TWN Info Service on WTO and Trade Issues (May17/07)
8 May 2017
Third World Network

WTO Committee debates rise in AD actions, EU's AD Regulation
Published in SUNS #8455 dated 4 May 2017

Geneva, 3 May (Kanaga Raja) -- A regular meeting of the WTO Committee on Anti-Dumping Practices on 27 April saw several developed members highlighting a sharp rise in new anti-dumping actions last year which they claimed was due mainly to overcapacity in emerging markets, in particular China.

This claim was however countered by China which underlined that the Committee is not the appropriate forum to address the issue of overcapacity and government intervention.

In turn, China pointed out that a certain member (the United States) has implemented more than 200 anti- dumping and countervailing measures on imports of steel products from other WTO members.

The meeting also discussed proposed amendments by the European Union, on 9 November 2016, to its Basic Anti-Dumping Regulation, with Russia and several other countries expressing concern over this proposed amendment.

Meanwhile, a meeting of the WTO Negotiating Group on Rules on 2 May, amongst others, saw New Zealand highlighting a new proposal it has jointly submitted with Iceland and Pakistan on disciplines for fisheries subsidies (see separate story).

RISE IN ANTI-DUMPING ACTIONS

According to trade officials, at the meeting of the AD Committee on 27 April, Japan, the United States, Mexico and Canada highlighted a sharp rise in the number of new anti-dumping investigations. They claimed that this rise was due mainly to overcapacity in emerging markets, especially China.

Japan highlighted the high number of new AD investigations initiated in 2014 and 2015. It said that 154 new investigations were initiated in the first half of 2016 alone.

Japan said that this is the result of overcapacity in steel and other sectors, mainly from producers in emerging markets.

The US also pointed to China, saying that of the 22 WTO members reporting anti-dumping activity in the last six months, 18 have targeted China, mainly in the steel sector.

According to the US, significant excess capacity in China has given members no choice but to address the problem through anti-dumping actions.

The US said that China is not allowing the market to dictate supply and demand. On the contrary, it is increasing government intervention.

Mexico said the magnitude of government intervention creates distortions and injury not only in the producer's home market but that of other countries.

China's policies are impacting the rest of the world, and members need to explore solutions to the problem, it added.

Canada said trade remedies such as anti-dumping measures are legitimate responses to these concerns and will continue to be applied if products are dumped.

It noted the revised paper on industrial overcapacity which Canada, the US, the EU and Japan submitted to a meeting of the WTO Committee on Subsidies and Countervailing Measures on 25 April (see SUNS #8453 dated 2 May 2017).

In response, China emphasised that the AD Committee is not the appropriate place to discuss so-called over-capacity or government intervention.

It said that government intervention can come in both good and bad forms, and so can overcapacity. According to China, market forces must be allowed to operate and to do so, competition must take place.

It also pointed out that a causal link has to be established between overcapacity, government intervention and injury.

According to trade officials, China pointed out that a certain member (the US) has implemented more than 200 anti-dumping and countervailing measures on imports of steel products from other WTO members.

According to China, over the last 30 years, this member has initiated over 100 investigations on one product alone - hot-rolled steel.

Duties of nearly 130% have been applied on imports of that product originating from China for 20 years, and yet China continues to maintain high exports to that market.

In addition, this member is now resorting to other rarely-used remedies, notably Section 232 investigations, on steel and aluminium imports, China charged.

[According to the US Department of Commerce, a Section 232 investigation is conducted under the Trade Expansion Act of 1962, as amended, with the purpose of determining the effect of imports on national security.]

China said that it is concerned with this development, and called on the US to explain its intentions regarding resort to such investigations.

Based on this, who is restricting trade, China asked, noting that while Chinese steel accounts for half of world production, only a small portion of that is exported.

China stressed that trade remedies are legitimate, as long as the investigations comply with WTO rules.

EU BASIC ANTI-DUMPING REGULATION

According to trade officials, Russia expressed concerns about the proposed amendments to the EU's Basic Anti- Dumping Regulation.

Russia said the good news is that the EU Commission seems to have given up its "non-market economy" (NME) designation and that all WTO members will be treated as market economies.

The bad news, however, is that this NME designation is being replaced by another WTO-inconsistent measure - the concept of "significant distortion", whereby EU investigators may be allowed to discard domestic prices and costs (including the costs of raw material inputs) in the exporting country due to the existence of significant distortions in the exporter's marketplace.

Russia pointed out that this appears to be a "face lift" of the old NME concept. It said that it is outdated and outrageous in light of the WTO Appellate Body's findings in DS473, "EU - Anti-Dumping Measures on Bio-diesel from Argentina."

According to Russia, the Commission's proposal seems to punish all producers with a comparative advantage, and therefore is inconsistent with Article 2.2.1.1 of the WTO Anti-Dumping Agreement as well as Article 6 of the GATT.

In a communication (G/ADP/W/497), Russia posed several questions regarding the proposal for the EU Basic Anti-Dumping Regulation concerning the determination of normal value.

Russia asked the EU to explain what are the reasons and intentions for changing the provisions of calculation of normal value.

Russia referred to Recital (2) of the Proposal, "in view of developments with respect to certain countries that are Members of the WTO, it is appropriate that, for those countries normal value should be determined on the basis of paragraphs 1 to 6a of Article 2 of Regulation (EU) 2016/1036".

Russia asked the EU to clarify what countries and what developments this Recital refers to?

The EU was also asked to clarify whether this Recital refers only to the countries that are currently treated by the EU as non-market economy countries.

In particular, will the provisions of this Recital be applied to any of the Member States of the Eurasian Economic Union that are WTO Members.

Should the Recital refer not only to the countries currently treated by the EU as non-market economy countries, please explain what other countries it refers to and what developments in them are meant, Russia asked.

According to Article 6a (a) of the Proposal, there might be cases when "it is not appropriate to use domestic prices and costs in the exporting country due to the existence of significant distortions".

Russia asked the EU to clarify what criteria are going to be used in order to evaluate the "significance" of such "distortions".

According to the Explanatory Memorandum to the Proposal, the proposed methodology of normal value calculation "would allow the Commission to establish and measure the actual magnitude of dumping being practised in normal market conditions absent distortions".

Russia asked the EU to explain the meaning of the notions "actual magnitude of dumping" and "normal market conditions absent distortions".

The EU was also asked to describe the methodology that is envisaged by the Commission's drafters in order to evaluate "actual magnitude of dumping" and "normal market conditions absent distortions".

According to trade officials, Bahrain (on behalf of the Gulf Cooperation Council), China, Pakistan, Kazakhstan and Indonesia voiced concerns over the EU's proposed amendment.

Bahrain said that the proposal by the EU Commission raised significant questions for exporters to the EU, particularly the idea that EU investigators can reject exporters' reported costs if significant distortions are found to exist.

According to Bahrain, the EU seems to be trying to disadvantage certain exporters without developing a clear concept, which would lead to discriminatory measures.

Such practices have already been found to be inconsistent with WTO rules through dispute proceedings, it pointed out.

China commended the EU's shift away from NME designation. It said rising protectionism means members must be particularly cautious in amending their trade remedy practices.

It said this is one of the reasons why China made its new proposal on 24 April on advancing negotiations on anti- dumping disciplines and other trade remedies.

However, China pointed out that the concept of "significant distortion" is not defined in any WTO agreements. It leads some to wonder whether this is an evolved version of the NME designation with a new title.

China asked the EU how it planned to implement this concept consistent with WTO rules.

According to trade officials, the EU said that the Commission's proposal was still subject to review and approval by the European Parliament and Council.

The EU cannot prejudge the outcome of that review, thus it was not in a position to address the questions raised by members.

If and when the amendments are adopted, the EU will inform WTO members and questions on the final measure can be submitted.

Asked whether WTO members could submit comments during the review, the EU said numerous opportunities were given for comment prior to the publication of the Commission proposal.

CHINA'S PROTOCOL OF ACCESSION

According to trade officials, China reminded the meeting that Section 15(a)(ii) of its 2001 Protocol of Accession to the WTO expired on 11 December 2016 and that members can no longer use the "surrogate methodology" permitted by this provision in anti-dumping investigations.

Most members using the surrogate methodology have clearly stated their intention to comply with their WTO obligations, but a few have not, said China.

China asked these members to respect their WTO obligations. It pointed out that this was a legal - and not a political - issue and that China would use all necessary measures to defend its rights.

The US said this was no longer an issue appropriate for discussion in the Committee, as the matter was now the subject of WTO dispute proceedings (DS515 and DS516).

The US maintained that the expiry of a single provision under the section in question does not mean members must grant China market economy status.

According to trade officials, Mexico also asked if it was appropriate to discuss this matter in the Committee given that dispute proceedings are under way.

Mexico reiterated that it did not necessarily agree with China's interpretation of Section 15 of the Protocol and that it can be interpreted in different ways.

Japan said that it was concerned with China's interpretation of the Protocol's provisions. It said members may continue to use methodologies not based on a strict comparison with costs in China.

In response, China underlined that the issue was appropriate for discussion in the Committee.

It brought the dispute cases to the WTO because China adheres by the rules, and it believed the DSB would justify China's complaint.

The Protocol reflects a compromise made by China and WTO members 16 years ago, in black and white, and it was time to honour those commitments and terminate the surrogate methodology, China said.

COUNTRY-SPECIFIC CONCERNS

The Committee also discussed several country-specific concerns.

According to trade officials, the EU voiced concern over the US decision to impose AD duties on imports of certain carbon and alloy steel cut-to-length plate from Austria, Belgium, France, Germany, and Italy.

It maintained that the imported amounts were low and the dumping margins were inflated as a result of the use of the "targeted" dumping methodology which was recently condemned by the WTO in DS464, "US - Anti- dumping and Countervailing Measures on large residential washers from Korea."

The EU said without the use of this methodology, no dumping would have been found on some of the exports.

Japan reiterated its concerns with longstanding US AD measures on imported Japanese products, including 16 that were in force for more than 20 years and one that has been in place for 38 years.

Japan said that an AD measure can be extended beyond the normal 5-year limit only if the authorities determined further dumping was probable, and not plausible.

Korea questioned US practices in investigations which led to the imposition of AD duties on corrosion-resistant steel products as well as hot-rolled and cold-rolled steel flat products.

According to Korea, US authorities denied information submitted by the targeted companies and applied "total facts available", which has been facilitated by amendments adopted in 2017 giving investigators greater leeway to adopt this practice.

Korea said that use of this was contrary to WTO jurisprudence. Exporters were being subject to "total facts available" regardless of how hard they tried to cooperate with investigators, Korea added.

Korea also voiced concerns over use by the US Department of Commerce of a practice known as "particular market situation" (PMS) in a review of an AD order on imports of Korean oil country tubular goods (OCTG).

Under Section 504 of the Trade Preferences Extension Act of 2015, the US Department of Commerce has the authority to address market distortions in the production of foreign merchandise as part of its calculation of dumping margins in anti-dumping proceedings.

This was used for the first time in the Korean OCTG case, which increased the dumping margin and subsequent duties.

Korea underlined that the use of "total facts available" and PMS have serious implications for the fundamental fairness and legitimacy of the trading system as a whole.

Korea's concerns over the use of the PMS methodology were shared by China and Russia.

China said it was concerned about the orientation of US trade policy and potential distortions to global supply chains. It also questioned the consistency of Section 504 with WTO rules.

In response, the US said some of the investigations in question were still ongoing.

The US maintained that Japan's "chronic" complaints about longstanding measures are not justified. It argued that 80% of the measures imposed on Japanese imports have been terminated.

As for the older measures, the US said that the Japanese firms in question have not participated in reviews of the measure. The lack of evidence presented on their part limits information available to the investigating authorities.

On Korea's concerns about the "total facts available" and the PMS methodology, the US said neither practices have resulted in new "thresholds" for imposing duties or the imposition of new standards.

Under Section 504, Commerce may use alternative costs if the cost of materials reported does not accurately reflect the cost of production, said the US.

The Korean OCTG case was the first where PMS was applied, and Commerce will continue developing this concept on a case-by-case basis when facts and circumstances warrant, it added. +