Report from the Commission - First annual Report from the Commission to the European Parliament on third country anti-dumping, anti-subsidy and safeguard action against the community (2003)
Date: 2004-12-23
Institutions: European Commission
Subjects: Australia, China, India, Latin America, Russia, Ukraine, United States, agricultural trade, anti-dumping legislation, export policy, international competition, protective clause, third country, trade dispute, trade relations

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.12.2004 
COM(2004) 831 final 

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REPORT FROM THE COMMISSION 

FIRST ANNUAL REPORT FROM THE COMMISSION TO 
THE EUROPEAN PARLIAMENT 

ON THIRD COUNTRY ANTI-DUMPING, ANTI-SUBSIDY AND SAFEGUARD 
ACTION AGAINST THE COMMUNITY (2003) 

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PART I: INTRODUCTION 

Overall trends 

The  year  2003  has  confirmed  the  increasing  trend  in  the  number  of  trade  defence 
cases  being  opened  against  Community  exporters.  The  number  of  definitive 
measures in force against the Community has increased from 169 at the end of 2002 
to  192  at  the  end  of  2003.  Although  this  increase  can  partly  be  attributed  to  the 
growing  number  of  countervailing  duty  cases  targeting  the  Common  Agricultural 
Policy (CAP), the major part is due to the fact that some countries are opening cases, 
which  are  clearly  below  World  Trade  Organization  (WTO)  standards  and  which 
never should have been opened in the first place. 

The  number  of  measures  could  also  rise  in  the  coming  years,  mainly  due  to 
uncertainties  surrounding  China’s  future  use  of  trade  defence.  Until  present,  China 
has made relatively little use of trade defence, and only 4 EU products were in 2003 
subject to measures. The strong pressure exerted by the EC in every case opened by 
China on EU exporters may have influenced this low count. 

The  US  is  another  country  constantly  monitored  by  the  EC.  The  US  is  the  WTO 
member  whose  measures  are  most  frequently  challenged  in  the  WTO  dispute 
settlement system. This would seem to reveal a certain incompatibility between US 
practice  on  Trade  Defence  Instruments  (TDI)  and  the  rules  of  the  WTO.  This 
discrepancy  is  highlighted  by  the  US  reluctance  to  accept  the  rulings  of  the  WTO 
panels and in fact even to implement them (e.g. 1916 Anti-Dumping act and the Byrd 
Amendment). 

In terms of statistics, the US had in 2003, as in the previous year, the largest number 
of  measures  in  force  (53)  against  the  Community,  followed  by  India  (32),  Brazil 
(12), South Africa (11) and Canada (10). As for the number of investigations against 
the  Community,  which  were  underway  at  the  end  of  2003,  India  had  the  largest 
number  (7),  followed  by  the  US  (5),  China  (4),  Ecuador  (4),  Ukraine  (4)  and 
Venezuela (4). 

In spite of the significant number of measures in force against Community exporters, 
there is some ground for optimism for the coming year(s). On the multinational front, 
the EC is encouraging discussions in the context of the Doha Development Agenda 
to introduce higher standards in AD and CVD investigations.  

On a bilateral level, the EC is setting up TDI ad hoc expert groups with a number of 
trade  partners  (India,  China  and  Korea).  These  groups  offer  an  opportunity  to 
exchange  information  and  views,  outside  the  existing  formal  framework,  on  better 
ways of carrying out investigations and applying TDI rules.  

increasingly  viewed  by 

In addition, the Directorate General for Trade (DG Trade) is frequently solicited by 
third countries to organise training for their officials on EC TDI practice. EC practice 
is 
to  emulate” 
(“Vorbildsfunktion”),  due  to  the  high  standards  applied  in  trade  defence  matters. 
Since 2001, seminars have so far taken place in Thailand, Indonesia, Ukraine, China, 
Russia, India, Pakistan and Romania, just to mention a few. This exercise allows DG 

third  countries  as  a  “model 

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Trade  to  “coach”  third-country  officials  in  order  to  improve  their  investigative 
methods. 

PART II: GENERAL ISSUES WITH THIRD COUNTRIES  

1. 

Typical shortcomings  

Although there are variations from country to country, some problems are common 
to  many  third  country  cases.  On  a  procedural  level,  the  standard  for  initiating  an 
investigation is often low. Some countries seem to require very little evidence for the 
complainant  prima  facie  to  prove  the  case.  As  to  the  substance,  the  most  common 
deficiency noted is the lack of in-depth analysis of injury and causality. In particular, 
“other  factors”,  which  sometimes  clearly  are  causing  more  injury  than  imports,  are 
often neglected. As a result, the measures imposed are frequently disproportionate to 
the injury allegedly suffered by the domestic industry. 

An increasing number of countries, mainly developing and “transition” countries, are 
becoming active users of trade defence instruments. This development is especially 
noticeable in the area of safeguards, which some countries seem to be using rather as 
routine measures of protectionism instead of an “emergency valve”. The Community 
has  consistently  raised  the  problem  of  the  excessive  use  of  safeguards  within  the 
WTO, and has strongly advocated the need to apply very high standards for the use 
of safeguards to preserve the exceptional nature of this instrument. 

There  is  equally  a  recurring  problem  of  insufficient  disclosure  of  information  by 
some  countries  when  using  TDI.  Naturally,  lack  of  information  can  make  it  very 
difficult to evaluate on what grounds an investigation has been opened. The problem 
of  insufficient  disclosure  is  the  more  serious  when  it  comes  to  justifying  the 
imposition  of  measures  or  the  rejection  of  evidence  submitted  by  Community 
exporters. 

Paradoxically, some third countries do not ensure to a sufficient extent that sensitive 
information does not reach other interested parties. EC exporters have reported that 
confidentiality rules are not always respected by the investigating authorities in some 
third  countries  and  that  this  strongly  discourages  them  from  co-operating  in  the 
proceedings,  especially  in  AD  investigations,  where  parties  are  required  to  submit 
information of a very confidential nature.  

2. 

Countervailing of agricultural exports  

Special  mention  should  be  made  of  the  constant  increase  of  the  number  of  CVD 
actions targeting EU exports of processed agricultural products or food preparations. 
In 2003, these cases concerned primarily EU exports of olive oil, processed fruits and 
vegetables,  and  derivatives  of  cereals.  Third  countries  usually  allege  that  these 
exports automatically benefit from EU agricultural subsidies, although EU subsidies 
are granted to the farmers and not the exporters of the products concerned.  

The  EC  has  strongly  argued  that  third  countries  cannot  simply  assume  that  aid 
granted  to  the  farmers  “passes  through”,  directly  and  in  full,  to  the  unrelated 
impose  a 
insisted 
processors/exporters.  The  EC  has 

that  any  decision 

to 

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countervailing  duty  must  be  based  on  a  full  demonstration  that  the  exported  goods 
have clearly benefited from such aid.  

This  is  a  matter  of  high  priority  for  the  EC  in  terms  of  general  policy,  not  least 
because the EC has in the last years, most recently in 2003 engaged in wide ranging 
reforms of the CAP, which will reshape the nature of the support granted. As a result, 
an increasing amount of aid will shift from production support to “decoupled” forms 
of aid (single-farm payment) with no link whatsoever with production and no trade-
distorting effect.  

Clearly,  the  Commission  will  have  a  role  in  ensuring  that  any  such  changes  are 
properly  taken  into  account  by  countries  applying  the  CVD  instrument.  The 
requirement to demonstrate the existence of “pass through” should make it a lot more 
difficult for third countries to countervail the aid schemes concerned. 

PART III: ACTIONS BY COUNTRY 

1. 

UNITED STATES 

At the end of 2003, the US had a total of 53 trade defence measures in force against 
imports  from  the  Community.  The  majority  of  the  measures  take  the  form  of  AD 
duties (36), while 17 are countervailing measures. During the year 2003, 5 new AD 
investigations were opened, while no new measures were imposed. Also in 2003, the 
US  terminated  its  three  outstanding  safeguard  measures  (Line  pipe,  Wire  rod  and 
Steel). Steel remains the main target of US TDI activity, followed by chemicals and 
agriculture. 

The United States continues to put forward its specific interpretation of the relevant 
WTO  agreements,  an  interpretation  that  often  leaves  room  for  challenge  as 
demonstrated by the significant number of panels the US has lost in cases involving 
all three types of commercial defence instruments in the past two years. The major 
events  in  2003  relate  to  measures  subject  to  WTO  dispute  settlement  proceedings 
and, in particular, the termination of the US safeguard action on steel1. This measure, 
which  disrupted  all  international  steel  markets,  was  successfully  challenged  by  the 
EU  and  7  other  WTO  members.  On  10  November  2003,  the  Appellate  Body  (AB) 
found  that  the  US  safeguard  action  was  in  breach  of  the  WTO  Agreement  on 
Safeguards on several counts. Further to this ruling, the US decided to terminate the 
measures without any delay. 

As briefly mentioned, there are still a number of US practices which raise questions 
as  to  their  compatibility  with  international  rules  and  on  which  the  EC  has 
concentrated  substantial  efforts  in  2003.  This  is  the  case  in  the  practice  known  as 
“zeroing”,  which  fails  to  give  credit  for  non-dumped  transactions  in  circumstances 
not  permitted  by  the  WTO  Anti-Dumping  Agreement  (ADA).  Other  aspects  of  the 
US  trade  practice,  which  were  closely  followed  by  the  EC  were  the  Byrd 
Amendment and the US “sunset reviews” methodology. 

1 

A multiple action involving more than 10 products and hundreds of custom codes. 

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2. 

INDIA 

At the end of 2003, India had a total of 32 trade defence measures in force against 
imports from the Community. The vast majority of these measures take the form of 
AD  duties  (29),  while  3  are  safeguard  measures.  This  is  a  significant  increase 
compared to 2002, where India had 26 measures in force, and to 2001 where there 
were only 19. 

In  2003,  India  opened  7  new  AD  investigations  and  imposed  8  measures.  This 
compares  to 11 initiations  and 9 measures imposed in 2002. As regards the sectors 
most affected in 2003, the chemical industry remains the main target, followed by the 
pharmaceutical sector. 

India has, in recent years, sharply increased its use of trade defence measures and is 
now the world’s largest user of the AD instrument. It has since 2001 overtaken the 
United States in terms of initiations of AD cases. As an illustration, India initiated on 
a world wide basis 80 new investigations in 2002 (as compared to 35 by the United 
States and 20 by the EC). 

India’s  growing  use  of  AD  appears  difficult  to  justify  given  the  high  level  of 
protection  already  afforded  to  Indian  domestic  producers.  The  still  high  import 
protection sometimes seems to have the perverse effect of forcing foreign companies 
to dump in order to enter the market, with the result of exposing them to AD actions. 

EU exporters to India over the last few years have expressed growing dissatisfaction 
with this situation. They feel that their access to the Indian market is being unfairly 
jeopardised  by  an  abusive  use  of  the  AD  instrument,  and  that  they  are  not  always 
given “due process” in the Indian investigations. 

Dispute settlement consultations for Indian cases 

In the last 3 years, the Commission has made repeated attempts, both through direct 
interventions  in  the  Indian  proceedings  and  at  political  level,  to  bring  the  Indian 
authorities to align their investigations on WTO standards. 

It  is  the  Commission’s  view  that  the  majority  of  the  Indian  AD  measures  raise 
serious  questions  as  to  their  compatibility  with  WTO  rules  both  on  procedural  and 
substantive grounds. In many cases, the injury analysis appears to be superficial with 
little or no disclosure of information, which would permit an objective evaluation of 
the  injury  allegedly  suffered  by  the  domestic  industry  and  with  only  a  perfunctory 
attempt to link the alleged injury to imports. 

In view of the lack of improvement, the Commission on 8 December 2003 took the 
decision, in agreement with Member States, to request DSU consultations with India 
on 27 of its AD measures. 

Several discussions have since then been held with the Indian authorities as to how to 
resolve the dispute. 

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3. 

RUSSIA AND UKRAINE  

In  terms  of  TDI,  Russia  and  Ukraine  have  so  far  limited  themselves  to  safeguard 
actions.  2003  has  been  relatively  quiet,  since  only  one  measure  was  imposed.  This 
brings  Russia  to  a  total  of  4  measures  and  Ukraine  to  a  total  of  1.  In  terms  of 
initiations,  Russia  opened  only  one  new  investigation  in  2003  (dry  yeast)  which 
compares favourably with 2002, where Russia opened no fewer than 8 investigations. 
A  number  of  these  investigations  were  terminated  in  2003  without  any  measures 
imposed. 

The  decrease  in  the  number  of  safeguard  actions  is  also  in  part  due  to  the 
preparations currently underway for Russia’s accession to the WTO, which requires 
the  enactment  of  WTO  compatible  safeguard, AD and anti-subsidy legislation. The 
Commission  has  been  involved  in  the  finalisation  of  Russia’s  new  law  on  Trade 
Defence, which will be applicable upon Russia’s WTO accession. 

4. 

CHINA 

Since China joined the WTO in December 2001, DG Trade has followed all Chinese 
trade defence cases closely in order to ensure that they meet the relevant WTO rules. 

During  2003,  4  AD  investigations  were  opened  by  China  on  products  originating 
either in the EC as a whole or in one or more of its Member States. This compares 
with 2 AD investigations opened against imports from the EC in 2002. 

At the end of 2003, a total of 4 AD measures were in force against imports from the 
Community  compared  to  1  at  the  end  of  2002.  There  were  no  safeguard  or  CVD 
measures in place on imports from the EC. 

On the Chinese approach to AD cases, it is probably too early to say whether or not 
systemic problems exist given that, so far, only one case concerning the EU has been 
opened  after  WTO  accession.  While  there  were  certain  problems  identified,  it 
remains to be seen if China will take on board our concerns in forthcoming cases. 

5. 

LATIN AMERICA 

During 2003, Latin American countries opened 1 new AD case (Brazil) and imposed 
2  new  AD  measures  (Brazil  and  the  Andean  Community).  Also,  2  new  CVD 
investigations were opened in the same period (by Mexico and Venezuela) and 4 new 
safeguard investigations initiated (by Ecuador), with 1 new CVD measure (Peru) and 
1 new safeguard measure imposed (Ecuador). 

Activity,  by  traditional  users  such  as  Argentina,  Brazil  and  Venezuela,  at  least  as 
regards  actions  directed  at  Community  exports,  seems  to  remain  stable.  As  regards 
Argentina,  this  can  be  explained  by  the  important  events  of  the  last  two  years,  i.e. 
changes in domestic macroeconomic policy and the currency devaluation,  elements 
which have raised new barriers to imports. 

However, countries such as Peru and Ecuador are emerging as new and/or frequent 
users of trade defence instruments, notably of safeguards. 

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6. 

AUSTRALIA  

At the end of 2003, Australia had a total of 7 trade defence measures in force against 
imports from the Community. The majority of these take the form of AD duties (4), 
while  3  are  CVD  measures.  During  the  year  2003,  Australia  opened  1  AD 
investigation and 1 CVD investigation and imposed 1 AD measure. This compares to 
no  measures  imposed  in  2002.  Furthermore,  in  2003  Australia  terminated  4 
investigations  (3  AD,  1  CVD)  initiated  in  previous  years  without  the  imposition  of 
any measures. 

Australia  is  one  of  the  “old”  users  of  trade  defence  instruments,  and  has  often 
targeted community agricultural aid schemes. 

PART IV: CONCLUSION 

Concrete results obtained 

Year 2003 has seen several positive results for EC exporters targeted in third country 
proceedings (see list below). A number of very important cases have been terminated 
without  the  imposition  of  measures  while  in  other  cases  measures  have  been 
withdrawn.  This  shows  that  active  and  direct  involvement  by  the  Commission  can 
have  a  significant  impact  on  the  outcome  of  TDI  proceedings  launched  by  third 
countries. 

The Commission is constantly improving its working relations with third countries, 
since  it  gives  more  room  for  mutual  understanding  and  for  finding  solutions 
acceptable to all parties concerned, as for instance in the investigation regarding EU 
exports of olive oil to Australia.  

The  following  key  cases  deserve  to  be  mentioned  (please  see  the  relevant  country 
section in the report for further details): 

–  Withdrawal of the US steel safeguard action, trade affected: 900 million euros 

– 

Compliance  by  the  US  with  the  WTO  ruling  on  the  so-called  “privatization 
case” (DS-212), trade affected: 300 million euros 

–  Withdrawal  of  the  Chinese  safeguard  measures  on  steel,  trade  affected:  200 

million euros 

– 

– 

– 

– 

Termination  of  the  Indian  AD  investigation  on  X-Ray  baggage  inspection 
multi-energy systems from EU, trade affected: 20 million euros  

Termination  of  the  Russian  safeguard  investigation  on  imports  of  wallpaper, 
trade affected: 112 million euros  

Exclusion  of  EC  exporters  from  the  Russian  safeguard  measure  on  ball-
bearings, trade affected: 10,6 million euros 

Termination of the Mexican AD investigation on imports of ceramic tiles from 
Spain, trade affected: 48 million euros 

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– 

Termination  of  the  Australian  AD  investigation  on  imports  of  olive  oil  from 
Italy and Spain and anti-subsidy investigation on the same product from Italy, 
Greece and Spain, trade affected: 60 million euros  

Another  positive  achievement  in  2003  has  been  the  improvement  of  co-ordination 
with Member States on third country measures. In March 2003, the Commission had 
in-depth discussions with Member States (Commercial Questions Group) on how it 
deals  with  third  country  measures.  This  has,  inter  alia,  lead  to  the  identification  of 
direct  contact  persons  within  the  national  administration  of  each  Member  State,  to 
ensure  that  DG  Trade  can  rapidly  communicate  information.  As  of  1  May,  this 
Member State “hotline” has been extended to include the new EU members. 

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