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ECIPE WORKINIG PAPER .

No.
03/2010 THE POLITICAL ECONOMY OF EU ANTI-DUMPING REFORM By Dirk De Bièvre and Jappe Eckhardt Dirk De Bièvre (dirk.debìevre@ua.ac.be) is Prortssor of International Politics and Jappe Eckhailt (jappe.eckhardt@ua.ac.be) PhD researcher,both at the Research Group on European and International Politics, D ep ar tm ent oJ Po I it ical S ci enc e, U ni v e rsiteit Antw erp en ABSTRACT IN rr¡rs pApER, we provide a political economy account of the European Llnion's failed attempt to reform its anti-dumping legislation between 2006 and 2008.We review the role played by different interest gïoups, and the way public authorities at both European Commission and member state level responded to conflictíng societal demands.
Despite declining support among outsourcing producers and a rise in organisational capacity among importers and retailers, a coalition of heavy manufacturing producers mobilised against a change in the status quo.While the diffuse interests of consumer organisations and NGOs remained mute, sector consolidation was key to the capacity to mobilise against concentrated losses in defence of the vested interests of a policy commu- nity of traditional anti-dumping users, supportive member states, and the European Commission Directorate oftrade defence.
C C t=*t"u*o .,tÀ ^.o""n* k- HCIPEË zctoog roa,rrfô JEL Code: Fl0, Fl3, Ll 1 Keywords: anti-dumping, collective action, interest groups, sector consolidation, geographical concentration www.ecipe.org info@ecipe.org Rue Belliard 4-6, 1040 Brussels, Belgium Phone +32 (O)2 289 1350 \ ECIPE\MORKING PAPER l.INTRODUCTIONl AcconorNc ro pREvArLrNc EU anti-dumping legislation, European producers can lodge a com- plaint alleging dumpingby non-EU producers on the European market, obliging t}e Directorate forTrade Defence of the European Commission to launch an investigation.
If the Commission services find dumping as well as injury to European producers, the Commission is entitled to raise cìuty levels on foreign irnports of the procluct in qüestion.

By 2006, various societal groups, a qualified rnajority of mernber states, as well as the then Com- rnissioner forTi'ade, Manclelson, favoured reforrn of existing ploceclures.
Reform conside¡ations u'ere rnainly concerned with European pr-oducers having outsourcecl parts of their production outside the EU, the interests of retailers ancl consumers, the transparency of and the criteria for the Commission's handling of cases, and the interests of small businesses.
In December 2006, these considerations resulted in a Green Paper aimed at consulting with interested parties' posi- tions on reforming trade defence instrurnents in general and anti-dumping in particular.2 In this paper, we address the question why anti-dumping reform failed, clespite changed prefer- ences and political mobilisation on the part of businesses, member states, and the European Commission.We start out by developing three plausible explanations that would lead us to exPect a successful reform as well as three expectations that would speak for the maintenance of the status quo.These concerns changed incentives for societal interests and public authorities, both member states and European Commission, as well as potential international sources ofpreference formation.
We thus review the relative impact of a whole range of factors, each of which raises contrasting expectations of reform or status quo.

We test each of these rivalling hypotheses in a chronologically structured analytical narrative ofthe reform process from 2006 up to its suspen- sion in 2008.

We conclude with a couple of observations on interestgroup research, the mobilisa- tion of concentrated interests, status quo politics, and the nature of European trade policy.

2.
2.

RIVALLING EXPECTATIONS OF REFORM AND STATUS OUO IN rrus sEcrroN, we develop tlree theoretical expectations ofsuccessful reform as well as three rationales for the maintenance of the status quo.

First, growth and consolidation in the importer and retail sector may well have facilitated sector collective action in favour of a reform t}rat would reduce the number of import-chilling anti-dumping cases.
Also, the increase in produc- rion outsourcing to outside the EU single market may temper enthusiasm for the imposition of anti-dumping duties.

On the other hand, we can expect producers in consolidated sectors of manufacturing to mobilise against the certainty of concentrated losses.

Second, geographicaì concentration of production within the EU may weaken both i¡terest groups' and public authori- ties' inclination to support anti-dumping duties.
Private interests and member states without production in particular sectors may thus be favourable to anti-dumping reform.

On the other hand, anti-dumping investigating authorities and traditional private sector users of anti-dumping policy might well have a vested interest in keeping mutually-supportive relationships in the form of policy community of interest groups, politicians and the executive.Third, EU anti-dumping might increasingly trigger retaliatory anti-dumping from non-EU trading parbrers.
On the other hand, the EU negotiators in theWTO Doha Round could well engage in a multilateral effort to The ECIPE Working Paper series presents ongoing research and work in progress.

These Working Papers might therefore present preliminary results that have not been subject to the usual review process for ECIPE publications.

We welcome feedback and recommend you to send comments directly to the autho(s).

No.
No.

03/201 0 t ( ECIPEWORKING PAPER limit tle use and,/or abuse of anti-dumping laws.We eìaborate on each of these theoretical expec- tations, before engaging in an empirical test of each of them in sections 3 and 4.

2.1.

SOCIETAL PREFERENCES: OUTSOURCING, CONSOLIDATION, AND PO- LITICAL MOBILISATION Tit¡orrroN¡.r usERs oF anti-durnping are very often producels in consolidated or'oligopolistic' sector-s, i.e.

consisting of a lor+'numbers of firms.


Mostl¡ these firms rely on large econornies of scale, as in the manufacturing sectols of steel, chernicals, rnetals, and consumer electronics.
Firms in such market niches face lou'er collective action problerns than clo a high nurnber of smaller firms, because producers in consolidated sectors need to coo¡dinate their actions wit} fewer other actors, and because a set of dominant firms 'r¡'ithin the sector may have clisproportionate incentives to assume t}e costs of getting organised (see Olson 1965).
In anti-dumping, this en- tails compiling a file alleging dumping by competitors outside the EU and maintaining relations with the European Commission's Directorate ofTrade Defence.r Firms with large economies of scale have an incentive to ensure that their iong-term investments turn a profit, also in the face of an increase in foreign competition in the course of their investment cycle.The presence of one leading firm or a group ofcoalition leaders facilitates the delegation ofacquisition ofspecialised expertise to permanent service personnel in t}eir branch or sector peak association, in casu thei¡ trade association in Brussels.
It also makes it easier to meet the requirement written into the EU anti-dumping regulation that an anti-dumping complaint can only be initiated if its supported by a minimum of 25%o of the total EC production of the like product, and anti-dumping duties can only be imposed, if at least 50% of the producers of this product support the complaint (EC Regulation 384/96).4 It makes a difference whether you have to mobilise several thousands of firms or just a few dozen.
And it makes a difference if you can get t}is act together more easily than others.s In the last t}¡ee decades, most anti-dumping complaints came from heavy industry and manufac- turing in raw materials, steel, chemicals, and metal products (Messerlin 1990; Messerlin 2001 ; De Bièwe 2003; Davis 2009).6Table 1 gives an overview of the degree of consolidation in differ- ent EU industries.
TABLE 1: DEGREE OF CONSOLIDATION OF SELECTED EU MANUFACTURING INDUSTRIES lndustrv tvoe Publishinq and printinq* Food products* Machinerv and eouioment* Wood products* Medical aooliances* Chemical products* Textiles* Paper and pulp products* Wearinq apparel* Glass products* Rubber products* Beverages* Druqs and medicines Leather products* Shiobuildinq and reoairs* Steel.- Non-ferrous metal* HHI 0.0058 0.oo5s 0.0062 o.oo79 0.o125 0.o153 0.o148 o.0193 o.0245 o.0544 0.o650 0.0738 0.0839 0.0851 o.1004 0.1100 o.1237 The hígher the Hirschman-Herf¡ndahl ' Source: OECD enterprise data,2002 from Austria, Belgium, Finland, ltaly, Sweden, UK. "
Source: Commission of the European Communities (2008), Based on 2004 enterprise data from the then 1 5 EU member states.

lndex HHl, the less companies are active ìn the sector No.03/2010 Ì ECIPEWORKING PAPER The chemical industry has for long displayed a high degree of consolidation, especially in its sub- sector ofpetrochemicals, and throughout the 1 990s the steel industry has undergone a transfor- mation from a nationally cartelised sector into a higtrly transnational and consolidated one.
Firms in both sectors have consistently delegated the processing and filing ofanti-dumping allegations to their sector-wide, Brussels-based peak association - the European Chemical Industry Council (CEFIC), the Euiopean ConJederation oflron and Srcel Industries (EUROFER) -, which have developed routine intelaction rnocìes u'ith Cor¡mission services.
During the period frorn 1980 until 2004, CEFIC filed 66 and ¿URO¡¿n 27 out of a total of 393 anti-clurnping investigations startecl by t}re Euro- pean Cornrnission.

Other anti-clumping complaints are compiled and filed by other, yet srnaller branch-specific tracìe associations like Eurometoux,the CommitteeJor European Copier ManufactuÍers, the European AssociationJor Textile ?olydefns, The European Bicycle MantJacturers Association , or The Liaison Committee oJ EuropeanWire Rope Industri¿s.
Occasionall¡ also ad åoc coalitions form ancl file complaints.

They are often committees within a particular pr"oduct market, not created with the goal of achieving longevity, and carrying fanciful names such as ALAßM (car radio receivers), Camera (TV cameras),?oetic (Tèlevisions), or TTJBE (seamless steel tubes and pipes).
As a matter of fact, they are frequently only covers for one individual firm with a dominant position in the specific product market, and they disappear into oblivion once the complaint has been lodged.

Firms going it alone are even ïarer, initiating only 30 EC anti-dumping actions over the last three decades.

Entirely absent as filers of anti-dumping requests are highly fragmented economic sectors com- posed of small and medium-sized enterprises, consuming industries, as well as services providers.
These have few to no incentives to try and identify dumping and mobilise politically to Êle an anti-dumping complaint, and also do not develop privileged relationships with the case handlers of the Directorate fortade Defence.
More recendy though, the transformation of production processes and international supply chains during the last two decades have changed the preferences of organised interests and firms about anti-dumping policy.Traditional import-competing producers are increasingly confronted with a divergence of interests between them, as manufacturers producing only within the EU support the status quo, while outsourcers favour reform of prevailing anti-dumping policy.
Meanwhile importers, retailers and consuming industries have increasingly consolidated, enabling collective action against import restrictions.

To start with the producers, more than 807o of anti-dumping cases in the last decade have in- volved eit}er raw materials or low-skilled manufacturing products (Davis 2009).

In botJr sectors, higher input-costs (e.g.

wages) have placed European producers at a disadvantage vis-à-vis firms in developing and emerging economies, especially inAsia.
As a consequence of increasing import- competition from manufacturers abroad, traditional European producers lost an important part of their traditional market share and saw a significant decline in production (Davis 2009).
This prompted industry in Europe to reduce mass production and concentrate on higher value-added products and niche markets, as well as to subcontract a¡¡d relocate labour-intensive, less value- added operations to low-cost countries, mainly inAsia (in the footwear indusft¡ Brenton, Pinna et al.

2000; in the textiles and clothing industry, Nordås 2004).
The creation of international supply chains that turn firms into importers next to remaining producers in a particular product market has also characterised the consumer goods producers.

As a consequence, anti-dumping duties on imports have become a burden ratler than a bless- ing for outsourcing producers, occasioning them to oppose the imposition of anti-dumping du- ties.
Producers of high value-added products became much less entÀusiastic about anti-dumping No.03/2010 ECIPE\MORKING PAPER measures, joining the ranks of exporters in feeling tJre adverse effects of retaliatory anti-dumping measures by otÀer countries (see below).

What is more, they got involved in production that no longer competed directly with imports from low-cost producers (see, for example, Underhill 1998).
At the same time, importers, retailers ancl consumirig industries - those bearing the most con- centratecl cost of the irnposition of anti-dumping duties - have equalìy unclergone change.Their share in total GDP in Europe has steadily glourn, while traditional customers of domestic EU production - retailers and consuming industries - have inc¡easingly turned to imports.

Manv re- tailers t}us turnecl into direct cornpetitoi-s for tleir former suppliers.
Furtherrnore, a remarkable wave of consoiidation, especially among letailers, causecl a small nurnber of large enterprises to dominate t}e sector, enhancing their capacity for collective action on their shared preference for less import restrictions (see for example, Gereffi 1 999; Fuchs and Kalfagianni 2007).
The ability to pressure policy rnakers depends to a large extent on whetler the members of a group actually establish a trade association (Olson 1965; Hansen 1990; Hathaway 1998).The incentive to take this organisational step is given by the concentrated costs the imposition of anti- dumping duties generate for this now small group of actors.
Moreover, groups tend to mobilise more in the face of concentrated and certain losses than for concentrated but uncertain future benefits (Goldstein and Martin 2000; Dür 2007; Dür 2010).

Importers indeed started to establish tleir own umbrella organisations at the EU level immediately after consolidation in the sector (e.g.

Eurocommerce,Íhe ForeignTiadeAssociation).


Due to sector consolidation and easier collective action, importers' and retailers' preferences for cheap importers could now find a clearer politi- cal expression, resulting in political mobilisation against individual anti-dumping cases as well as support for a reform of prevailing EU anti-dumping practice.

2.2.
2.2.

PUBLIC PREFERENCES: ERODING SUPPORT VERSUS VESTED INTER- ESTS As rnp EuRoprex single market deepened over the last two decades, some industries disappeared in one area and became geographically concentrated in others.

Machinery to produce high-tech textiles is concentrated in the North of Ital¡ the Basque country, Baden-Württemberg, while employers and employees in other areas in Europe have no political stake in this product market.
Similarl¡ shoe production has drastically declined in Germany and the United Kingdom, while Italy has remained strong in footwear production, and Spain and Portugal have equally maintained a large share (Shu 2008; Davis 2009).As geographical concentration in different economic sec- tors has increased (see table 2), member state support in individual cases for the imposition of anti-dumping measures has seen a steady decline (Evenett andVermulst 2005).
Industry support in favour of single anti-dumping complaints is equally concentrated geographicall¡ with almost half the complaints receiving support from German companies, and about a third of complaints getting endorsements from only French, Italian, and Spanish firms (Davis 2009).

{- t No.

03/201 0 ECIPEWORKING PAPER TABLE 2: GEOGRAPHICAL CONCENTRATION OF EU INDUSTRIES AND DOMINANT COUNTRIES (MIDELFART-KNARVIK, OVERMAN ET AL.
2OO2) H eavi ly conce ntrute d ¡ nd u str¡ e s (that have remaíned concentrcted or became even more concentrated over time) M ed i u m Con ce ntrated i ndustries (that have become more concen- trated over time) M ed i u m Co n centrated i ndustres (that have become /ess concenttated ovet t¡ me) Motor Vehicles Motor Cycles Aircraft Electrical Apparatus Chemical Products Petroleum & Coal Products Textiles Wearing Apparel Leather & Products (e.g.
shoes) Furniture Transport Equipment Beverages Tobacco Office & Computing Machinery TV & Communication Professional lnstruments Machinery & Equipment Dominant countries: Germany, France, ltaly, Spain Dominant countries: Spain, France, Portugal, ltaly Dominant countries: Germany, Italy, Portugal, Spain It is worth noting that EU member states had reduced the decision threshold in the EU Council of Ministers to approve of Commission's proposals to impose definitive duties from a qualified to a simple majority vote back in 1994 (Woolcock 2000) and reduced it further in 2004 from when onwards abstentions were to be counted as votes in favour.
Although this reduced the effects of declining member state support for granting individual anti-dumping protection for some time, a series of highly controversial cases has ïecently undermined the acceptance of anti-dumping practice.
Contrary to this potential source for an erosion ofpublic actors'support for prevailing anti- dumping practice, dre status quo dnte creates the preconditions for a closely-Init policy commu- nity consisting of a large Commission Directorate in danger of losing its policy autonomy and of complaining industries with a vested interest in maintaining the current institutional set-up that might be changed to their disadvantage.

2.3.
2.3.

FOREIGN ANTI-DUMPING MEASURES AS RETALIATION AGAINST EU DUTIES A rnrno porENTrAL source ofa change preferences ofEuropean firms on the use ofanti-dumping measures is the fact that the EU has increasingly become the target of anti-dumping duties itself (Prusa and Skeath 2002; Blonigen and Bown 2003).
During the 1980s and most of t}e 1990s, the EU \¡r'as one among a few high-income countries that used anti-dumping measures, mainly against imports from firms in low-income countries.Today however, countries all over the world and across the whole development and income spectrum have adopted anti-dumping policies (Prusa 2005).

This proliferation of anti-dumping laws has lead to frequent recourse to retalia- tory anti-dumping duties between countries (Prusa and Skeath 2002).
Fear of retaliation may well induce complaining industries to refrain from filing anti-dumping requests and even entice authorities to start reforming the system (Blonigen and Bown 2003).

When in addition to t}at, domestic exporters start to get hurt by third country anti-dumping measures and organise politi- cally against it, policy makers may consider tle interests of all domestic producers, and not just of import-competing sectors (Lindsey and Ikenson 2001 ) .
Illustrative of this recent effect in EU anti-dumping dynamics has been t}le Commission's publica- tion of reports on third country trade defence instruments against the EU.

One report is especial- ly highly critical of the'increasing'and often'disproportionate'use of anti-dumpingmeasures b¡ mainly developing and transition, countries against European exports and explicitly stresses the No.03/2010 C i ECIPEWORKING PAPER negative consequences for EU exporteïs (Commission of the European Communities 200aj.
In order to counter these pressures arising from ¡etaliatory anti-dumping measures against Eu- roPean anti-dumping duties, one might imagine that the European Commission engage in mul- tilate¡al negotiations to limit and discipline the use or misuse of anti-dumping policy.
This is ef- fectively u'hat they did by participating in the sci-called Rules Negotiations mandated by the Doha Ministerial Declalation.T Hor,r,ever, gilen that the US arguablv hanclles anti-clurnping practice in a fashion that has greater potentiai to be disagreeable to non-American producels, the EU could harclly expect these negotiations to put a lid on the international spread in anti-durnping use.Täble 3 gives an overvieu' of the set of expectations leading us to expect reform and potential sources of a status quo of prevailing anti-dumping reguiation.
TABLE 3: THREE SETS OF EXPECTATIONS PRO OR AGAINST REFORM Pro reform Against reform 1 2.
Growth & consolidation in the import and retail sector; increase in outsourcing Resistance from consolidated iraditional producers Geographical concentration in production leading to declining support in member states w¡thout production Existing vesied interest policy community of haditional AD users and policy makers 3, Prudence to avoid retaliatory AD by foreign countries Difficulty to discipline AD use in WTO rules negotiations in Doha Round 3.
CURRENT ANTI.DUMPING REGULATION AND PROPOSED REFORM 'Ws Now runN to the prevailing anti-dumping regime in the EU and then assess which actors have asked for changes to that status quo.

As we go through the different stages of the decision making Process it becomes clear that producing firms and their interest associations play a decisive role, as tÀe political purpose of anti-dumping regulation is to protect import-competing industries against surges in imports.
An anti-dumping case in the EU goes through a multi-step process (seeTäble 4).

First, a complain- ant, i.e.

an individual firm or an inte¡est association, initiates an anti-dumping case on behalf of a section oft}e producers ofa particular product.

Ifa quarter ofthe producers ofa particular product allege that foreign producers are dumping, i.e.
selling below production cost, products on the EU market, the Directorate forTrade Defence at DGTrade of the European Commission is obliged to investigate their request.

A set of producers defines the size of t}e industry and the nature of the product on behalf of which the complaint is filed, by providing a list of all known Community producers of the so-called'lfüe' product.
Furthermore, firms that both produce and import the product in question - outsourcing firms - may be excluded when definin gthat 25Vo proportion of Community industry.

In a second step, the Commission presents the case to the anti-dumping advisory committee, comprised of representatives of the member states, before it launches a formai investigation of the foreign firms allegedly dumping products on the EU market.
During the third stage of the procedure, the Commission establishes dumping, the level of in- jury to domestic European firms, whether dumping was the cause of injury to the indusu¡ and finally whether the imposition of anti-dumping duties would be in the "Community Interest".

The latter means, in theor¡ that the Commission is obliged to take into accor¡nt the interests of No.03/2010 EC]PE]¡/ORKING PAPER lour distinct groups when assessing t}e impact of a potentialAD action: (a) the complainant, i.e.
the dornestic producers; (b) the retailers and their associations; (c) the import users and their representative associations and (d) consumer organisations (Vermulst andWaer 1996).

In other words, the Community interest test"operates as a safety valve in anti-dumping cases.

.

.

[it] allows the possibility of avoiding the automatic imposition of duties where duties would create adverse, e.r'en disastrous economic effects on other sectors of industry" (Wellhausen 2001).
Hovt'ever, the Comrnunity interest test is harclly ever usecl to rejectAD measures (Wellhausen 2001 ; Sapir' 2006).

In many cases, once dumping and injury are proven and measures ar-e expectecl to give reiief to the complainant industry, it is pr-esumed almost autornatically that these rneasul-es ale in the Cornrnunity interest.
Dur ing the fourth stage, the Commission again consults the Council's anti-dumping aclvisory committee and can decide to impose so called provisional AD duties, which are imposed fol six months (with the possibility of a three-month extension).

One month before the expiry of these provisional duties, the Commission is obliged to issue a proposal for definitive anti-dumping measures to the Council of rninisters.
In otler words, the Commission does not need the support of the member states to start raising duties.

Finall¡ the Commission puts a proposal on definitive duties to a simple majority vote in the Council, with abstentions counted in favour (Shu 2008).

This prevailing status quo came under considerable pressure when severaì trade defence instru- ment (most notably anti-dumping) cases generated controversy over the last decade.
One of those controversial anti-dumping cases has been the long-standing "bed linen saga" of the EU against India, Pakistan and Egypt.

Between 1996 and2}02, Eurocoton (the Committee of the Cotton and AlliedTèxtile Induskies of the EU) initiated several anti-dumping cases against imports of cotton- type bed linen originating in the aforementioned countries.
In all these cases the Council imposed definitive duties after investigations by the Commission.These Council decisions, however, did not come about easily.

The Eurocoton complaints had impelled a harsh political confrontation between traditional producers ofbed linen in the EU, backed by the Southern European member states with domestic production, and importers, supported by Northern member states.

Unsur- prisingly, the votes in the anti-dumping committee were very dlfficult.
In case of duties against imports from India, for instance, the committee recorded a tie vote, seven-seven, with Germany initially postponing and eventually casting the tie-breaking vote (Dutta 2006).

Similar voting patterns occurred in the cases against Pakistan and Egypt.

A similar clash occurred in cases of shoe as well as apparel imports from China.
Up until the end of 2004,the EU had quotas on many shoe as well as textile and cìothing products imported from China.With the lifting of the quotas at the beginning of 2005, China's share in total imports in many product categories rose dramatically in the course of 2005.

While importers saw big op- portunities in imports of Chinese shoes and clothing, domestic EU import-competing producers felt tlreatened by these cheap imports.The latter group took action.
In tfre case of shoe imports, European producers filed an anti-dumping complaint against shoes from China andVietnam.

During the investigations and discussions on duties that followed, opponents and supporters, again, aligned along geographical and thus member state lines with and without production facili- ties.
Because member states could not agree on measures in the anti-dumping Committee, the Commission ended up proposing a compromise: duties for two years instead of five; duties of 16.5%oagainst shoes from China, where 30%o to 40%o is normal; and no duties on children shoes.s Although in the end the compromise was accepted by a (small) majority of the member states, no one was satisfied (Kommerskollegium 2007).
No.03/2010 ' ì i :.-' ECIPEWORKING PAPER Meanwhile, the 2005 quota phase-out on textiles imports from China unleashed an identical political batde, a battle which has become known as the'bra wars.'

In this case, producers in the EU did not file an anti-dumping case after the sharp surge in imports from China but demanded the introduction of safeguard measures (i.e.

the re-introduction of quotas) on a whole range of products.
Afte¡ these demands, the Commission was confronted again with heavy political pressur-e from those in favour and those against such rneasures.

In the end, the EU and China agreecl to start talks on the issue in the course of 2005, which eventually led to the signing of a Memorandurn of Unde¡stancìing (MoU).

ln this MoU the EU and China declared that the EU coulcl impose safeguard measures on 'l 0 proclucts until 2007.
Hor,r'ever, it took the Cornmission rnore t}an a month to get the MoU implemented and in this month Eur:opean retailers placecl very big orders with Chinese exporters on top ofthe goods already ordered.This created mas- sive problems because tìese items (which were thus ordered before the MoU was implemented) reached Europe after the implernentation of the MoU.
Consequentl¡ quotas for the entire year were full within no-time and an adclitional 77 rnillion items (mainly bras, hence the 'bra wars') from China were blocked at European borders.This refuelled the debate between those in favour, and those against, the use of trade defence instruments.This time the debate focused on whether or not to enlarge the quotas and, by doing so, release the blocked garments.The debate, which generated a lot of media coverage, ended in another compromise: half the amount of the blocked garments were counted towards the 2005 quotas, while the other half towards the 2006 quotas (EcÌ<hardt 2010).
Under pressure f¡om so much politicisation and public criticism of current anti-dumping (and other trade defence) practices, then European Commissioner forTiade, Peter Mandelson, con- cluded that current anti-dumping rules did not sufficiently take into account the interests of con- sumers and producers who have outsourced production.This position lead to the official launch, in December 2006, of one of the initiatives within the Global Europe trade policy framewo¡k: a public consultation on the basis of the report "Europe'sTiade DeJence Instruments in a Changing GIobaI Economy.
A Green Paper þr Public Consuhation" (Commission of the European Communities 2006).e The intent of the Commission's reform initiative became clear from tÀe questions that were to guide the consultation: Do we take enough account ofthe producers who have relocated parts of t}eir production outside the EU in the present system?

Do we need to look at new ways of reflect- ing the interests of retailers as well as consumers when imposing antidumping duties?
Could we be more transparent in the way we handle anti-dumping cases?Are we using the right criteria in launching investigations and in defining and implementing anti-dumping measures?And, frnall¡ are we doing enough to ensure that the interests of small business are taken into account when imposingTDl's?

In other words, the reform considerations were all aimed at giving greater weight to the interests of importers and consumers at every stage of theAD procedure (seeTäble 4).
As we will see below, when we analyse the reform process in detail, importers hailed the ideas put forward in the 2006 Green Paper, especially on issues such as the standing requirements and the Community interest test, whereas producer groups quickly realised that the introduction of ( t No.

03/201 0 .\,\/ ECIPEì¡/ORKING PAPER a distinction between outsourcing and exclusively European-based producers would cause them harm in the long run.
TABLE 4: STATUS OUO OF CURRENT ANTI.DUMPING REGULATION AND COMMISSION REFORM CONSIDERATIONS STAGES CURRENT ANTI-DUMPING REGULATION REFORM CONSIDERATIONS Standing requirement Firms representing 25olo of Community production Raise threshold to 4O-500/o; include outsourcers Advice Council advisory committee Contact third counlry governments 'Community interest' Mainly test injury io producers lnjury test also for importers & consuming industries Provisional duties Short notice Advance notice Council vote Simple majority; abstentions as 'yes' Only'yes'votes 4.
THE REFORM PROCESS PROPER: 2006-2008 Arrr¡oucn rHE REFoRM initiative was officially launched in December 2006, Commissioner Mandelson already gave a speech in May 2006 in which he hinted at reforming anti-dumping procedures.l0 Somewhat later, on 1 1 JuIy 2006, the Commissioner invited several trade experts to present a reflection paper on EU trade defence instruments.rt Peter Bernert, President of EuroCommerce, tÀe European association representing the commerce sector, expressed a clear preference for more consideration for importers' interests.
Jan Eggert, Secretary-General of tÀe Brussels-based ForeignTrade Association and peak association of European retailers and im- porters, advocated a thorough reform, specifying a whole range of reforms for each stage of the anti-dumpingprocedure.As CEO of the German chemical firm K*SAG, R. Betlke advocated no fundamental changes to existing legisìation.
André Sapir, former advisor to Commission-Presi- dent Prodi, professor of economics at the ULB and Brueghel, proposed that t}e Commission take better account of users and consumers when assessing the Community interest, and presented some concrete proposals to increase the transparency of proceedings as well as measures.
Adrian Van den Hoven, director ofinternational relations at the European employers'peak association, BusinessEurope, presented some of the pros and cons of a rebalancing of interests when reforming anti-dumping.Two people reflected on the negative impact of anti-dumping measures on develop- ing countries: Sheila Page from the International Economic Development Group in London, and Täriq Fatemi, PakistanAmbassador to the EU.
Also present were two professors of law, Claudio Dordi from Bocconi Universit¡ and Gary Horlick, fromYale University and anti-dumping at- torney, both critical of the current anti-dumping procedures in the EU.

Producer groups, alarmed by Mandelson's speech and the composition of the expert grouP, started to get organised around that same time.
More in particular, eight producer groups and traditional users of anti-dumping (seeTable 6later in this paper) thought that EusinessEuro¿e would not be able to come to a unifred position to defend their interests, as this comprehensive peak association would be split between their heawy manufacturing members and their downstream users of those products.They therefore mobilised on their own against any potential weakening of Europe's trade defence instrument, and sent two letters of concern to t}e Commission in the second half of the year.t2 In other words, the concenfrated interests of manufacturing in consoli- dated sectors fearing future losses found their political expression in early political mobilisation.
During that period producer groups also started to get the impression that the Commission serv- ices were informally changing the handling of pending anti-dumping cases to their disadvantage and to the benefrt of outsourcers and importing interests.
At the same time, efforts continued witlrin ßusjnessEuropeto come to a compromise between tÀe diverging interests of different tyPes 10 No.03/2010 C ( ECIPEWORKING PAPER of manufacturing industries, watering down some of the more radical parts of Mandelson's re- form ideas, while accommodating the interests of outsourcing producers, consuming industries, in order to maintain the mercantilist outlook of the European employers' peak association and its commitment to reciprocai trade liberalisation.Yet, two pragmatic complomise proposals co- ordinated u'ithin the organisation's international relations department and committee, failed to get enough suppoì-t f¡om BusinessEurope rnembers.
So, the groups opposing anti-dumping reform were already very \,\'ell oi-ganised when, on 10 October 2006, the Commission published its CommunicationGlobal Europe,Competing in thelVorld, A Contibuion to the EU's Growh andJobs Strategy and its Green Paper frorn 6 December 2006 (see Table 5).

TABLE 5: TIMELINE EU ANTI-DUMPING REFORM 2005 2006 August lan May 4 Summer July 1 1 Oct 1o Dec 6 Textile crisis Evaluation of EC TDl, final report of Law Firm Mayer et al.
Commissioner Mandelson announces reform initiative AD on footwear f¡om Vetnam & China Expert group, invitations to Directors and Sec.-Gen. European Commission Communication GIobal Europe, Competing ín the World, A Contribution to the EU's Growth and Jobs Strategy European Commission Green Paper'G|obal Europe, Europe's TDI in a changi ng global economy' March 13 Hearing: strong opposition March 30 Deadline questionnaire 2007 April - May - informal case-by-case changes ' no publication of results of questionnaire June 1 3 Oct 23 Nov I Nov 19 Position on the follow-up to the Green Paper consultation on EU trade delence instruments @EFIC, Eurometaux, EUROFER, ACEA, ...) Orientation debate at the College concerning the folìow-up Seminar'Competitiveness in a Global Economy - A Challenge to Trade Dis' cipline?
organised by 1 6 producer assocìations (Eurometaux and others) Evaluation of the responses to the public consultation on Europe's TDls in a changing global economy 2008 Jan Press Release: Suspension of reform After the adoption of the Green Paper, industry had three months to fill out a questionnaire for interested parties contained in the Green Paper publication.
Shortly before that deadline, DG Trade held a public hearing on 13 March 2007, bringing together about 500 representatives from indusk¡ the rading sector, member states, experts and parties interested in anti-dumping policy.

At tlis event, participants could ask beforehand to be allocated speaking time and, due to good coordination efforts on behalf of the producers, most of this time was taken up by representatives from producers reluctant or thoroughly hostile to changes in current anti-dumping policy.
'3 A similar pattern became apparent in the responses to the questionnaire.

Of the 5 14 replies by firms and tade associations, oÃy 1/ 3 were unique, as producer groups had mobilised their member firms to file exactly the same opinion as the view tleir representative organisation had expressed in Brussels.The importer and retail sectors on the other hand, had not engaged in 11 No.03/2010 ECIPE]MORKING PAPER t}is strategy of numbers, resulting in far less submissions on their behalf.
Moreover, they had coordinated their responses to a lesser extent, resulting in mixed signals about their concrete preferences and desire for the reform options we reviewed in the section above.
Although in the past, particular cases had elicited the voicing of objections to current practice, like in the aforementioned cotton ancl shoes cases, importers and retailers had not beefed up their lobbying representation in Brussels.The European Consumers'Organisation,BEUC, apartfrom responcling to the Cormnission questionnaire, failecl to fol-mulate a irosition paper- on the Cornrnission's reform suggestions, ancl continuecl to concentrate on protest against indiviclual anti-dumping decisions, confirming the expectation that these cliffuse interests failed to mobilise at all.ra Eurocommerce,The peak association representing small as well as large commercial enterprises, has only two people working on tr ade issues, whereas every specialised producer group has permanent staff clealing with trade, and specialised organisations like CEFIC or EIJROFERhave a team of people working on the topic.
Realising the disadvantages for small and medium-sized enterprises (SMEs), the Commission had indeed included a vaguely worded suggestion about'technical assistance' to SMEs both at the complaint stage as well as during the investigation stage.

Commissioner Mandelson and his Cabinet were frustrated about the strong opposition and lack of support for their plans.
His determination to try and act as the agent on behalf of outsourc- ers, importers and retailers ran into a wall of incomprehension and obstruction, yet, practice in his services did change.

In the first five montls ol 2001 the Commission did not open any new anti-dumping investigation, feeding suspicion among traditional users of anti-dumping that the Commission was fudging the cases.
Commissioner Mandelson also tried but failed several times to have employees from European peak associations opposed to t}e reform removed from their positions, which only hardened fronts between supporters and opponents of the reform.
Only in September 2008 howevea did the Commissioner and t}e Secretary-General of the European Commission act upon corruption allegations against the Director ofTïade Defence, Fritz-Harald Wenig, and moved him to anotÀer position after an exceptionally long tenure as Directo¡ ofTrade Defence.rs Meanwhile the same Commission services were faced with the difficulty of drawing conclusions from the public consultation, which had not resulted in the backing for some of the reform op- tions the Commissioner had put forward.
Opposition to reform became bluntly manifest in the middle ol 2007 .

On the initiative of Monique Jones, Director ofTrade and Competitiveness at Eurometaux & Chair of theWorking Group onTrade Policy Instruments at BusinessEurope,the original coalition of eight producers opposing the reform lvas now expanded to include a mem- bership of 1 6 regular users of current anti-dumping regulation (see table 6).

t þ 12 No.03/2010 t ( ECIPEWORKING PAPER TABLE 6: TDI COALITION MEMBERSHIP FROM JULY 20oG (WITH .)
TILL MID 2007 (ALL) (source: http://www.euractiv.com/29/images/AlliTDDuly0T_tcm29-165590.pdf, last v¡sited on 2 April 2009) Abbreviation EUROMETAUX* EUROCOTTON- cEFtc- EUROFER- CIRFS' EFMA- ESTA" EUROALLIAGE- ECGA EUROMINES EWRIS CEPI CEI-Bois CECED CERAME-UNIE ACEA Cooperation with ETUC 2.

4. tr 6.

7. a 9.

10.

11 12.

13.

14.

.f5.

16.
Trade association full name and sector European Association of Non-ferrous Metal lndustrv Committee of the Cotton and Allied Textile lndustries of the EU European Chemical lndustry Council European Confederation of lron and Steel lndustries lnternational Ravon and Svnthetic Fibre Committee European Fertilizers Association European Steel Tubes Association Associatíon of European Ferro-alloy Producers European Carbon and Graphite Associatíon European Association of Mining lndustries European Federation of Wire Rope lndustries Confederation of European Paper lndustries European Confederation of Woodworking lndustries European Association of Household Appliance Manufacturers Liaison Office of ihe European Ceramic lndustry Association of Eurooean Automobiles Manufacturers Eu ro pean Trad e U n i ons Conf ede ration Members of this coalition also actively lobbied the German Presidency to get the Commission to stop its legislative initiative.
According to one of our interview partners, together with members of this coalition, members of the Sundesverband der Deutschen Industtie (BDI) came over from Berlin to spend two weeks talking to all the relevant decision-makers on the matter, such asTrade Com- missioner Mandelson, Enterprise ComrnissionerVerheugen, European Commission President Barroso, and member state representatives in the Council committee on trade matters.
One of their argumentative strategies was to warn that the introduction of a differentiation between foreign production facilities belonging to European firms versus non-EU firms would violate the non-discrimination rule of the'WTO.

As German support in the Council was widely considered crucial on this matter, the reform initiative was effectively derailed and its advocates clearly put in a minority position.
On 23 October 2007, the College of the European Commission held a so-called Orientation Debate on the proposed reform.16 b: this document, Commission services had summarised the results of the questionnaire from the Green Paper and submitted a first draft of proposed changes to the basic regulation on anti-dumping and anti-subsidy.

Areas of agreement included minor adaptations such as providing technical assistance to SMEs, increasing transparency, involving trade unions.
Wide disagreement remained however, on the original purposes of tìe reform initiative, especially t}re broadening of tìe Community interest test to tåe interests of import- ers, consuming industries, and retailers; including outsourcers as European industries; raising the 25Vo standing requirement rule; and levels and duration of measures.

Despite the discussion between Commissioners on the topic, DGtade had not yet officially released its analysis of the answers to the questionnaire.
Shortly afterwards, the pro-TDI coalition staged a widely attended Seminar entitled'Competi- tiveness in a Global Economy-A Challenge toTrade Discipline?

'on 8 November 2007, atwhich they presented the results of the answers to the guestionnaire.

Since these results were publicly available on the Commission website at the time (no longer now), the coalition of 16 European producer trade associations had hired a consultant to analyse all responses.
As late as l9 November 2007,rhe Commission finally released its own version of the results of the questionnaire.

13 No.

03/201 0 ECIPEI¡/ORKING PAPER On 1 1 January 2008, Commissioner Mandelson held a press conference at which he announced the shelving of the anti-dumping reform initiative.r?
Faced with the effects of the professionally mounted lobbying campaign by producers, the Commissioner had failed in getting support from a qualfied majority of member states for at least some of tle reform proposals.

Arguabl¡ the final blow to the reform initiative came when Commission President Barroso engaged in his strategy of keeping all contentious issues off the EU table in orcler to get the Lisbonteaty ratifiecl .

6.
6.

CONCLUSION Iw rs¡s pApER, we have arguecl that the high clegree of political mobiiisation by concentrated pro- ducer groups and the weaker mobilisation of irnporters ancl retailels constituted the main cause for the recent failure of EU anti-dumping reform.We identify several systematic developments that fed into an inclease in political mobilisation against the prevailing EU anti-dumping policy.
Increased consolidation in the importe¡s and retail sector did lead to a reduction ofcollective action problems in the sector.

A spìit among producers between trade associations representing firms producing exclusively witlin the EU on the one hand, and those that have outsourced parts of their production on the other hand, created t}e incentives to review the rules about who is en- titled to apply for anti-dumping measures.
Furtìermore, the geographic concentration of manu- facturing in particular areas witlin t}re European single market, has led to a gradual decline of active political support for anti-dumping measures when put to a vote in the Cor¡ncil of Ministers.

Finall¡ fear of foreign retaliation against EU anti-dumping measures might well have moderated producers as well as policy makers' inclination to resort to anti-dumping policy.
In the course of the reform initiative brought underway by the European Commission, heavy industry manufacturers and their trade associations successfully defended the status quo in anti- dumping legislation and practice by forming a solid coalition with a clearly coordinated strategy.
'While the political economy of interest mobilisation might go a long way to explaining this policy outcome after almost 3 years of intense private and public activit¡ it is equally interesting to speculate about the public nature ofa policy that - due to organisational collective action effects - clearly privileges some groups of actors more over others.
As long as the public interest test in anti-dumping policy remains procedurally mainly limited to the interests of a set of concentrated producers and their employees, economic sectors mainly composed of small and medium-sized enterprises facing prohibitively high collective action problems, as well as consuming industries, importers, retailers, and consumers bear the diffuse costs of a policy that basically appropriates private welfare goods for a small section of society.
In the light of the findings of this stud¡ it seems highly unlikely that the European Union will engage in legislative change to its anti-dumping policy any time soon.

It may even be unlikely that Presidency and/or Commission initiatives on increased transparency through clearer dead- lines, the ex ante release of information on planned provisional duties and so on, have a chance of garnering support among interested and mobilised organised interests and their membe¡ state representatives.
As industry demand for anti-dumping goes up and down with the business cycle, the current dramatic economic downturn does not seem to create favourable preconditions.

On the other hand, the advent of a new trade commissioner Karel De Gucht and his cabinet may bring in a more pragmatic style conducive to garnering consensus on increasingprocedural clarity and predictability in the conduct of EU antidumping policy.

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t6 No.03/2010 ECIPEWORKING PAPER FOOTNOTES 1.

We gratefully acknowledge research funding from the Fonds voor Wetenschappelijk Onderzoek (FWO) - Vlaanderen / Research Foundation - Flanders.
We would like to thank Fredrik Erixon, Gary Horlick, Petros Mavroidis, Edwin Vermulst, and Maurizio Zanardi for detailed comments and suggestions on earlier versions of this paper.

We also thank the participants of the European Consortium for Political Research (ECPR) Joint Sessions of Workshops, April 2009, Lisbon, and our colleagues at the Research Group of European and lnternational Politics, Department of Political Science, Universiteit Antwerpen, especially Caelesta Poppelaars.
The following practitioners shared their views with us: Retailers and importers: Stuart Newman, Legal Advise¡ Foreign Trade Association, Ralph Kamphöner, Senior Adviser lnternational lrade, EuroCommerce, Alasdair Gray, Director Brussels Office, British Retail Association; Producers & traditional users of AD: Monique Jones, Director Trade and Competitiveness, Eurometaux & Chair Working Group on Trade Policy lnstruments, BusrnessEurope, Colin Purvis, Director General, lnternational Rayon and Synthetic Fibres Commit¡ee (CIRFS), Adrian Van den Hoven, Director lnternational Relations, BusinessEurope, Sergio Marclli, European Textile and Apparel Association (Euratex); Anti-dumping law practitioners: Edwin Vermulst, Attorney, Vermulst, Verhaeghe & Graafsma Advocate; European Commission: Stefaan Depypere, Director Trade Defence, DG Trade.
All judgements, assessments, and opinions in this paper are our own.

2. lade defence instruments consist of anti-dumping measures, anti-subsidy - also called 'counlervailing duty' - policy, and safeguards.

The two latter instruments are rarely used in the EU and political contention was only about anti-dumping.

3.
3.

The Directorate for Trade Defence has an impressive personnel capacity of 1 64 Commission officials out of a totâl of 468 officials working at the Directorate-General for Trade, one of the largest DGs in the European Commission.
The bulk of these employees are so-called Case Handlers (see the Distribution of officials and temporary agents by DGs and the Commission Directory at http://ec.europa.eu/civil_service/ about/figures/index-en.htm and http://ec.europa.eulstaffdir/plsql/gsys-page.display_index?plang:f[rl; last visited on 1 April 2009).

4.

COUNCIL REGULATION (EC) No 384/96 of 22 December 1995 on "protection against dumped imports from countries not members of the European Community".
The legal obligation to observe this minimum support to start ant¡-dumping investigations does not come cheaply as it is enforceable by the EU's trading partners and fellow WTO members in front of the WTO Dispute Settlement Mechanism.

5.
5.

Economists tend lo ascribe the prominence of industries dealing with raw materials, steel, chemicals, and the like in anti-dumping exclusively to 'declining comparatìve advantage', discounting the organisational variable of collective action advantages for concentrated sectors.
lt is hard to imagine though that you can be in decline for over 40 years and still be the leading producer as is the case for the European chemicals sector - an observation that makes it plausible that collective action and organisational characteristics play a key role in explaining the industries' predominance in anti-dumping complaints.

6.
6.

For a database on all anti-dumping cases initiated on behalf of European producers, see the database (left column on EU anti-dumping petitions from 1980 until 2004 at http://www.ua.ac.be/dirk.debievre 'Documenten', bottom of that page).

7.

See WTO -website: http://www.wto.org/english/katop-e/rulesneg-e/rulesneg-e.htm, last visited on 4 February 201 0.

B.

At the final stage, the concessions on children shoes were dropped and were included again in the case.

9.
9.

The full speech of Commissioner Mandelson from 6 December 2006 is available at http://ec.europa.eu/ commission-barroso/ashton/speeches-art¡cles/sppm135-en.htm (last visited 25 March 2009).

10.

See Commissioner Mandelson's speech of 4 May 2O06, available at http://trade.ec.europa.eu/doclib/ docs/2006/may/tradoc-1 28581.pdf (last visited 5 November 2009).

1 1.

All expert opinions are on file with the authors and available upon request.

1 2.
1 2.

See the letter lo Commissioner Mandelson of 28 July 2006, available at: http://www.euractiv.com/29/ images/ADMandO6-tcm29-1 60263.pdf (last visited 2 April 2009) and the second letter to Commission President Barroso of 29 November 2007, available at: hüp://www.euractiv.com/29/images/ADBarO6_ tcm29-1 60262.pdf (last visited 2 April 2009).

13.

A transcript of the entire public hearing is on file with the authors and available upon request.

14.

See http://wrvw.beuc.eu/, see 'Policy issues A-Z'.


t7 No.

03/201 0 C ECIPEWORKING PAPER 15.

'Commission to probe trade leakl http://www euractiv'com/en/pa"/commission-probe-trade-leak/article- 1 7 51 82, 9 September 2O08.

16.

Orientation Debate at the Coltege concerning the foltow'up to the Green Paper on Europe's trade defence instruments in a changing global economy, internal European Commission document on file with authors.

17.
17.

See the online article on EurActiv: http://www.euractiv.com/en/trade/member-state-divisions-delay- eu-trade-reforms/article-169527 and the press reìease from Reuters: http://in.reuters.com/article/ businessNews/idlNlndia-31 3597200801 1 1.

-) l8 No.03/2010