Trade Defence Instruments TDIs. The EU's approach to Trade Defence Instruments

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1 Trade Defence Instruments TDIs The EU's approach to Trade Defence Instruments Open trade is recognised as an engine to growth and job-creation but also requires that fair competition, without distorting practices, is maintained between domestic and foreign producers. The EU has a duty to use TDIs to re-establish a competitive environment for the EU industry when harmed by dumped or subsidised imports. The use of TDIs is based on WTO rules. The EU is an efficient and measured user of TDI's and applies a number of conditions additional to those required by the WTO, including the Union Interest test and the lesser duty rule. The EU works actively to encourage its trading partners to use their TDIs in accordance with WTO rules and to apply the same high standards in conducting investigations and respecting the rights of parties, as is done in the EU. Background Material: 1. Statistics on the use of TDIs 2. Main conditions to impose anti-dumping and anti-subsidy measures 3. How to follow a TDI case - the procedure 4. Where to find information on TDI cases on DG TRADE's website

2 1. Statistics on the use of TDIs 1.1 Initiation of anti-dumping and anti-subsidy cases by the EU The EU's initiation activity expressed in average initiations per year in the period 2009 to 2011 has decreased when compared to the periods In the period and average of 51cases initiated per vs. 67 for the previous 13 years. The economic crisis has not led to an increase in the cases initiated New cases Reviews Total Table: average cases initiated and EU anti-dumping and anti-subsidy measures in force The number of anti-subsidy and antidumping measures in force is at a historical low and the overall number of measures in force in the EU is much lower than in other major WTO members like the USA and India. Anti-dumping and antisubsidy measures in force in the EU Table: development AD/AS measures in force between Number of Country measures in force USA 303 India 206 Turkey 119 P.R. China 111 Argentina 85 Brazil 73 Mexico 39 Canada 42 South Africa 34 Table: number of AD/AS measures in force at the end of June 2011 (most recent data available) 1.3 Percentage of trade affected by anti-dumping and anti-subsidy measures. Since 2007, there has been a constant decrease in the percentage of imports affected by EU anti-dumping and anti-subsidy measures. In the first two years of the crisis (i.e and 2010), less than 0.5% of imports was affected by AD/AS measures. When comparing this figure to those of the three preceding years which were over 0.6%, the EU's prudent use of these instruments even in times of economic crisis is underlined. 2

3 2. The main conditions to impose anti-dumping anti-subsidy measures Before any measures can be adopted to counteract dumping and subsidies, certain conditions must be met: Condition 1 Imports must be dumped A product is considered as being dumped if its export price to the EU is less than its normal value. The normal value is usually the market price for the product in the exporting country. If there are no sales or there is a low volume of sales or if sales are made at a loss, the normal value of the product is usually based on the cost of production in the exporting country plus a reasonable amount for selling, general and administrative costs, and profit. The export price is the sales price to the EU. Figure 1: Dumping margin In order to establish the dumping margin, a fair comparison must be made between the export price and the normal value. Adjustments may have to be made to ensure that normal value and export price are on a comparable basis (see Figure 1). Condition 2 Injury There must be material injury to the Community industry producing the like product. The determination of injury requires an examination of the volume and prices of dumped imports and their consequent impact on the Community industry. In this regard, the Commission verifies whether there has been a significant increase in dumped imports, either in absolute quantities or in terms of market share. In determining the effect on prices, an important consideration is the extent to which the import price undercuts the Community producers' price (see Figure 2). Determining the impact on the Community producers requires analysis of various typical economic factors: market share, output, profits, productivity, return on investment, ability to raise capital, growth, magnitude of dumping, etc. Figure 2. Injury margin 3

4 Condition 3 Causal link The dumped or subsidised imports must be a cause of the injury. They need not be the only cause - other factors might also contribute. Condition 4 Union interest Anti-dumping/Anti-subsidy measures must not be against the Union interest. Although this test is not required by WTO rules, it ensures that account is take of the overall economic interests in the EU including the domestic industry producing the product concerned, importers, Community industries that use the imported product and will ultimately pay a higher price and, where relevant, the end consumer of the product. 4

5 3. How to follow a TDI case the Procedure 5

6 4. Where to find information on TDI cases on DG TRADE's website The Notice Board Lists all TDI information published in the Official Journal (Legislation, Notices and Information) in chronological order. 6

7 Investigations Provides a timeframe and key steps to all ongoing TDI cases. 7