UK trade remedies policy Contents

---

4New trade defence investigations

76.The WTO rules set out the circumstances in which trade remedies may be introduced, but WTO members may choose not to impose them. Developing its own UK policy enabled the Government to decide whether it wished to adopt a different approach from that which the UK had experienced as part of the EU.

77.James Kane, IfG, told us that the UK system looked “quite similar” to the EU system, but that it was too soon to tell exactly how it would operate because “a lot of the provisions, both in the statute and in the regulations … could be implemented with quite different consequences in individual cases” and that “The devil is always in the detail, and that is probably true of trade remedies more than anything else”.98 Dr Lorand Bartels agreed, saying that it would be necessary to see how all of the rules in legislation and guidance were actually applied in practice, particularly in relation to the economic and public interest tests.99

78.The Manufacturing Trade Remedies Alliance however has said that it:

has concerns that the UK has created a high hurdle for UK trade remedies to be adopted and believes that HMG has created a system that potentially makes it harder to adopt measures than any other global trade remedy regime.100

79.The Minister told us that in designing the UK system, the Government had “looked at international best practice and legislated for the full suite of tools that are permitted under the WTO’s rules”.101 When asked whether the UK regime would differ from that of the EU, he said that:

… [The UK regime] is going to be focused on the actual trade remedies that are necessary to combat unfair trade practices and will not have unnecessary barriers in place that might be deemed by some … to be protectionist rather than focused on defending the British national interest.102

Process for new investigations

80.The Taxation (Cross-border Trade) Act 2018 and the secondary legislation made under it sets out the legislative structure for the new UK trade defence regime. Further detailed guidance has been published by the Secretary of State.103 The TRA may initiate a new investigation when a UK industry applies to it to do so or, in exceptional circumstances, when asked to do so by the Secretary of State. Industry must submit an application to the TRA setting out why an investigation is necessary and providing evidence of dumping or subsidy, or unforeseen surges in imports, and injury.

81.The Government has introduced a UK-specific condition requiring industry to meet a 1% market share threshold to launch a new investigation.104 If the appropriate conditions are met, the TRA will then conduct an investigation to decide whether the criteria for the imposition of a trade remedy are met. It will also calculate the amount of duty that may be imposed and carry out an economic interest test. The TRA may then recommend to the Secretary of State that a measure is imposed.

82.Following a recommendation from the TRA, the Secretary of State can then impose a trade remedy but need not do so if he or she considers that the remedy is against the public interest. If the measure in consideration is anti-dumping or anti-subsidy, the Secretary of State must accept the TRA’s determination meets the economic interest test, unless he or she is satisfied that the determination is not one that the TRA could reasonably have made. For safeguard measures, the Secretary of State can reject the recommendation if he or she considers that it does not meet the economic interest test. If the Secretary of State accepts the recommendation to impose a measure, he or she will publish a public notice imposing an additional duty, and if they reject it, they must explain their reasons to Parliament for doing so. In some circumstances, those affected by a trade remedy, or by a refusal to impose a remedy may challenge the decision of the TRA or the Secretary of State via an application to the Upper Tribunal.105

83.DIT has explained that the TRA’s data gathering process may involve holding oral hearings where parties can comment on the investigation, and that during an investigation, in certain circumstances, the TRA can recommend the application of provisional measures in order to prevent injury being caused to domestic industry. At the end of an investigation, the TRA will publish a Statement of Essential Facts, setting out the detailed reasoning for its decision. Interested parties will have the opportunity to provide comments and submissions on this Statement. The TRA will then publish a final determination setting out its final recommendation of measures to the Secretary of State.

84.Richard Warren, UK Steel said that experience to date from working on transition reviews, indicated that the TRA was “very much keeping itself objective and arm’s length”. He explained that:

It gives absolutely nothing away in terms of its thinking and what analysis it is doing. There are no informal discussions that you may find perhaps with other authorities. In some ways that is very good. In other ways, perhaps if you are used to more informal discussions with the EU Commission, it can be frustrating. What it definitely says is that we probably will not know for a year how this will practically function and whether we find it more or less difficult to have measures implemented or maintained.106

85.The British Ceramic Confederation said that new investigations would be “challenging and expensive” because UK industry will incur consultant or lawyer costs which were previously shared by the whole of EU industry.107 Simon Walker agreed that this would be “a real problem” for UK industries that had previously been members of a Europe-wide association and had been able to share the legal and advisory costs among 28 member organisations. However, he said that WTO rules required the same level of evidence in each case and “there is not a great deal we can do about it.”108

86.Satjit Singh explained that TRID was offering support to small and medium-sized enterprises to help them understand what was involved in the trade remedies process. He said that TRID had opened a pre-application office, which gave advice to small and large businesses about new applications and was educating and working with industry to explain what sort of information would be required at different stages of the process.109

Contributors and interested parties

87.The regulations and guidance define the respective roles and rights of interested parties and contributors to an investigation. Guidance published by DIT explains that:

When we initiate an investigation, we will set a period for interested parties and contributors to contact us to register their interest. Parties will be able to register through our Trade Remedies Service. Interested parties are those who are directly involved in our investigation, such as exporters or importers of the goods concerned in the investigation or trade associations representing UK producers. Contributors are those other than interested parties who have contacted us to participate in the investigation or review.110

88.Dr Lorand Bartels suggested that this distinction between interested parties and contributors was not unusual, and that it “counteracts a little bit the fear that trade remedies will not be applied as often as across the Channel”.111 However, Rosa Crawford, TUC said that the UK legislation was “significantly weaker than the EU’s legislation” because it defined trade unions as contributors rather than interested parties. This meant that they did not have the power to trigger investigations and would have access to less information during the investigation.112 As contributors, unions also did not have the power to appeal decisions.113 Rosa Crawford said that it was crucial that unions were involved in the TRA’s discussions and judgments to ensure that the TRA took account of broader factors relating to a sustainable long-term economy, but that there were no guarantees that this would happen.114

89.The Minister told us that the primary contributors would be domestic producers and exporters whose goods were under investigation, because they held the evidence to determine whether dumping or subsidisation was causing injury to their industry. However, once an investigation was underway the TRA would have a duty to consider all relevant evidence, including contributions from trade unions.115

Calculation of tariffs

90.The British Ceramic Confederation said that the level a trade remedy is set at was likely to be lower in the UK than the EU and expressed particular concern about “the compulsory lesser duty rule, lack of taking account of regulatory costs and ILO standards”.116

91.The UK has adopted a lesser duty rule where the amount of anti-dumping duty on imports is either the margin of dumping or margin of injury, whichever is less.117 This means that the duty must be no more than is necessary to prevent injury, even if that amount is less than the dumping margin or subsidy. James Kane, IfG, explained that until a couple of years ago, the EU had universally used the lesser duty rule. However, recent reforms of EU trade defence legislation, meant that it would no longer apply the lesser duty rule in anti-subsidy cases and would reserve the right not to apply it in anti-dumping cases. He said that in effect, the UK was “sticking with the previous EU system of always applying the lesser duty rule”.118 Satjit Singh, interim Chief Executive Designate, TRA, acknowledged that the EU in certain circumstances no longer had to apply the lesser duty rule, but said that the Government’s evidence base showed that there was no indication that lower tariffs resulted in an unfair increase in imported goods, and that the mere fact of having a trade remedy in place acted as a deterrent.119

92.The British Ceramic Confederation told us that a number of regulatory costs and obligations in relation to energy, climate and environmental issues will not necessarily be taken into account in calculating the injury margin, and that this would place overseas manufacturers at a significant commercial advantage. It also said that EU system allowed for a minimum of 6% profit when calculating injury margins, which the UK system did not. In addition, the UK had not stated a preference for benchmarking data to come from a country abiding by International Labour Organization rules. For a relatively labour-intensive industry like ceramics, benchmarking against a country which used bonded labour would result in a lower anti-dumping duty for UK manufactured products.120 Satjit Singh told us that “this is a Government decision, and we have a remit that we have to carry out”.121

93.The Minister disagreed with the suggestion that the lesser duty rule might result in less effective measures. He told us that measures that had been applied using the lesser duty rule were often high and had been extremely effective and sufficient to stop exporters from injuring industry by dumping goods. He explained that:

We believe this provides the right protection for Britain. Others make their own judgment as to which systems they might prefer, but we believe this provides the right protection for British industry, including ceramics, in the United Kingdom. As far as I am concerned, this is always under review and we will always make sure that where there are things that need to change, as we were discussing earlier in terms of the TRA as a whole or in respect of particular measures that we have introduced or not introduced, we will always review things as time moves on. But we believe that, right now, this rule is perfectly sensible and does not mean weaker protection for industry.122

Economic Interest Test

94.Before reaching its decision on whether to recommend a trade remedy, the TRA has to decide whether it is in the economic interest of the UK to impose the remedy. This additional test is not required by WTO law, but is part of the UK regime, as set out in Schedule 4, paragraph 25 and Schedule 5, paragraph 23, of the Taxation (Cross-border Trade) Act 2018. The UK legislation includes a list of factors which must be taken into account, so far as they are relevant, when conducting the assessment. These factors include both the impact of the injury on the affected industry and also the likely impact on particular geographic areas, or particular groups in the UK of imposing or not imposing the remedy, and the impact on consumers of doing so. DIT guidance states that if the TRA decides that the costs of a measure outweigh the benefits, it will provide a reasonable explanation to demonstrate that this is the case and that if it concludes that the economic test is not met, it will explain why it reached that conclusion.123

95.Some witnesses expressed concern about how the economic test would operate. Rosa Crawford said that the economic interest test was “extremely subjective” and dependent on “the judgment of whoever is making the assessment”.124 The Manufacturing Trade Remedies Alliance expressed concerns about the “systematic over-complex economic analysis” required by the economic interest test.125

96.Dr Lorand Bartels said that the economic interest test was “equivalent in some ways” to the EU’s Union interest test.126 He suggested that the assessment of the factors “clearly involve political judgment” and that it was too soon to tell how the different factors would be weighed up. However, given that the presumption was that the economic interest test was met, he suggested that “the likelihood is that this is not going to be a reason for trade remedies in the UK being tougher than elsewhere.”127

97.James Kane said that there would always be a need for judgment in applying the factors required to assess economic interests. He explained that, for example, some economists would judge that trade remedies were never in the economic interest of any country.128 He added that it would be difficult to demonstrate full transparency of decision-making, “because people have different views about some of the questions that the TRA is required to consider”.129 He told us that in his view, “the economic interest test is a tremendously difficult task for any unelected person to carry out” and said that:

… the economic interest test is going to be a tremendous challenge for a body like the TRA to carry out without becoming politicised because it is a very political question. The officials in the TRA are going to have to be very, very careful to, in effect, show their working and perform this task, which in some ways is quite impossible, as best they can.130

98.Simon Walker, Chair Designate, TRA, explained that the economic interest test was carefully defined in the legislation and was something that the TRA would “try to apply absolutely fairly and without any kind of bias at all and with complete transparency on our reasoning” and that it was “something that will have to be weighed up very carefully”.131 He agreed that the economic interest test would involve an element of political judgement:

… Of course, you are right, there are political dimensions to it, and that is why the Secretary of State has the right to overrule, ultimately, our recommendation. If we recommend a measure and if she applies a public interest test or feels that it is not in the public’s interest, she can overrule it. She has to lay down her reasons to Parliament, but that is her absolute right.132

99.The Minister agreed that there was potential for there to be politics in the trade remedies process but said that this would be in the public interest test and not in the economic interest test. He explained that the factors to be considered in the economic interest test related to the economic significance of the affected industries. He said that the economic interest test was “a balancing act on economic grounds that will be undertaken by the TRA” and that it was right that the TRA did that “in order to take the politics out of it and to focus on the economics”. In summary, he said that “right now we are clear that the TRA is independent and should be doing this on economic grounds”.133

Public Interest Test

100.The Secretary of State may reject a recommendation from the TRA to impose a trade remedy if they are satisfied that it is not in the public interest to accept it. If the TRA’s recommendation is rejected, the Secretary of State must lay a statement before the House of Commons setting out the reasons for rejecting the recommendation.134

101.Dr Lorand Bartels explained that the fact that the Secretary of State’s consideration did not take place “behind closed doors” suggested that the UK system might offer greater transparency than the EU and other systems, and that “the drafters of the regulatory system should be commended for this”.135 He explained that:

There is always a political dimension in the EU. The EU member states have a say, usually via the anti-dumping committee. In other countries this is all done behind the scenes, so to have this out there might be greater for transparency. It might dissuade the use of hidden public interest tests finding their way through the system. Again, the basic point is that it could be, but we just do not know yet.136

… Yes, if one looks at it from the point of view of an industry that just wants instant protection, okay, maybe you do not want all these hoops to jump through but, if you look at this from the point of view of the country as a whole, I think the system looks reasonably accountable.137

102.TRID has published comprehensive guidance on its processes for initiating and conducting new investigations and was ready to accept new applications from the start of this year. We commend the DIT for its work to achieve this.

103.Some witnesses told us that it was too soon to judge how the UK trade remedies regime will be applied in practice and whether the UK will adopt a different approach to that of the EU. We also, however, heard concerns from manufacturers and trade unions that under the UK system, it will be more difficult to secure trade remedies and remedies will be lower.

104.The operation of the UK trade remedies regime will be of continuing interest to this Committee, and we welcome the Minister’s comments that that the regime will remain under review to ensure it provides the right protection for UK industries.

105.We heard concerns that the Government chose to define unions as contributors in the UK regime rather than interested parties as in the EU regime. The TUC told us that this means they cannot trigger new investigations, they have access to less information during an investigation and they cannot initiate an appeal against a decision. We ask the Government to explain, in its Response to this report, why it chose to reduce the role of unions in the UK trade defence regime.

106.The UK trade defence regime includes both an economic interest test and public interest test. We heard evidence that the economic interest test would require not just economic assessment, but also an element of political judgement, and some witnesses questioned whether this was an appropriate function to be carried out by an independent TRA. We have some sympathy with these concerns and believe that it will be difficult in practice to separate the objective factors set out in legislation from more subjective judgements such as the assessment of relative harm on different stakeholders. It remains to be seen how these tests will operate in practice, how transparent the processes will be and how contentious the outcomes of these tests will be.

107.If the TRA recommends an anti-dumping or anti-subsidy measure, the Secretary of State must accept the TRA’s determination meets the economic interest test, unless he or she is satisfied that the determination is not one that the TRA could reasonably have made. For safeguard measures, the Secretary of State can reject the recommendation if he or she considers that it does not meet the economic interest test. The Government should set out, in response to this report, the rationale for the Secretary of State having a greater role in the economic interest test in respect of safeguarding measures.

108.UK businesses will no longer be able to collaborate with European partners in order to share the considerable expertise and costs required to launch and participate in trade defence investigations. We are encouraged that TRID has established a support service to help businesses understand the application process.

Enforcement

109.Her Majesty’s Revenue and Customs (HMRC) will be responsible for the enforcement of trade remedies at the UK borders. DIT explained that:

Goods subject to trade remedies are included within the controlled goods list which will require full customs declarations from January 2021. The ‘UK Global Tariff’ (including trade remedy duties) will apply to all goods imported into the United Kingdom from 1 January 2021, unless an exception applies. Exceptions may include a preferential arrangement, such as a free trade agreement.138

110.Laura Cohen, CEO, British Ceramics Confederation, suggested that the TRA would need to establish a good relationship with HMRC and be proactive on measures to avoid circumvention of tariffs. She said that it would also be necessary to monitor trade flow patterns and communicate with the industries affected in order to detect and address circumvention.139 The British Ceramic Confederation pointed out that the European Commission had “self-initiated an investigation into Chinese ceramic tableware and kitchenware after finding strong evidence from other EU national customs authorities that the anti-dumping tariffs were being circumvented” and that following the investigation, the Chinese companies involved had been subject to increased tariffs.140

111.Lorand Bartels told us that it was not uncommon for trade remedies authorities to need to amend trade remedies because the existing measures were being circumvented by exporters, and agreed that detecting and resolving such issues would require good communications between the TRA and HMRC:

Usually, the customs authority, or HMRC in our case, will come up with the data to show that something is a bit fishy and, therefore, it should have a direct line to the Trade Remedies Authority alerting it that something might need tweaking or, for instance, just the very prosaic communication that is needed when it comes to applying customs duties of a trade remedy sort. Do you come up with a new customs code? How do you figure that all out? This is red tape-type stuff. I am sure they will be able to figure this out.141

112.Satjit Singh told us that the TRA’s job was “to carry out an investigation and recommend trade remedies where appropriate” and that it was then “for HMRC to administer and enforce those trade remedies”. He added that the TRA was not resourced to actively monitor the impact of remedies, and that in any event the industry affected was more likely to have the information to show that trade remedies were not working. He said that “If they bring that evidence to us, we shall certainly look at it to undertake what is known as a circumvention review”.142 Simon Walker added that:

Fundamentally, it is for HMRC to enforce these matters at our borders. Obviously, we will pass on any information we receive. But if a product is being dumped, there is a measure against it, and if that is being circumvented via a peculiar route, it is very likely that it is the competitors of that product that will find out first.143

113.Claire Vince, DIT, explained that DIT was working very closely with all Departments with an interest in trade remedies, and that the primary focus at present was “embedding the new structures and making sure that everything is absolutely correct on the systems”. She added that one or two issues had been identified, but that this was “almost inevitable with the volume of data that was put on to the HMRC” and that this process was “pretty much there”.144

114.The Minister confirmed that the Government wanted to make sure that there were good relationships across the whole of Government:

DIT’s work involves interaction with HMRC, not just in this area, but in a number of other areas, including tariffs more generally in respect of trade deals, and indeed with other parts of Government in perhaps other areas of policy like DEFRA on agriculture. Absolutely making sure there are good working relationships, joined-up Government—if we can still use that oft-used phrase—is absolutely crucial to the effective conduct of these matters.145

115.Good working relationships between the TRA and HMRC will be important to the effective functioning of the UK trade remedies regime. We ask that the TRA write to us, within three months of its formal establishment, to explain how the two bodies are working together to support the operation of the regime.