposition of tariffs on steel and aluminium, and certain countries’ objections to the EU’s new trade defence rules).
5.9We draw the Minister’s responses to the attention of the Committee on Exiting the EU and the International Trade Committee, which will no doubt wish to probe the Government further on its developing plans on trade remedies after 31 December 2020.
Full details of the documents
(a) Communication on Modernisation of Trade Defence Instruments: Adapting Trade Defence Instruments to the current needs of the European Economy: (34838), 8493/13, COM(13) 191; (b) Proposal for a Regulation amending Council Regulation (EC) No 1225/2009 on protection against dumped imports from countries not members of the European Community and Council Regulation (EC) No 597/2009 on protection against subsidised imports from countries not members of the European Community: (34863), 8495/13 + ADDs 1–2, COM(13) 192
Background
5.10On 16 April 2018, the Council adopted the proposed Regulation by a qualified majority (the UK and Sweden voted against it, and Ireland abstained). The European Parliament is expected to vote in plenary on the final text of the regulation in May. Entry into force of the Regulation is expected in late May.
5.11The previous Committee’s Reports, listed at the end of this chapter, provide further details of the draft Regulation, the Government’s position and related background.
Previous Committee Reports
Twenty-second Report HC 301–xxi (2017–19), chapter 7 (28 March 2018); Third Report HC 83–iii (2013–14), chapter 6 (21 May 2013).
67 Council Regulation (EC) No 1225/2009 and (EC) No 597/2009 were re-codified in 2016 under EU Regulation 2016/1036 and EU Regulation 2016/1037.
68 The lesser duty rule means that the EU imposes trade defence duties that are sufficient to remove the injury to EU industry (at the ‘injury margin’), which may be below the actual dumping margin. The lesser duty rule is recommended under WTO rules, but many of the EU’s trade partners do not apply it. It therefore compensates producers for the harm caused by unfair trade (to allow them to make a reasonable profit) rather than for the actual amount of dumping.
Published: 22 May 2018