COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the modernisation of trade defence instruments

1. Introduction 3

1.1. Trade defence 3

1.2. The EU's trade defence instruments 3

1.3. Evolution of EU's Trade Defence Instruments 5

2. Procedural issues and consultation of interested parties 5

2.1. Evaluation study 6

2.2. Consultations with stakeholders and member states 6

2.3. The Impact Assessment Steering Group 7

2.4. The Impact Assessment Board 7

3. Problem definition 7

3.1. Efficiency 7

3.2. Effectiveness 13

3.3. Subsidiarity principle 233

4. Objectives 233

4.1. General objectives 233

4.2. Specific Objectives 244

4.3. Operational objectives 244

5. Policy Options 26

5.1. Identifying the policy options 26

5.2. Description of the policy options 266

6. Analysis of impact 300

6.2. Impacts of Policy Option 1 – no change 322

6.3. Impact of the individual proposals under policy Option 2 355

6.4. Impact of Policy Option 3 400

7. Comparing the options 411

8. Monitoring and Evaluation 422

ANNEX 1: Statistics 444

ANNEX 2: Flow chart 511

ANNEX 3: Omnibus 522

ANNEX 4: Evaluation study 544

ANNEX 5: Summary report public consultation 76

ANNEX 6: minutes IASG meeting 11818

ANNEX 7: codification 1211

1. Introduction

1.1. Trade defence

The EU's commitment to the liberalisation of international trade depends on a level playing field between domestic and foreign producers based on genuine competitive advantages. The European Commission's role in achieving open and fair trade includes the defence of European production against international trade distortions such as subsidisation or dumping, by applying trade defence instruments ('TDI') in compliance with EU law and WTO rules.

The EU trade defence system operates under the WTO legal framework. WTO rules allow importing countries to protect their industries against dumped or subsidised imports, provided that certain well-defined conditions are met. Article VI of GATT 1994 and the WTO Anti-Dumping (ADA) and Anti-Subsidy Agreements (ASCM) give WTO Members the possibility to adopt trade defence measures. All major WTO Members including the EU use trade defence instruments.

The WTO sets mandatory minimum standards for the application of TDIs which must be respected in all cases. TD measures can only be imposed if the relevant investigation concludes that imported products are dumped in the importing country or benefiting from a subsidy; and that these imports are causing material injury, or threaten to cause material injury, to the domestic industry of the importing country. Moreover, measures imposed must not exceed the level of the dumping or subsidy margin.

1.2. The EU's trade defence instruments

TDI only affect a small trade volume as compared to the EU's total trade activity, i.e. less than 0.5% in 2011. However, for a specific sector or industry concerned by an investigation, the impact can be significant in terms of its financial or employment situation (please refer to annex 1 for TDI statistics that illustrate the overall context of TDI).

TDIs consist of anti-dumping, anti-subsidy and safeguards. The first is the most frequently used trade defence instrument. It addresses imports into the EU of products from a non-EU country which are sold at prices lower than normal value[1], in circumstances where they are injuring competing EU producers. The anti-subsidy instrument deals with subsidised[2] imports which likewise cause injury.

The anti-dumping and anti-subsidy instruments are very similar in terms of procedure. The EU industry affected by dumped or subsidised imports can lodge a complaint with the European Commission, providing evidence of the dumped or subsidized imports and of the injury they have caused. If the complaint contains sufficient evidence an investigation is opened (which lasts for around 15 months in case of dumping and 13 months in case of subsidisation); and in which all parties concerned (Union producers, exporters, importers, users of the product and consumer organisations) are invited to participate. If the investigation confirms the allegations in the complaint, an anti-dumping or anti-subsidy duty will be imposed. Measures remain in force normally for 5 years but they can be reviewed during this period. There is also a possibility to renew them for another five years if an expiry review confirms the need for such renewal.

The safeguard instrument is the third trade defence instrument. The criteria and procedure to impose safeguard measures are different from the anti-dumping and anti-subsidy instruments. Safeguard measures can be imposed as a result of a sudden surge of imports without the need to provide evidence of unfair practice. Measures can also be imposed much faster, i.e. provisional measures can be imposed at the same time as the initiation of an investigation and measures apply equally to all sources of the imports concerned. The safeguard instrument is thus the most restrictive instrument and the EU has only very rarely used it. Therefore, and because of the different nature of the instrument and the different procedure, as compared to anti-dumping and anti-subsidy, the safeguard instrument is not part of this exercise.

While the EU's trade defence system is constructed on the rules of the World Trade Organisation, the EU applies higher standards in the application of the TDI than those required by the WTO agreements. In order to balance the needs of European industry to receive relief from unfairly traded imports against the interests of user industries and of consumers, the EU has incorporated 'WTO+' features into its TDIs: in particular the "lesser duty rule" and the "Union interest test". None of the other WTO Members applies "WTO pluses" in such a comprehensive manner as the EU.

The lesser duty rule provides that a duty set at a lower level than the margin of dumping or subsidy is imposed in cases where such lower duty is sufficient to remove the injury to the Union industry. In practical terms, after the calculation of both, the dumping/subsidy margin and the injury margin, the two margins are compared and the lower margin is used as a basis for the level of duty to be applied.

Furthermore, antidumping and anti-subsidy measures may not be imposed if they conflict with the Union interest. The Union interest test ensures that the overall economic interests of the EU are considered before measures are imposed – taking into account the interests of the domestic industry producing the product concerned, importing companies, Union industries that use the imported product, and, where relevant the final consumers of the product concerned. In cases where the imposition of the duty would have a disproportionate negative effect on users and consumers of the product, as compared to the benefit that the Union industry would derive from the measures, the duties are not imposed, even though the existence of injurious dumping/subsidisation has been established.

These "WTO pluses" provide the necessary tools to assess the situation of the internal market and to ensure proportionality and balance in the application of the instruments. But they also lead to cases where the EU does not impose measures, in circumstances where the domestic industry in other jurisdictions would have obtained relief from dumped or subsidised imports.

Both the anti-dumping and the anti-subsidy instrument are based on rather long and technical proceedings, involving many different steps and complex procedures and calculations. The flow chart in annex 2 describes a typical anti-dumping investigation.

Even though the EU applies very high standards and its TD system serves as a benchmark for many other users of TDI, the practice over time has shown that certain improvements have become necessary, as explained in section three, in order to ensure its continued efficiency and effectiveness.

1.3. Evolution of EU's Trade Defence Instruments

The EU's trade defence policy started in 1968 when the Community signed the first GATT Anti-dumping Code. Until 1994, a single basic regulation included provisions on both anti-dumping and anti-subsidy. The current TDIs (in the form of separate anti-dumping, anti-subsidy and safeguard basic regulations) were enacted in December 1994 in the course of the implementation of the results of the Uruguay round on multilateral trade negotiations. This was the last major revision of the EU's trade defence instruments.

In 2006/2007, a reform exercise was launched in the form of a green paper. The green paper proposed – among many other issues – to enlarge the legal definition of a Union producer so as to include companies which have outsourced production outside the EU, but which have retained significant operations and employment in Europe (e.g. product design, distribution). It also proposed to strengthen the Union interest test by taking into account a broader set of interests, and by allowing measures to be fine-tuned downwards following the results of the Union interest test. The green paper process failed for a number of reasons. There was no convergence of views among stakeholders and it was impossible to find political support for the most controversial issues e.g. changing the definition of the Union industry and changing the scope of the Union interest test. The reason for this lack of support was that many stakeholders felt that the green paper proposal would only increase the gap between EU practice and that of other WTO members. Because of this deadlock other more practical issues could not be addressed either.

TDIs will be subject in the future to new decision-making rules once the 'Omnibus' regulation[3] is adopted (please see annex 3). The on-going work on the adoption of the Omnibus regulation is a separate exercise from the present initiative and it cannot address any issues specifically related to the efficiency or effectiveness of the TDIs. However, the conclusion of the two will lead to a new and more modern system of rules, procedures and decision-making which can take these instruments forward for the coming decades.

2. Procedural issues and consultation of interested parties

The evidence that supports this initiative has been drawn from the Commission services' own extensive experience with the application of TDI and a number of other sources, including a comprehensive evaluation prepared by outside consultants, informal contacts with key stakeholders at the beginning of the process, a high level conference, and a public consultation.

2.1. Evaluation study

In 2010 an external consultant (BKP Development Research & Consulting GmbH) was commissioned to evaluate the EU's TDIs. The objectives of the study were mainly: to describe the current practice in the field of TDIs; to carry out an economic analysis of the arguments relating to trade defence instruments and their application in the international legal and economic context: and to assess the performance, methods, use and effectiveness of the current system in achieving its objectives. The evaluation was published in March 2012[4], and provided important input to the modernisation process (please refer to annex 4 for a summary of the evaluation study).

2.2. Consultations with stakeholders and member states

The initiative on the modernisation of TDIs was formally launched in October 2011. To complement the evaluation and to prepare the next steps, DG Trade also conducted preliminary informal consultations with experts[5] in the use of TDIs in November 2011.

A public consultation on the modernisation of TDIs was then undertaken from 3 April to 3 July 2012. The online questionnaire was published in all EU languages on DG Trade's website, and DG Trade participated in a number of different meetings in order to publicize the consultation, to explain the initiative in greater detail, and to clarify the process. From April to June DG Trade participated in around 20 meetings and conferences organized by business associations grouping all the main stakeholders of the EU's trade defence system.

On 10 May 2012 DG Trade organised a conference on the modernisation of TDIs. The purpose of the conference was to present and discuss the modernisation process and the evaluation of the EU's TDIs. Around 200 stakeholders participated and a number of them provided preliminary feedback on the ideas identified in the public consultation.

By the closing date DG Trade had received a total of 310 replies to the online questionnaire. A wide variety of stakeholders participated in the survey, e.g. business associations at European and national levels, European industry, importers, governmental authorities, etc. The views expressed on the various issues addressed in the public consultation were often divergent between Union producers and importers; i.e. issues supported by Union producers were rejected by importers and vice versa. The largest number of responses -- more than two thirds – was received from Union producers and associations representing Union producers, which shows how important and sensitive the subject is for them (for more detailed information on the public consultation results see annex 5). Nevertheless, the replies received from importers' associations represent a very high number of importing companies.

Since the beginning of the process, member states have been kept informed regularly via different interventions in the Council working party on trade questions and the Trade Policy Committee. DG Trade has also participated in different conferences organised by the member states in order to present the initiative to national stakeholders (e.g. Portugal, U.K., France and Germany).

2.3. The Impact Assessment Steering Group

In order to prepare the public consultation and to draft the impact assessment for the initiative, an impact assessment steering group (IASG) was set up by DG Trade in February 2012. All relevant services were invited to participate, and representatives from 11 Directorates General regularly participated in the meetings[6]. The IASG met 4 times and discussed all parts of this impact assessment. The minutes of the last meeting of the IASG are attached to the IA as annex 6. The IA was submitted to the impact assessment board (IAB) on 7 November.

2.4. The Impact Assessment Board

The impact assessment was presented to the board on 5 December 2012. Its comments and recommendations for improvements of the report have been incorporated in this revised text.

In particular, the introduction has been modified in order to better explain the functioning of the trade defence instruments and the specific features of the EU system as compared to the WTO minimum requirements. The problem definition has been streamlined and the impact analysis was refocused in order to first analyse the impact of individual measures before analysing a package option. For illustration several annexes have been added.

3. Problem definition

The problems and the underlying drivers

In its day to day use of the instruments, Commission services have encountered and identified various areas in the current TDI system that call for improvement in order to increase efficiency and effectiveness of the instruments. The evaluation study and stakeholder consultation indicated that a further improvement of the system is desirable in order to cope with the changing trading environment. The following sections highlight the main problems, as well as their specific underlying drivers.

3.1. Efficiency

3.1.1. Suboptimal transparency regarding investigation procedures before provisional measures

Suboptimal transparency at certain steps of a TDI proceeding negatively impacts on efficiency. However, one of the major challenges is to find the right degree of transparency in order to allow for a more efficient investigation but without divulging confidential information.

Currently, importers and exporting producers in the third country(ies) concerned do not have access to the confidential file of the investigation and thus they cannot check the calculations made by the Commission services. They do not receive a disclosure about the investigation prior to the Commission's decision whether or not to impose provisional anti-dumping or anti-subsidy duties. This can in certain cases lead to errors that can have an impact on the level of the provisional duty.[7]

In the public consultation 42% of stakeholders identified a need for advance notice and limited pre-disclosure in order to remedy the information void prior to provisional measures.

3.1.2. Suboptimal transparency about the work of the Anti-dumping/ Anti-subsidy Advisory Committee

The Anti-dumping/Anti-subsidy Advisory Committee (ADC/ASC) established under the basic regulations consists of representatives of each of the Member States and meets roughly every 4 to 6 weeks. At present, stakeholders do not receive any information about proposed measures before the meeting of the ADC/ASC[8]. This is especially a concern in relation to provisional measures. If provisional measures are adopted by the Commission after consultation of the ADC/ASC, they become effective immediately – which creates particular difficulties for shipments already in transit at the time of imposition. In practical terms, the costs of a product could sometimes increase significantly as a result of the imposition of duties. A shipment may have left an overseas port before the imposition of a TD duty, but may reach a port in the Union only after the date the duty entered into force and will thus have to pay the duty.[9] Likewise, and also in order to reduce lengthy and unnecessary uncertainty, interested parties would like to receive prior information in cases where provisional measures are not imposed.

In this context, mechanisms for communication and dissemination of information also play a role in TDIs, and have led to certain inequalities in the system: for example, associations and companies that are represented by specialised lawyers, or that have signed up to certain information networks, often have access to information much faster than other companies which do not avail themselves of such possibilities. This imbalance can lead to clear advantages for those who are aware about whether or not provisional measures will be imposed and at what level, and who can thus take their business decisions accordingly; while others, less well informed, cannot.

3.1.3. Suboptimal transparency with regard to the Commission services' procedures for choosing analogue countries

The need for improved transparency is also evident in investigations where the exporting country is considered to be either a non-market economy or an economy in transition. In such cases information from an analogue country is normally used to establish normal value. The choice of analogue country can be difficult and controversial since it can have a direct effect on the level of the final duty imposed[10].

Currently, it seems that insufficient information is made public by the Commission services about the methods used for choosing analogue countries, and about possible cost adjustments required for the determination of normal value taken from an analogue country.[11] This can lead to additional requests from parties for explanations which is time consuming and impacts negatively on the efficiency of the proceedings.

3.1.4. Suboptimal transparency regarding the determination of "target profit" levels for use in injury margin calculations

The determination of the Union industry's target profit[12] (for the purposes of the determination of the injury margin and the application of the lesser-duty-rule) is a contentious issue. Problems have arisen because of doubts about the adequacy of the information that is currently disclosed in relation to "target profit" levels and the calculation of injury margins.

As a result, some stakeholders allege that the calculation of the profit margin was in certain specific cases subjective, and resulted in unjustifiably high levels of injury margins. By contrast, some EU producer associations claim that they do not understand why in certain cases a profit margin has been selected that is not in line with typical margins for the industrial sector in question. In their view this could result in an ineffective level of measures being imposed[13]. The injury margin calculation is of particular importance since the EU TDI system has the lesser duty rule as an obligatory feature (a WTO+ element, please see point 1.2 above).

The evaluation study showed that in the period 2005 to 2010 (the evaluation period) the lesser duty rule had led in 26 out of 47 AD cases to duties based on the injury margin. The average reduction of the duty due to the injury margin being lower than the dumping margin was about 9,3 percentage points or 28% over the period[14].

Table 1: Effect of the lesser duty rule on the duty level

|| 2005 – || 2010

HS chapter and description || Ave. def. dumping margin || Ave. def. duty

20 Vegetable, fruit, nut, etc. food preparations || 9,05 || 7,95

28 Inorganic chemicals, precious metal compound, isotope || 35,32 || 22,76

29 Organic chemicals || 29,49 || 21,89

39 Plastics and articles thereof || 12,75 || 12,75

41 Raw hides and skins (other than fur-skins) and leather || 69,80 || 58,90

44 Wood and articles of wood, wood charcoal || 25,18 || 25,18

54 Manmade filaments || 7,10 || 7,10

64 Footwear, gaiters and the like, parts thereof || 39,90 || 9,85

72 Iron and steel || 30,36 || 20,12

73 Articles of iron and steel || 45,46 || 36,53

76 Aluminium and articles thereof || 33,21 || 17,86

81 Other base metals, cermets, articles thereof || 64,62 || 29,30

83 Miscellaneous articles of base metal || 27,10 || 27,10

84 Nuclear reactors, boilers, machinery, etc. || 41,84 || 41,84

85 Electrical, electronic equipment || 47,33 || 27,84

87 Vehicles other than railway, tramway || 32,57 || 16,87

90 Optical, photo, technical, medical, etc. apparatus || 38,80 || 34,00

95 Toys, games, sports requisites || 5,80 || 5,80

Total average || 33,63 || 24,30

Source: evaluation study, volume 1, section 2.3.2.1

Regarding AS cases, the impact of the lesser duty rule has not been significant in past investigations, since in many cases the subsidy margins have been lower than the injury margins. However, recent cases have shown that subsidy programs result in greater distortions and higher subsidy margins, e.g.:

Investigation || Subsidy margin || Injury margin

PET, Iran || 51,8% || 16,7%

Graphite electrode systems, India || 14,9% || 7,0%

3.1.5. Suboptimal transparency regarding the Union interest analysis

The Union interest test (UIT) is an important feature of the EU's TDI system (see explanation under 1.2 above). There have been a number of cases in which the investigation showed that imposition of measures would be against the Union interest and accordingly, measures were not imposed (e.g. 3 CD-Rs cases, 3 DVD-Rs cases, or polyester staple fibres). In certain cases UIT considerations can also have an impact on the form of the measures, i.e. a minimum import price instead of an ad valorem duty (melamine case).

However, experience in investigations shows that the Commission’s practice during the Union interest analysis is not well understood, in particular, by less experienced stakeholders who have fewer contacts with the Commission’s TD services. This can lead to inefficiencies and frustrations in the proceedings and unnecessary delays.

Partly as a result of the alleged lack of clarity about the Commission’s procedures for conducting this analysis, some stakeholders claim that the UIT is subjective and does not weigh adequately the interests of the different stakeholder groups.[15] (For other issues related to the UIT please refer to chapter 3.2.5. and 3.2.10 below).

3.1.6. Suboptimal transparency about how the Commission services conduct expiry reviews

Expiry reviews are investigations conducted at the end of the five year period of TD measures upon request of the industry, in order to examine whether measures should be renewed for another five years.

Expiry review investigations are more complex than the original investigations, which are exclusively based on data relating to a period in the past. In particular, they involve a so-called likelihood analysis, which is a reasoned and fact-based look into the future. The investigation has to analyse both: whether there has been continuation of dumping/subsidisation and injury; and whether the repeal of measures would be likely to result in a recurrence of dumping/subsidisation and injury (prospective analysis). The practice is thus highly technical, and sometimes stakeholders have doubts about how the likelihood analysis is conducted, as well as about precisely what information is needed from them. This again leads to inefficiencies in the proceedings (e.g. increased workload for all parties involved). Some stakeholders also claim that owing to insufficient information about how Commission services conduct expiry reviews, unnecessary controversy has occurred in some past cases.

3.1.7. Uncertainty about whether or not trade defence measures will expire is considered to be prolonged unnecessarily

As a rule, measures expire after 5 years unless the EU industry concerned lodges a request for an expiry review, at the latest 3 months prior to the end of the 5 year period. However, since the Commission does not immediately announce whether it has or has not received such a request, uncertainty about whether measures will expire or not exists and may have a negative impact on importers' business strategies. However, WTO law does not allow any publicising of the application for the initiation of an investigation, unless a decision has been made to initiate (article 5.5 of the anti-dumping agreement and article 11.5 of the subsidy agreement). Therefore, this idea will not be further pursued under this exercise.

In this context, the table below indicates the number of expiry reviews, initiated over the last decade and the number of terminations and continuations of measures. The 10 year average shows that around two-thirds of expiry review investigations end with the continuation of measures (in this context please also refer to the duration of TDI measures in chapter 3.2.12).

Table 2: Number of expiry reviews initiated and on-going

EXPIRY REVIEWS || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011

initiated || 12 || 13 || 5 || 6 || 23 || 12 || 11 || 7 || 11 || 14 || 8

still on-going || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 2

continuation of measures || 6 || 2 || 5 || 6 || 16 || 5 || 10 || 7 || 10 || 9 || 3

termination || 6 || 11 || 0 || 0 || 7 || 7 || 1 || 0 || 1 || 5 || 3

rate of continuation of measures || 50% || 15% || 100% || 100% || 70% || 42% || 91% || 100% || 91% || 64% || 38%

Source: DG TRADE, Unit H1

3.1.8. Suboptimal non-confidential versions of complaints and submissions

Under the current provisions interested parties do not have access to the confidential file of an investigation. Some stakeholders claim that the content and quality of information included in non-confidential versions of complaints and submissions is in certain cases insufficient and of poor quality. Introducing an APO (Administrative Protective Order) system – by which the legal representatives of parties would be granted access to the confidential files – could greatly increase transparency, and would be welcomed by some stakeholders.

However, Union producers and also importers fear the increased costs of such a system, since it would make the need to hire a lawyer almost unavoidable in order to file a TDI complaint or cooperate in a TDI proceeding. Furthermore, and perhaps even more importantly, due to the different legal systems in the different EU member states, it might be very difficult to handle[16].

Thus, it seems that any benefits resulting from an APO system for a few stakeholders (e.g. trade defence lawyers) would be largely outweighed by the disadvantages for many others (e.g. Union producers, importers, exporters and EU institutions), without any overall gains in efficiency. This particular idea will therefore not be pursued.

3.1.9. Suboptimal transparency regarding refund procedures and about how to apply for refund of duties paid

Under the provisions of the Basic AD and AS Regulation, importers may claim a refund of all or part of the duties paid if certain conditions are met. In order to cooperate successfully in refund procedures, parties involved have to invest resources. Moreover, it is claimed that Commission services provide insufficient information for importers about how and when to apply for a refund of duties.

Finally, decisions regarding refund applications are currently not published in the Official Journal (in contrast to provisional or definitive duty regulations). There is an increasing number of refund claims over recent years, and therefore the need to facilitate and streamline such claims has become rather urgent in order for the Commission services to be able to deal with the increased work load, with limited resources, and without lowering the quality of the analysis of the claims received.

Table 3: Number of refund applications

|| 2000-2003 || 2004-2007 || 2008-2011

Number of importers applying for a refund || 19 || 52 || 120

Source: DG TRADE, Unit H4

3.2. Effectiveness

3.2.1. Increasing risk of retaliation against actual or potential TD complainants

In recent years, the threat of direct or indirect retaliation against EU producers who use TDIs has become a growing concern. Instances of direct retaliation have been identified after EU producers lodged a complaint with the Commission to start an anti-dumping or an anti-subsidy investigation. Such retaliation can take the form of direct threats from governments of the third country concerned against the company or companies filing a TDI complaint, or even against member states.

In a number of instances, the authorities of the targeted country initiated proceedings against EU firms producing the same group of products, as a reaction to the EU's TDI action (examples include the cargo scanners and carbon steel fasteners TDI cases). In certain instances, the initiation of a specific type of case, (i.e. a threat of injury case or a subsidy case) against a third country was mirrored by the initiation of the same type of cases by the third country against EU exporters. The analysis of such cases showed that they were initiated on purely political grounds, without any sound legal basis under WTO rules. In other instances, companies that were considering filing TD complaints have been warned that such a move might endanger their investments in the third country concerned, (for example, the possibility that planned factory expansions would be refused)[17].

3.2.2. Related increasing risk that EU companies will not co-operate in TD investigations

In its current practice, the Commission encourages EU producers faced with the threat of retaliation to file complaints by keeping the identity of complainants confidential. However, EU industry still fears "tit for tat" strategies from targeted exporting countries, and is often reticent to file complaints or to cooperate in any subsequent investigation. Since no obligation to cooperate exists under current rules, companies that feel threatened by retaliation may also decide to withdraw from a case after initiation. In cases where the withdrawal of one or more producers leaves the Commission with insufficient information at its disposal to continue the investigation, the whole proceeding may be jeopardised and injurious dumping/subsidisation may be left unaddressed. [18]

The problems for TD users arise in the first place because the current TD framework provides insufficient protection for actual or potential complainants.

According to the replies received in the public consultation, 31% of respondents claim to have already been subject to retaliatory behaviour in the form of threats or of unwarranted TD measures being imposed. Many respondents reported that governments of third countries imposed countermeasures on the same or different products than the ones targeted by the EU investigations (see above). In many cases parties reported that they have been subject to aggressive behaviour on behalf of exporters or of their own customers; and in certain instances, they have also been exposed to more direct approaches (such as personal blackmail of a CEO of a company), or to approaches made directly to the EU association.

3.2.3. Growing threat of circumvention of TD measures, and of other types of fraudulent behaviour in the context of TD investigations

A growing problem that occurs after definitive measures have been imposed relates to the circumvention of measures: exporting producers and/or importers find ways and means to import a product subject to an AD or AS duty, without actually paying the duty.

The most frequent forms of circumvention identified in the public consultation are mis-declaration of origin (11%), mis-declaration of customs classification (11%) and slight product modification (8%). Relocation of production to, or re-packaging in, third countries which are not subject to the TDI measures, have also been identified as ways to circumvent AD or AS duties. Another, rather recent development, involves so-called rogue traders. Rogue traders are temporary business set-ups that go bankrupt at the “right” moment, and thus become unable to honour any duty claims. Obviously, such circumvention practices aim at avoiding AD or AS duties which are often significantly higher than ordinary customs duties.[19]

Such practices can considerably reduce the effectiveness of measures for the complaining industry and unduly penalise importers that play by the rules and pay the additional duties.

Various other types of fraudulent behaviour by exporters have been encountered by the Commission services' investigators in the course of investigations. These include practices such as preparing a second specific set of accounts for the purpose of the TD investigation; or submitting an incomplete company structure in order to channel exports through exporters with a lower or no duty. This type of behaviour is aimed at getting a lower duty rate or even a zero rate.

Under the current system, the Commission services carry out circumvention investigations from time to time, and the basic regulations already provide for the possibility to initiate such investigations ex officio. Overall, however, the existing TDI framework provides insufficient deterrent to circumvention and other types of fraudulent behaviour; and the existing Commission services' practice for monitoring of trade flows are not optimal for consistently detecting circumvention and other types of TD-related fraud.

Table 4: Number of anti-circumvention investigations initiated

|| 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || 2012 (Sep)

Circumvention investigations initiated || 3 || 2 || 4 || 1 || 1 || 6 || 3 || 7

Source: DG Trade, Unit H1

3.2.4. Remedies for EU industry against third country subsidisation and structural raw material distortions of exports are insufficient to restrain the practice

Subsidisation by third country governments is an increasing concern. Subsidisation means direct intervention in the market by governments by way of financial contributions to their companies. Such subsidisation is considered to be more distortive than dumping. Although dumping may in some cases be at least partly the result of government intervention (for example, when it occurs as a consequence of high import duties on products in the exporting country), dumping remains primarily an unfair practice or strategy by individual firms.

However, the current EU TD system does not provide any means of dissuading third country governments from providing such subsidies to their companies. On the contrary, as a result of the lesser duty rule applied by the EU[20] (in AS cases as well as in AD cases), the same product under investigation in several countries may end up with much higher duties in other third countries than in the EU, which encourages exports to be deflected to the EU. While the latter problem can also occur in AD cases, the impact is amplified when the third country has carried out a combined AD/AS case. As a result, in the vast majority of cases such trade distortive subsidisation does not lead to any disadvantages for the governments and companies involved. Consequently, the number of AS cases is much lower than the number of AD cases and according to statistics[21] the level of AS duties is generally lower than the level of AD duties.

Concern has also been raised with regard to structural raw material distortions. These distortions can take the form of a subsidy (e.g. provision of cheap energy by the government). However, often they are not countervailable and need to be addressed in an anti-dumping context, e.g. various forms of export restrictions, or trading of raw materials on specialised exchanges which are under state influence and to which access of companies is restricted.

Table 5: Number of anti-dumping and anti-subsidy investigations

2005-2010 || Anti-dumping investigations || Anti-subsidy investigations

Cases initiated || 116 || 14

Duties applied || 5,4% to 90,6% || 4,3% to 53,1%

Average duty || 33% || 22,7%

Source: Evaluation study, volume 1, section 2.2.1 and 2.3.2

3.2.5. The level of participation by EU importers and downstream users/consumers in TD investigations, and the quality of their submissions, is often low

In a TDI investigation, findings are mainly based on information provided by interested parties. Cooperation from all interested parties is therefore very important in order for the Commission services to arrive at well-founded decisions. Interested parties cooperate by completing a detailed questionnaire in a timely manner and by accepting a verification visit at their premises, carried out by Commission investigators, in order to check the veracity of the questionnaire reply.

However, problems arise because the time allowed for replying to questionnaires is short; and because the questionnaires are deemed to be complicated. Replying to a questionnaire can thus be a very burdensome and time consuming exercise.

Typically, the level of cooperation received from importers and users of the subject products is lower than that from exporters to the EU or from Union producers.

Data from importers and users is particularly relevant for the Union interest test (please also refer to chapter 3.1.5 above). The difficulties are even greater for SMEs, which often lack the necessary time and resources to complete the questionnaire within the deadlines. By failing to submit their questionnaire responses in time, users and importers deprive themselves of their right to make submissions in the context of the Union interest analysis and the Commission's Union interest analysis may not show the full extent of possible problems resulting from the imposition of TD measures.

These concerns are supported by the majority of importers and users who contributed to the evaluation; they stressed the need for longer time limits to provide responses, due to the complexity of information demanded in the questionnaire.[22]

3.2.6. EU SMEs may be denied protection from dumped or subsidised imports due to the cost and complexity of TD procedures

The technical nature of TDIs means that companies often find it difficult to submit complaints either because of a lack of data available or the associated high costs.

This particular problem is most frequently encountered in fragmented sectors that are composed of a large number of SMEs[23]. They face fundamental barriers such as high organisation costs, and limited resources for gathering the necessary evidence to prepare a complaint, i.e. they cannot provide the prima facie evidence for dumping, injury and causality that is necessary to file a TDI complaint. As a consequence many SMEs do not have the possibility to seek protection against unfair trade.[24]

The particular difficulties faced by SMEs were noted in an earlier evaluation (2005) of the EU's trade defence activities; and the SME helpdesk was created in order to try to address some of the problems. Nevertheless, since the creation of the SME helpdesk, some stakeholders have been complaining that it was understaffed and that difficulties of communication, mainly due to language problems, needed to be remedied. The public consultation showed that 72% of stakeholders saw a need to upgrade the helpdesk.

In this context it should be mentioned that micro companies are not excluded from this initiative. Although micro companies with producing interests are rarely actively involved in TDI proceedings (because of their complexity, and the considerable need for resources, but also because they are usually less active internationally than larger companies), any TDI measures imposed also benefit micro companies which produce the product concerned. Equally, micro companies with importing interests will also be subject to any TDI measures imposed. Micro importers can defend their interests by cooperating in a TDI proceeding on the basis of a simplified questionnaire.

3.2.7. Varying the level of duties following an expiry review

Due to their legal scope, expiry reviews do not always fully take into account market developments that have occurred after the imposition of definitive measures in the original investigation. Expiry reviews are initiated at the end of the normal 5 year duration for TD measures and as a result, measures can either be maintained at the same level or repealed, but not modified. The choice between maintaining and repealing measures is normally adequate because such reviews examine whether dumping/subsidisation and injury would be likely to continue or recur if the measures were repealed.

However, the choice can become problematic particularly in the case of a second or third expiry review, where 10 or more years will have lapsed since the original investigation and many changes may have occurred in the underlying market, (e.g., emergence of new producers, changes in consumption patterns, technological developments, or simply a change in the level of dumping/subsidisation and/or injury). Such changes may warrant a change in the level of measures applied, rather than either maintaining or repealing them. However, current TDI procedures do not permit the level of duty imposed to be varied following an expiry review.[25] (Please also refer to chapters 3.1.6 above and 3.2.7 below).

3.2.8. No reimbursement of duties in cases where measures are repealed after an expiry review

Expiry review investigations usually take around one year and measures remain in force while the review investigation is on-going. Under current rules, the duties collected during an on-going expiry review cannot be reimbursed even in cases where it is decided that the measures should be repealed.

Importers in particular may view the collection of duty in these circumstances as unfair, because it leads to increased costs for them and possibly to higher prices for the final consumer. On the other hand, some producers argue – both in the public consultation and more generally – that such extended protection only serves to compensate for the injury suffered by the industry before measures are first imposed (which can take up to 2.5 years).[26]

3.2.9. Unjustified benefit from TD measures for EU industry involved in anticompetitive behaviour

Normally, a complaint is filed by an industry and if the investigation shows the existence of dumping/subsidisation, injury and a causal link between the dumping/subsidisation and the injury suffered by the industry, TD measures are imposed. Yet, it may happen that subsequently the same industry is found by DG COMP to have been involved in anti-competitive practices such as cartel behaviour or taking advantage of a dominant market position. Such anti-competitive behaviour cannot easily be detected in a TD investigation, but might be the subject of a separate investigation by DG COMP. In such circumstances, any price injury previously found in the TD investigation may then be due to artificially high prices following anti-competitive behaviour and the industry concerned may unduly benefit from the TD measures.

3.2.10. EU firms that choose to outsource the final stage of production may be targeted by TD measures

Nowadays products are often "made in the world" with different stages of production located in different parts of the world, and also incorporating components from a number of countries. However, it is often considered that the current TDI framework does not adequately take into account this increasing global fragmentation of production, with more and more companies depending on outsourcing strategies.

Economists argue that trade defence was originally conceived in order to protect national production systems, and as a result, EU firms which outsource intermediate stages of their production process are well protected by TDI; whereas EU firms which outsource the final stage of production to a third country may become subject to an anti-dumping or anti-subsidy duty when importing the final product into the EU.

The current provisions of the EU legislation, as well as the parallel WTO provisions, provide that "domestic industry" should be defined on the basis of where the physical production takes place, i.e. effectively the last stage of production where the product is brought into being. Economists often raise this as a problem insofar as companies which have outsourced a part of their production may not be regarded as a part of the "domestic industry".[27] As a result, such companies may not have their voice heard as a "domestic (Union) producer".

However, the latter companies will have their case examined under the Union interest test[28] which takes into account positive and negative consequences for all stakeholders when imposing measures, including companies which have outsourced part of the production process. In this context it is recalled that changing the current definition of the Union industry by including producers who have outsourced production was one of the main issues, besides changing the scope of the Union interest test that led, to the failure of the green paper exercise in 2007.[29]

3.2.11. Time taken from onset of injury to imposition of measures

The time required to impose measures and protect EU industry from unfair trade is relatively long. Among peer countries which use TDIs, the EU takes the longest time to impose provisional measures: 9 months from the date of initiation, whereas Canada, Australia, USA and India normally impose provisional measures within 5 months or even earlier.[30] EU producers claim that the long wait before provisional measures are imposed, together with the complexity of the investigations, lead to a low deterrent effect of TDI. Moreover, it takes a certain amount of time for the industry to prepare a complaint. The implication, therefore, is that the existing standards for accepting a TD complaint and for the conduct of a TD investigation are too demanding.

Graph 1: Time taken to prepare a complaint

-

Source: Evaluation study, volume 1, section 5.2.1.3

In the public consultation opinions were voiced in favour of shortening investigations, e.g. maximum 12 months (6 months for the provisional phase), and faster imposition of provisional measures.

3.2.12. TD measures could remain in force too long

The period for which TDI measures are actually in force – normally 5 years – is subject to diverging views.

Current TD regulations provide no time-limits for the duration of TD measures, and EU producers are generally satisfied with the current practice. Some claim that this duration has allowed them to make investments to be able to counteract the effects of dumping/subsidisation practices even after the removal of duties. Importers, on the other hand, complain that duties are often in place for long periods of time without proper justification. They are also critical of the renewal of measures as a result of expiry reviews. They claim that the threshold for initiation is too low[31] and that it is too easy to file an expiry review request.[32] As a result, they argue, measures in some sectors (fertilizers, organic chemicals or salts) have been in place for ten or even more years[33]. Some believe that protection by TDI becomes nearly permanent.[34]

However, actual case statistics show that less than 10% of measures remain in force for more than 15 years.

Table 6: Number of measures in force

|| AD || AS || Total || %

No of measures in force end 2011 || 120 || 10 || 130 ||

For more than 15 years || 9 || 0 || 9 || 6,9%

Source: DG TRADE, unit H1

3.2.13. Interests of workforce, and EU employment, can be poorly protected in cases where management chooses not to file an AD or AS complaint

In the current EU TDI system, investigations are normally initiated following a complaint by or on behalf of the Union industry. Under the current system trade unions cannot file a TD complaint. In order to ensure access to TDI in situations where the interests of EU producers and their workforce diverge (notably, for example, because of fears of retaliation), the evaluation study recommended that labour representatives should also have the right to submit complaints[35].

However, due the specific nature of the information required to file a complaint, it seems technically unfeasible for trade unions to file a complaint without the cooperation of their management. Regarding the issue of retaliation, it has already been identified as a separate problem (chapter 3.2.1 above) and is being tackled under option 3. Furthermore, this issue was not identified as a priority for stakeholders. It will therefore not be pursued further under this initiative.

3.2.14. Some stakeholders claim that the EU's duty collection system provides insufficient disincentives against dumping or subsidisation of exports to EU

Current TD regulations in the EU stipulate that a prospective duty collection system must be used. This means that duty rates are determined and collected using historical data, i.e. based on the data established during the investigation.

By contrast, under the retrospective system applied by the US, a duty is collected upon importation as a deposit only. The final amount will be determined later, based on the actual dumping/subsidisation during the period of the import transactions in question. In the evaluation, some EU producers requested a change from a prospective to a retrospective system. The reasons are that under a retrospective system, foreign firms that are engaged in unfair practices (i.e. dumping or subsidisation) have a higher incentive to dump less or to seek a reduced level of subsidy, so that they can benefit from a recalculation of the dumping margin.[36]

However, since the exact amount to be paid is not known until at least one year after importation, the financial liability for imports subject to anti-dumping or anti-subsidy measures is extremely difficult to predict; and fear of this uncertainty seems to prevail among stakeholders. Such a system would also entail an enormous increase of administrative burden for stakeholders and the institutions due to yearly reviews.

Under the current basic regulations, parties can request a refund in situations where they can show that the actual dumping/subsidisation is lower than the duty in force. The evaluation did not recommend a change in the system and only a small number of stakeholders raised this issue in the public consultation. This particular idea will therefore not be pursued further.

3.2.15. Codification of the basic regulations with regard to WTO and ECJ jurisprudence

The current basic regulations were enacted at the end of 1994. Since then, a large number of WTO dispute settlement rulings have been handed down which – even if they did not necessarily involve the EU – nevertheless have implications for the EU's practice, since normally such rulings are followed in subsequent disputes. In some instances, the text of the basic regulations has been made obsolete. Moreover, daily application of the basic regulations has also shown that a number of other provisions of a very technical nature should be clarified. In particular the following issues have become problematic in this context:

(1) Exporters with a dumping margin of less than 2% should not be re-investigated as part of a subsequent review while the text of the law provides that they could.

(2) The meaning in law of a "major proportion … of the total Union production" needs to be clarified.

(3) There is currently no explicit legal mechanism to exempt related companies from duties imposed following a circumvention investigation.

(4) Wording of the EU's basic regulations in respect of sampling provisions needs to be clarified in relation to WTO law.

(5) Provisions in the EU's basic regulations on who may submit information for the Union interest test do not correspond to current Commission practice.

(6) Provisions in the EU's basic regulations on registration of imports are not sufficiently clear.

(7) Current TD regulations do not authorise the Commission services to apply different investigation methods in review or refund investigations from those used in the original investigation.

These issues are not controversial and the Commission is legally required to address them. Please find detailed explanations on each item in annex 7.

3.3. Subsidiarity principle

Under Article 5(3) TEU, the subsidiarity principle does not apply in areas of exclusive EU competence. According to Article 3.1(e) of the Treaty on the Functioning of the European Union (TFEU), the common commercial policy is an exclusive competence of the EU. Article 207 TFEU further states that "measures to protect trade such as those to be taken in the event of dumping or subsidies" shall be based on the uniform principles of the common commercial policy. The subsidiarity principle therefore does not apply to the present initiative

4. Objectives

4.1. General objectives

As provided for in the Treaty on the European Union, in its relations with the wider world the Union shall contribute to free and fair trade (G1). [37]

Trade is also a key element in the EU's efforts to overcome the present economic crisis, as it is a major contributor to jobs and growth. Trade has been identified as a core component of the 2020 strategy with triple benefits from trade opening: economic growth, consumer benefits and labour effects (G2). As elaborated in the communication "Trade, Growth and World Affairs, Trade Policy as a Core Component of the EU's 2020 Strategy" of November 2010, the globalised economy provides greatly increased opportunities for trade, but is also prone to unfair trading behaviour.

The objectives of EU TDI policy are to address the distortions in trade brought about by dumped or subsidized exports by restoring fair conditions (G3) for EU industries affected by goods imported at less than fair value or which benefited from actionable/prohibited subsidies according to WTO rules. TDI's focus is on increasing EU competitiveness and the creation or preservation of employment in sectors adversely affected by unfair imports.

In order to achieve these general objectives a balanced approach is required in order to gain the necessary support from stakeholders and ultimately from Member States and the Parliament. The specific objectives outlined below should contribute to this goal.

4.2. Specific Objectives

– Create a trading environment in which EU industries (and by implication their workers) are able to compete on the basis of their genuine competitive advantages and make sure that they can make full use of the instruments legally at their disposal to restore a level playing field. (S1).

– Allow users and consumers to benefit from imports based on the genuine competitive advantages of foreign suppliers (S2).

– Increase confidence and awareness in the EU's TDI system among all stakeholders, including among small and medium enterprises (S3).

– Improve the level of cooperation of all stakeholders concerned in TDI proceedings (S4).

– Preserve the existing balance of interests between producing and importing interests (S5).

4.3. Operational objectives

4.3.1. Increased transparency and predictability (O1)

– Provide stakeholders with a summarised and non-confidential disclosure of the activities of the anti-dumping/anti-subsidy committees, so as to increase transparency with respect to the decision-making process in trade defence proceedings.

– Provide a prior notification, either that Commission services do not intend to impose measures; or else, about the type of measures that will be imposed, and when; in order to improve transparency and increase predictability for stakeholders.

– Provide a limited prior disclosure to exporters and Union producers that have been individually examined covering calculations and brief summary of the main facts of the case, in order to improve transparency and increase predictability for stakeholders in terms of expected results as well as to help them exercise their rights of defence.

– Improve transparency regarding certain complex elements of an investigation including injury margin, choice of analogue country, expiry reviews or Union interest test, by providing detailed explanations and by describing the various methodologies.

4.3.2. Fight against retaliation (O2)

– Increase the level of protection for potential complainants from threat of retaliation.

– Clarify the circumstances under which the Commission would initiate such investigations on its own initiative, and

– Strengthen the possibilities for the Commission to initiate such investigations on its own initiative by increasing the incentives for EU producers to cooperate in TD investigations, so as to ensure that Commission services have access to the data necessary to conduct investigations in particular in cases where these are launched ex officio.

4.3.3. Improve the effectiveness and enforcement of TD measures (O3)

– Provide closer monitoring of trade flows in order to detect circumvention activities, and take action against those detected as soon as possible.

– Put in place stronger mechanisms to deter market operators from engaging in circumvention practices, structural raw material distortions and/or fraudulent behaviour.

– Enhance the effectiveness of the AS instrument so as to reduce the incentives for market operators to accept trade distortive subsidisation.

4.3.4. Facilitate cooperation (O4)

– Provide all stakeholders, but in particular importers and users, with longer deadlines during investigations both for registering as an interested party and for submission of questionnaires, in order to improve the information available to Commission services when establishing findings in trade defence proceedings.

– Provide better information about, and streamline access to, refund proceedings in order to reduce the administrative burden for stakeholders and the institutions.

– Increase the support given to SMEs so as to help them overcome the problems of cost and complexity, and thus to facilitate their access to the trade defence instruments.

4.3.5. Optimizing review practice (O5)

– Ensure that measures do not remain in force longer than is necessary to offset injury caused by unfair trading practices; and in cases where measures are terminated, that the duties collected during the review investigation are reimbursed.

– Ensure that the level of measures following an expiry review can be adapted to current market conditions, whenever appropriate.

4.3.6. Improve legal certainty (O6)

– Ensure that current best practice is fully reflected in the legal basis.

– Ensure that the latest WTO and ECJ jurisprudence is fully reflected in the basic regulations[38].

5. Policy Options

5.1. Identifying the policy options

Several areas have been identified in which the efficiency and effectiveness of the current trade defence system can be significantly improved for the benefit of the parties involved. The analysis of problems has highlighted various specific issues, largely independent from each other, where specific actions may bring about the desired improvements. However, due to the nature of the individual problems, in most cases, the choice of options is limited to non-action or action, without many alternatives. Therefore, the different policy options identified are:

(1) Policy Option 1 - no change: the first option would be to continue with the current state of affairs, and leave current legislation and practice unchanged.

(2) Policy Option 2: option two consists of specific proposed interventions for each individual problem identified (and retained), with alternative solutions in a limited number of cases.

(3) Policy Option 3: the third option consists of a package of precisely those specific interventions examined under Option 2 where the overall impact is expected to be positive, and which do not change the balance between producing and importing interests[39].

5.2. Description of the policy options

Option 1 - No change

The first policy option entails taking no further action at EU level. As mentioned in the previous chapters of this impact assessment, trade defence instruments consist of three different EU regulations (anti-dumping, anti-subsidies and safeguard) which implement WTO trade defence rules in the European Union legal system, and which go further on some specific aspects.

Taking no action would mean maintaining the existing balance of interests between the various stakeholder groups – and the strengths and weaknesses of the existing framework – exactly as they are now.

However, in practice option 1 must be considered as a purely analytical construct for the reasons set out below in section 6.

Option 2 – specific interventions for each individual problem identified

· 'Codification' of the basic regulations in order to address WTO decisions, judgments of the EU courts, or existing Commission practice. In particular, the text of the basic regulations will be brought more clearly into line with two recent WTO dispute settlement rulings. Most of these modifications are already applied in practice, but they also need to be spelled out in the basic regulations.

· A pre-disclosure to interested parties around three weeks before the imposition of provisional measures (i.e. shortly after documents are sent to the ADC/ASC) consisting of: (i) a summary of the proposed measures for information purposes only; and (ii) the relevant calculations and adjustments for each cooperating exporter and the Union industry. Provisional measures would normally not be imposed within 3 weeks after sending the pre-disclosure. To further increase predictability, in cases where Commission services do not propose to impose provisional measures, interested parties would be informed of that fact in good time prior to the 9 months deadline via an advance notice.

· Related to the pre-disclosure is the "three weeks shipping clause". In practical terms stakeholders would have the legal certainty that no provisional measures will be imposed within 3 weeks after sending the pre-disclosure.

o Alternative: "six weeks shipping clause": stakeholders would have the legal certainty that no provisional measures will be imposed within 6 weeks after sending the pre-disclosure.

· In order to tackle the other issues identified on transparency and predictability, the Commission would publish guidelines on specific key concepts (i.e. on the Union interest test, the choice of the analogue country, the calculation of the injury margin, and expiry reviews). Such guidelines would be based on past cases, and would aim at clarifying the Commission's best practice in particular regarding issues where the basic regulations provide only very little guidance. This would help users to better understand the applied methodology and would also re-enforce the predictability of decisions, as the Commission is under the general administrative duty to treat similar cases similarly.

· Ex officio initiations in order to combat threats of retaliation against TD investigations or measures. Normally, TD investigations are initiated by Commission services on the basis of a complaint lodged by the EU industry. In order not to expose EU companies to threats of retaliation by third countries, the Commission would initiate investigations ex officio, i.e. on its own initiative without divulging the identity of the EU company/ies lodging or cooperating in an investigation. According to the basic regulations, ex officio initiations are permitted in "exceptional circumstances". The current texts would be modified in order to clearly identify threat of retaliation as an "exceptional circumstance".

· In order to make ex officio initiations a more effective tool against retaliation, and in order to ensure that Commission services have access to the data necessary to properly conduct an investigation, the basic regulations would stipulate that EU companies have an obligation to cooperate in ex officio investigations. Moreover, in order to provide Commission services with the means to obtain the necessary data from the companies concerned, procedures would be put in place so that cooperating companies can provide data to Commission services in confidence and can remain anonymous throughout the proceeding (e.g. clarify rules on anonymity, explore possibility of enhanced security in electronic submissions of documents, etc.).

Normally, in investigations initiated on the basis of a complaint by the EU industry, EU companies can choose whether or not to support the complaint, and whether or not to cooperate in the investigation. The obligation to cooperate for Union producers in ex- officio investigations is primarily intended to cover companies vis-à-vis threats of retaliation from third countries. Companies facing such threats could invoke the obligation to cooperate with the Commission, and thus such threats may become less effective. In deciding whether or not to go ahead with an ex officio investigation, Commission services would decide on the basis of the merits of the evidence available on injurious dumping/subsidisation. In addition, the Commission would also take into account available evidence as to whether any measures would have disproportionate economic consequences for the Union as whole, should the investigation confirm the existence of injurious dumping/subsidisation. Opinions expressed by economic operators concerned as to whether or not the case should go ahead will in no way be decisive. It is underlined that such ex officio initiations, and the related obligation to cooperate, would be strictly limited to cases where a threat of retaliation is at issue.

o Alternative: sanctions in case of non-cooperation: the Commission services would introduce sanctions for EU producers who refuse to cooperate in ex-officio investigations. Such sanctions could take the form of fines or obliging companies to grant access to the Commission services to their premises in order to obtain the data needed for the investigation.

· Ex officio investigations in cases of circumvention[40]. The Commission services would take a more pro-active approach and open anti-circumvention investigations as soon as a change is detected when monitoring trade flows.

· In addition, the current basic regulations would be changed so as to make the lesser duty rule inapplicable in cases of structural raw material distortions or subsidisation by the exporting country concerned. In cases of third country subsidisation and structural raw material distortions the non-application of the lesser duty rule would be applied country wide.

· In order to facilitate cooperation in investigations[41], longer time-limits would be granted to certain interested parties, i.e. users for registering as an interested party (29 days instead of 15 days), and for replying to questionnaires (51 days instead of 37 days). This would help increase the quantity and quality of information that serves as the basis for decisions, and particularly for the Union interest test analysis. Moreover, the Commission services would help users and consumers to better contribute to the Union interest analysis by identifying a focal point for those interest groups as well.

o Alternative: further extending time limits, e.g. 45 days for registering as an interested party and 60 days to reply to the questionnaire.

· Simplification of refund proceedings[42] by providing refund request forms and by publishing refund decisions on the Trade website.

· Facilitate SMEs' access to the EU's trade defence activity[43]. The SME helpdesk would be upgraded, and information regarding TDI would be more widely disseminated through specialised work-shops and seminars specifically targeted at SMEs and offered throughout the Union.

· The automatic combination of the 2nd and any further expiry review with an interim review would allow Commission services to examine in one and the same investigation, not only whether measures should be renewed or repealed, but also whether the level of the duty imposed should also be varied.

o Alternative: the notice of impending expiry, which is published in the Official Journal of the EU around 6 months before the expiration of measures, would be adapted in order to remind exporters and producers of the possibility to request an interim review which could then be carried out in combination with the expiry review.

· Reimbursement of duties collected during expiry review investigations, in cases where the latter are terminated without prolongation of measures.

· Ex officio interim reviews in cases of cartel behaviour. The Commission would open an ex officio interim review, in cases where DG COMP has confirmed that companies were involved in price fixing / abuse of a dominant position and might thus have unjustly benefited from a TD measure.

· Taking into account the interests of EU producers who have outsourced production to a third country. The current provisions relating to the Union interest test[44] would be changed in order to privilege the interests of companies that have outsourced their production outside the EU, but which have retained significant operations and employment in the EU.

· Introduce a limit to the duration of measures[45] (of 10 or 15 years).

· Modify current law and practice by introducing lower standards for initiation. Standards would also be lowered for the conduct of an investigation in order to provide earlier protection[46]. The intention would be to impose provisional measures much earlier than after 9 months, as happens under current practice.

Option 3 - a package of specific interventions with an overall positive impact

Of all the possible single intervention options identified under option 2, a package has been created from precisely those proposals where the impact is expected to be positive (please refer to table 7 below).

Option 3 is considered to provide a major contribution in achieving the objectives without changing the balance between producing and importing interests.

6. Analysis of impact

A thorough analysis was conducted to assess the impact of the different single intervention options identified. Then, option 3, the package of the proposals considered most suitable to achieve the objectives, was compared to option 1 – the baseline. The assessment is based to a large extent on Commission services' own analysis and practical experience, on the results of the public consultation of stakeholders, and on the independent evaluation study.

TD measures affect only a small share of imports (less than 0,5% of total trade was effected by TD measures in 2011). Thus the overall economic impact of any of the analysed proposals, as compared to the total economic activity in the EU is very limited. The social and environmental impact is also in most cases very small. The impact analysis below therefore focuses on the impact that any of the proposals identified under option 2 would have for the stakeholders concerned and in particular on EU producers and importers. Under option 2, the impact of the various proposals is analysed individually and then as a package under option 3.

However, although the impact of TDI on overall economic activity is very small, the existence of the instruments and their application are very important for the stakeholders concerned. For a specific industry or sector concerned by a TD investigation, whether or not TD measures are imposed can have a significant impact on its financial and employment situation. In certain cases it can even determine the survival or not of a particular industry in the EU. Moreover, the very existence of these instruments has a certain influence on economic operators, as some of them will anticipate the possible application of these rules in their economic behaviour.

6.1. Overview of the policy options analysed

In order to best achieve the objectives identified, legislative changes and/or soft law are required. The table below gives an overview of the various options and indicates whether a legislative change 'L', soft law 'S' (communications, notices) or a mere change in practice 'P' are required.

Table 7: Overview of policy options analysed

|| Option 1: no action || Option 2: single intervention option || Option 3: package

EFFICIENCY || || ||

Suboptimal || || pre-disclosure L || ü

transparency || || advance notice L || ü

before provisional measures || || activities of the ADC L || ü

|| || shipping clause 3 weeks L || ü

|| || alternative: 6 weeks shipping clause L ||

Suboptimal transparency regarding the methodologies used in an investigation || || guidelines S || ü

Clarification of the BRs with regard to WTO and ECJ jurisprudence || || codification of the current practice and jurisprudence and improvement of transparency L || ü

EFFECTIVENESS || || ||

Retaliation || || ex-officio initiations of new investigations L || ü

|| || obligation to cooperate in ex officio initiations to address retaliation L || ü

|| || alternative: obligation to cooperate combined with sanctions in case of non-cooperation L ||

Circumvention || || improved monitoring and ex-officio anti-circumvention investigations P || ü

|| || || ü

|| || ||

Trade distortive subsidisation and raw material distortions || || no lesser duty rule in cases of subsidisation, raw material distortions L || ü

Lack of cooperation || || extend time limits for parties for Union interest purposes by 14 days P || ü

|| || alternative: further extension of time limits ||

|| || upgrading SME help desk P || ü

|| || facilitate refund procedures S || ü

No reimbursement of duties when measures are repealed after an expiry review || || reimbursement of duties in expiry reviews leading to a repeal of measures L || ü

Varying duty levels following expiry reviews || || automatic combination of expiry and interim reviews ||

|| || alternative: invite parties to request expiry reviews with interim reviews P || ü

Unjustified benefit from TD measures for EU producers involved in uncompetitive behaviour || || ex-officio interim reviews P || ü

Interests of EU producers who have outsourced production are not taken into account || || take into account interests of EU producers who have outsourced production L ||

TD measures remain in force too long || || limiting duration of measures L ||

|| || lower standards for initiations P ||

Time taken from onset of injury to imposition of measures is too long || || lower standards for the conduct of investigations in order to impose measures earlier P ||

6.2. Impacts of Policy Option 1 – no change

It may be argued that the EU's TDI as currently applied function rather well and thus that there is no need for a review of the TDI instruments. Furthermore, the failure of the last attempt (the green paper exercise of 2006/2007) – due to a lack of consensus among stakeholders – could be seen as further proof that a majority of stakeholders does not want any change and would prefer the status quo.

However, if no action is taken, all problems identified in the problem definition earlier will remain unsolved while some will even become worse.

Economic impact for the stakeholders concerned

Non-action would have some negative economic impacts as it would likely lead to increased administrative burden and legal uncertainty, which in turn would negatively impact on the efficiency of the system.

No action with regard to further improving transparency and predictability will most likely negatively impact on the investigation process itself. In particular, an increasing number of requests under access to documents provisions, further increasing interventions by the hearing officer, etc. would be likely. Such requests are resource intensive and often difficult to deal with due to the already very tight investigation schedule. Moreover, smooth procedures will be even more important in view of the upcoming "omnibus" regulation, i.e., TDI proceedings will become more time-consuming (due to the revised consultation process that omnibus will entail[47]), and it is essential to introduce changes that can contribute to saving time during the investigation.

Table 8: Activity of the hearing officer

Hearing officer || 2008 || 2009 || 2010 || 2011

Interventions || 19 || 30 || 55 || 81

proceedings concerned || 11 || 24 || 29 || 35

Hearings held || 16 || 14 || 24 || 26

Source: Hearing officers annual reports

The lack of guidelines increases the risk that Commission services' work will be delayed, through e.g. increasing deficiencies in questionnaire replies necessitating lengthy deficiency letters, interventions by the Hearing Officer, access to documents requests etc. and even the risk of additional and avoidable legal challenges.

With regard to the dissemination of information and certain inequalities as to the level of information available to parties in respect of the activities of the anti-dumping/anti-subsidy committee, non-action would mean being aware of these inequalities and allowing clear advantages for some stakeholders – and clear disadvantages for others – to continue or even increase. In order to cooperate in a TDI proceeding and be able to fully exercise one’s rights of defence, timely information regarding imposition of provisional and definitive measures and other deadlines is key. Moreover, parties with a better level of information have better chances to achieve the best possible results for their company in a TDI proceeding, e.g. informed importers can better plan their orders and shipments.

As pointed out above, the current legislation also needs to be amended in order to reflect court rulings of recent years (the specific issues of compliance with ECJ and WTO jurisprudence are analysed under 3.2.15. above), for transparency purposes. Non-action in this regard could lead to uncertainty for stakeholders about their rights in cases where the existing basic regulations do not fully reflect WTO or ECJ decisions and current TDI practice.

As pointed out in the evaluation study the number of TDI cases brought before the EU courts has continuously increased between 2005 and 2010 (the period analysed by the study). Non-action may lead to a further increase of this trend.

Table 9: Breakdown of EU court cases by type of applicant

Applicant || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2005-2010

Exporter || || 4 || 1 || 5 || 8 || 5 || 23

Importer || 1 || 1 || 1 || 2 || || 3 || 8

Union producer || 3 || || || || || 1 || 4

Total || 4 || 5 || 2 || 7 || 8 || 9 || 35

Source: Evaluation study, volume 1, section 3.1.1, page 93

Table 10: Breakdown of EU court decisions on main legal issues (year of decision)

Decision || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2005-2010

Dismissed || 1 || 6 || 3 || 12 || 16 || 28 || 66

Granted || 3 || 1 || 4 || 3 || 5 || || 16

Total || 4 || 7 || 7 || 15 || 21 || 28 || 82

Source: Evaluation study, volume 1, section 3.1.1, page 93

Stakeholders have also been confronted by a new threat in recent years: retaliation. Retaliation from third countries is having an impact on the opening of new investigations. A failure to address retaliatory behaviour of this kind may ultimately lead to fewer companies exercising their rights under the WTO and EU law to seek relief from unfair trade; with the consequent impacts on growth, EU employment and, in the worst case, the viability of the competing EU producers.

Regarding effectiveness and enforcement, certain developments over the past years require adaptation of the current rules and practice. In particular, non-action with regard to subsidisation, structural raw material distortions, circumvention and fraud by parties in third countries is likely to lead to a further increase of such practices. Due to the mandatory application of the lesser duty rule in all cases in the EU system, there is often no appropriate sanction for such practices (please see section 3.1.4 above for a detailed explanation of the lesser duty rule), and EU producers will suffer disproportionately when compared to their counterparts in other third countries. In instances where also other countries have imposed trade defence measures, increasing deflection of imports to the EU could result from a lenient approach towards illegal and trade distortive practices in combination with the lesser-duty rule.

This is illustrated by a comparison of dumping margins by HS chapter found in the EU and the US cases below:

Table 11: AD duties applied by HS chapter 2005-2010 (in %)

HS chapter || US || EU

20 || 30,6 || 8,0

28 || 84,8 || 19,0

29 || 95,2 || 21,9

36 || 66,1 ||

37 || 47,2 ||

38 || 83,4 ||

39 || 41,0 || 12,7

40 || 12,6 ||

41 || || 58,9

44 || || 25,2

48 || 72,6 ||

54 || || 7,1

55 || 4,4 ||

58 || 124,1 ||

59 || 131,2 ||

63 || 96,0 ||

64 || || 9,9

68 || 136,7 ||

69 || 136,7 ||

72 || 16,0 || 20,1

73 || 42,5 || 36,5

74 || 34 ||

76 || || 17,9

81 || 129,3 || 29,3

82 || 21,6 ||

83 || || 27,1

84 || 68,8 || 37,2

85 || 107,8 || 27,8

87 || || 16,9

90 || || 34,0

94 || 113,7 ||

95 || || 5,8

96 || 154,7 ||

Total average || 77,1 || 23,1

Same sector average || 68,4 || 23,6

Source: Evaluation study, volume 1, section 2.3.1

Regarding trade flows, the impact of non-action is expected to be minimal.

Other impacts

The social and environmental impacts of non-action are also expected to be minimal. However, although impossible to quantify, in the long-term non-action may lead to certain negative consequences for the Union industry which may also have a negative impact on the job situation in the EU and on the environment.

In view of the above, non-action is not recommended. Indeed, besides the negative economic impact and the possible negative consequences in the long-term regarding social and environmental aspects, it may also lead to a certain unfairness in the system, and an increasing number of legal challenges.

6.3. Impact of the individual proposals under policy Option 2

· Advance notice, pre-disclosure and information about the activities of the ADC will have a certain positive economic impact on importers. It would allow them to better plan their imports, which is particularly important for goods already in transit. Costs would not increase unexpectedly.

Impact on EU producers could in theory be negative due to an increase in stock piling, but would in practice be very small. An advance notice does not give full legal certainty to importers; and they would thus neither be able, nor have an incentive, to place additional orders. Stock piling is therefore not expected to increase much as compared to today. Moreover, a large percentage of TD measures are in the areas of steel and chemicals. While advance notice might allow for additional shipments of some small lightweight items by air (e.g. DRAMs in the past) this would be exceptional. So, although there may be instances where imports increase because of the advance notice, the overall effect is expected to be limited.

· The so-called "three weeks shipping clause" would give legal certainty that measures would normally not be imposed for 3 weeks after sending the pre-disclosure. Thus there would be an additional small positive economic impact for importers as compared to the advance notice since importers would have the legal certainty that for 3 weeks no measures would be imposed.

By contrast the negative impact for EU producers would be similarly small as with an advance notice, since the only difference between the pre-disclosure 3 weeks before the imposition of provisional measures and the 3 weeks shipping clause, is legal certainty. The timeframe however remains the same and practically no additional stockpiling is expected. In the public consultation a slight majority of respondents was in favour of disseminating the information sent to the AD/ASC, i.e. 49% in favour, 45% against; 65% of respondents were against the 3 weeks shipping clause, and 53% of respondents were against a pre-disclosure/advance notice. Some respondents also feared that such dissemination of information may lead to pressure on member states through lobbying. However, lobbying is already taking place today.

Given the clearly identified need to improve transparency and predictability in proceedings (operational objective 1), and that any impact on stakeholders, i.e. positive for importers, or negative for producers would be very small, it was decided to pursue this proposal.

o Alternative: A shipping clause with a duration of 6 weeks would have a significant positive economic impact for importers. Being informed about impending measures 6 weeks before they were to be imposed would not only allow for all goods already in transit to enter the EU without paying the duty, but would also enable importers in many instances to place new orders, to ship them and have them cleared through customs before the duties entered into force. A significant increase of imports prior to the imposition of measures, as well as significant stockpiling, could be expected as a consequence. For the Union industry the effect would be negative since the remedial effect of the measures would be both diluted and significantly delayed. Thus, this proposal would have a significant impact on the balance of interests in favour of importers. Furthermore, in the public consultation a majority of 65% of respondents was against a shipping clause of even 3 weeks and hence 6 weeks would be even more impossible for them to accept. This alternative proposal will therefore not be pursued further.

· The publication of guidelines will also improve predictability and legal certainty for stakeholders In the public consultation a majority of respondents was in favour of the publication of guidelines: 64% in favour of a guidelines on injury margin, 69% in favour of a guidelines on choice of analogue country, 57% in favour of guidelines on Union interest test and 65% in favour of guidelines on expiry reviews.

· Clarifying practice and bringing the EU texts in line with jurisprudence of the EU courts and WTO rulings will ensure increased legal certainty or transparency for stakeholders and limit the EU's exposure to the risk of legal action in the future.

· The proposals for combating threats of retaliation, i.e. ex officio initiations and an obligation to cooperate in such proceedings for Union producers, should improve Union producers' ability to seek protection under the EU's trade defence system against unfairly traded imports, when the relevant criteria are met. To the extent they are better shielded from retaliation threats, they would not suffer increased losses as a result of continued dumped/subsidised imports for want of protection. Even though it may seem at first sight that an obligation to cooperate without any sanctions in case of non-cooperation may not be effective, the procedures to be put in place in order to facilitate cooperation and guarantee confidentiality and anonymity, should entice companies to fully benefit from the possibility of such ex officio initiations. In the public consultation 76% of stakeholders were in favour of ex officio initiations in cases of retaliation or threat of retaliation.

The overall negative economic impact of retaliation is very difficult to quantify, because due to such threats a number of TD cases are never initiated and the lost sales and decreasing profits of the EU producers concerned, due to the continued and uninhibited dumped/subsidised imports are not known.

As pointed out above (under 3.2.1), another form of retaliation is third countries initiating TD cases against EU exporters simply as a reaction to the EU’s own TD cases in order to dissuade either EU companies or the EU as such from using the instruments. In such cases average duty levels in the range of 12% to 35% have been imposed by third countries, thus considerably limiting the export possibilities of the EU companies concerned to those countries. The proposed actions against retaliation can help only to a limited extent with regard to this type of retaliation. Other actions in this respect consist of taking such unwarranted cases up bilaterally and eventually requesting dispute settlement under WTO.

o Alternative: possible sanctions in cases of non-cooperation would most likely not much increase the effectiveness of this proposal as regards further limiting the threats of retaliation. However, some Union producers may perceive such sanctions as an additional penalty imposed on them by the Commission in an already difficult situation. Therefore, this alternative solution will not be further pursued.

· Improved monitoring and ex officio anti-circumvention investigations would increase the effectiveness of the instruments. Circumvention could be detected faster and anti-circumvention investigations initiated quicker. Thus, the period of circumvention and the volume of imports entering by means of circumvention could be reduced. SMEs as much as larger companies would be able to benefit from these proposals.

· Non-application of the lesser duty rule: In cases of distortive subsidisation and structural raw material distortions the lesser duty rule would not be applied on a country-wide basis. Thus the competitive advantage provided by the third country government to its exporters could be significantly reduced due to a higher AD or AS duty. In any event, the non-application of the lesser duty rule would in a number of cases lead to higher duties and would also have an impact on costs for importers, and possibly ultimately on prices for users and consumers of the imported product. However, the possibility of such higher duties should discourage third country governments and exporters from engaging in unfair/illegal trading practices. A higher duty applied on a country-wide basis may have a significant negative impact on the overall export volume of the product from that country. The impact would be amplified in cases involving other third countries who benefit from the lesser duty rule. The imposition of higher duties would give some breathing space to EU producers affected by such unfair practices (please refer to 3.1.4 for details). In the public consultation 76% of stakeholders were in favour of not applying the lesser duty rule in cases of subsidisation, circumvention and fraud. In regard to fraud and circumvention, sufficient deterrents exist under current legislation, e.g. best facts available can be applied to companies who engage in such behaviour. Structural raw material distortions were raised as a major concern by many stakeholders in the public consultation.

· Longer time limits for users (by 15 days) will have practically no economic impact since this proposal aims mainly at improving the quality of data available at the moment of taking a decision for the imposition of provisional or definitive measures. Although, this proposal was not favourably received in the public consultation (63% against), it is proposed to go forward with this proposal. The proposal is important in the interest of fairness and improving effectiveness.

o Alternative: further extending time limits. Although this proposal has merit regarding facilitating cooperation for stakeholders and in particular for SME's, extending deadlines beyond the proposed 29 and 51 days would make it almost impossible to complete an investigation within the mandatory deadlines. This alternative will therefore not be pursued further.

· The proposal to re-enforce the SME helpdesk will help reducing the administrative burden for SMEs, i.e. it will help them to find information regarding TDIs quicker and will also provide useful guidance when cooperating in an investigation. At present, many SMEs are not even aware of TDI, although they are often the first businesses to suffer from unfair imports. Improving their awareness of TDIs will enable them to defend themselves against unfair trading practices – a right which at present can be more easily exercised by large, mature enterprises. SMEs will also benefit from many other proposals, e.g. longer time limits for users or facilitating refund procedures.

· Facilitating refund procedures will have a positive impact in particular for importers since procedures will be become somewhat simpler and less time consuming. Improving the efficiency of refund procedures will also help to decrease the administrative burden of the institutions.

· No negative impact for Union producers is expected from the implementation of the proposal to reimburse duties collected in on-going expiry reviews, in cases where a review concludes that measures should be terminated due to no likelihood of injurious dumping/subsidisation and as a result, the measures are repealed. The measures remain in force during the review investigation; the outcome of the review, and whether or not duties will be reimbursed will be made known only at the end of the expiry review investigation (which typically takes between 12 and 15 months to complete). Therefore, it is unlikely that importers would change their import strategy during the period of the on-going expiry review and risk not being reimbursed in case of a prolongation of measures. It is also highlighted that the reimbursement of duties represents a significant increase of administrative burden for the national customs authorities.

In the public consultation 56% of respondents were against reimbursing the duties in case of termination of expiry reviews without prolongation of measures. It was argued that the duties should be kept as a compensation for the injurious dumping/subsidisation that took place before the imposition of measures. This is however a misperception. According to WTO law a TD duty should remain in force only as long as and to the extent necessary to counteract injurious dumping/subsidisation. Moreover, since the positive impact on importers is not accompanied by any negative impact on Union producers it is proposed to go forward with this proposal. It is important to pursue this issue also in the interest of fairness, i.e. it is only fair to reimburse duties in cases where the review investigation shows that measures should be terminated.

· The automatic combination of the 2nd and any subsequent expiry review with an interim review may have a negative impact on stakeholders. Since such combination would not be warranted in all cases, it would thus only serve to create unnecessary additional workload. In the public consultation 57% of stakeholders were against such automatic combination.

o Alternative: The possibility for exporters to request an interim review in combination with the 2nd expiry review is not expected to have a significant negative impact since first, the burden of showing that the relevant criteria are fulfilled remains with the applicant requesting the interim review; and second, the standards of initiation and investigation for the interim review remain unchanged. This adapted proposal should address the concerns expressed by stakeholders who were against the automatic combination and thus this alternative will be further pursued in this exercise.

· The proposal regarding ex officio interim reviews in cases of anti-competitive (cartel) behaviour will also have a very limited economic impact since these cases are extremely rare (the Commission services are aware of a single case in the past). In the public consultation slightly more respondents were against (44%) than in favour (40%) of this proposal. However, this was most probably due to a misinterpretation of the question, and it is therefore proposed to pursue this issue, in the interest of good administration.

· Changing the definition of EU producers by also including EU companies that have outsourced the final stages of production would constitute an important departure not only from the current EU TDI system, but also from the WTO definition of domestic industry[48]. It would also have a direct impact on the number of AD investigations initiated since a complaint must be supported by a major proportion of Union producers. However, companies that have outsourced production would not support such a complaint. This would mean that EU producers who meet the current definition for Union industry and are faced with dumped and/or subsidised imports would have no means to seek a remedy. The economic consequences for these producers would be significant in terms of declining profits and the threat of job losses and possible company closures. Ultimately, the industry could be significantly weakened or, in cases of predation, even disappear.

It may be argued that certain industries producing in the EU are inefficient and the economic benefit derived from TD duties for EU producers does not justify the increased costs for users and consumers. In this context it should be highlighted that the Union interest test, which is a specific feature of the EU's TDI system – and not a WTO requirement – takes account of outsourced production. According to the Union interest test, measures may not be imposed in cases where despite the existence of dumping/subsidisation, injury and a causal link, such measures would be clearly against the interests of the EU. Thus, the additional costs of a duty for users of the imported product as an input, or for consumers, are weighed against the benefits that the industry would derive from the imposition of a duty. In cases where such additional costs for users and consumers are clearly disproportionate, duties may not be imposed.

Given the important negative economic impact for the Union industry and the fact that interests of EU producers that have outsourced production are already taken into account in the Union interest test, this proposal will not be pursued further.

· Limiting the duration of measures to a maximum of 10 or 15 years is also not foreseen in the relevant WTO agreements. Potentially unlimited TD protection is held by some to allow uncompetitive firms/industries to continue to trade at the expense of the consumer, delaying or preventing restructuring and the reallocation of capital and resources. Proponents of this view