Annual Report from the Commission to the European Parliament on third country anti-dumping, anti-subsidy and safeguard action against the Community (2004) {SEC(2005) 1519}
Date: 2005-11-23
Institutions: European Commission
Subjects: EU production, activity report, agricultural product, anti-dumping legislation, chemical product, export policy, international competition, iron and steel product, third country, trade relations

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.11.2005 
COM(2005) 594 final 

ANNUAL REPORT FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT 

ON THIRD COUNTRY ANTI-DUMPING, ANTI-SUBSIDY AND SAFEGUARD 
ACTION AGAINST THE COMMUNITY (2004) 

{SEC(2005) 1519} 

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INTRODUCTION 

The objective of this report is to give an overview of third countries trade defence measures, 
i.e. anti-dumping (‘AD’), countervailing (‘CVD’) and safeguard cases, against the European 
Community in the year 2004. The report is divided into two sections, the first one summarises 
the main trends of the year, while the second one, in the form of an annex, deals with specific 
countries or groups of countries, focusing in particular on the most notable cases. 

PART I: OVERALL TRENDS 

Year  2004  has  confirmed  the  increasing  trend  in  the  number  of  trade  defence  measures 
targeting Community exporters. The number of measures in force against the Community has 
increased  from  192  at  the  end  of  2003  to  199  in  2004.  Indeed,  the  reduction  of  tariffs  and 
other trade barriers increases the incentive in individual countries to resort to trade defence. In 
contrast, the EC remains world wide one of the most disciplined and moderate users of TDI. 
In principle, we do not object to third countries taking trade defence actions against the EC, as 
long as this is done in an objective and fair manner and in line with internationally established 
rules. Unfortunately, this is not always the case. The EC is frequently forced to resort to WTO 
dispute settlement to ensure that these countries adhere to international trade rules.  

The  increase  in  third  country  anti-dumping  measures  against  EC exporters  seems especially 
difficult  to  justify  since  in  most  industrial  sectors  the  EC  market  is  open  to  international 
competition (low import duties). EC producers operate under highly competitive conditions in 
their home market, which significantly lowers their capacity or incentive to export at dumping 
conditions on third markets. Further, some third countries continue to apply safeguards almost 
on a routine basis. This is of particular concern to the EC since the safeguard instrument is 
directed  at  fair  imports  and  should  for  that  reason  only  be  used  exceptionally  to  deal  with 
emergency situations. The EC has, in the context of the Doha Development Agenda (DDA), 
strongly advocated the application of higher standards in trade defence investigations. 

It is interesting to note that  an increasing number of  third  countries now almost exclusively 
initiate AD cases against the EC as a whole and not against individual Member States. As a 
result, the ensuing AD duties affect all EC exporters. In principle, proceedings against the EC 
as a whole are legal since the EC is a WTO member in its own right. In addition, there is a 
growing  recognition  on  the  part  of  third  countries  that  the  EC  is  an  integrated  market.  The 
benefit  or  otherwise  to  EC  exporters  of  these  two  options  is  not  clear-cut:  a  case  initiated 
against the EC as a whole may make it more difficult to find dumping and injury (for instance 
the  higher  export  price  of  one  Member  State  offsets  the  lower  export  price  of  another). 
Conversely, targeting only the low priced exports of one Member State can facilitate a finding 
of injury. It also has to be borne in mind that our position can be influenced by the fact that 
we apply our trade defence measures on a full Community basis, so it is difficult to challenge 
third countries that follow the same line. 

In terms of statistics, the repartition stays approximately the same as in the previous years: the 
US  accounted  in  2004  for  27  %  of  all  measures  against  the  EC,  followed  by  India  (18%), 
Brazil (7%), Canada (6%) and South Africa (5%). 

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PART II: ACTIVITIES 

1. 

Countries 

1.1. 

United States 

Compared  with  the  previous  year  -  dominated  by  the  steel  safeguard  case  -  US 
activity  in  this  area  was  relatively  quiet  in  2004.  The  US  did  not  initiate  any  new 
investigations against the EC, but undertook a number of sunset reviews of existing 
AD  and  CVD  cases.  The  Commission  has  been  active  in  particular  in  five  sunset 
reviews  concerning  CVD  measures,  which  in  one  case  led  to  the  removal  of  the 
duties in place.  

The  major  events  in  2004  relate  to  measures  subject  to  WTO  dispute  settlement 
proceedings  and,  in  particular,  the  initiation  of  a  WTO  case  on  “zeroing”  and  an 
implementation  panel  in  the  “privatisation  case”.  In  the  “zeroing  case”,  the  EC  is 
contesting a method which allows the US investigating authorities to disregard non-
dumped export transactions in their calculations (a method known as “zeroing”) with 
the  result  of  significantly  inflating  margins  of  dumping.  Without  this  practice,  it  is 
unlikely  that the  US authorities  would have  been  able  to  find  dumping  and  impose 
duties  in  such  a  significant  number  of  cases.  The  “zeroing”  practice  affects  several 
hundred  million  USD  in  trade  volume  for  EC  exporters.  The  panel  proceedings 
started in October 2004. Final panel report is expected at the end of September 2005. 

Another  major  event  in  2004  was  the  establishment  of  an  implementation  panel  in 
the  privatization  case.  Despite  the  improvements  brought  by  the  US  to  its 
privatization methodology as a result of the WTO panel ruling in 2002, some aspects 
of  the  ruling  have  not  been  implemented, e.g.  on  sunset  reviews  where  the  US  has 
failed  to  modify  the  measures.  Unfortunately,  for  this  disputed  implementation  the 
only recourse for the EC is to request another panel against the US. This panel was 
established on 27 September 2004 and the final report is expected on 14 June 2005. 

The US is the WTO member whose measures are most frequently challenged in the 
WTO dispute settlement system. This reveals a certain incompatibility between US 
practice on Trade Defence Instruments (TDI) and the rules of the WTO. This friction 
is  exacerbated  by  the  US  reluctance  to  implement  WTO  rulings  (e.g.  1916  Anti 
Dumping act and the Byrd Amendment). Part of the explanation lies in the fact the 
US  administration  is  under  intense  pressure  from  its  domestic  lobbies  and  from 
Congress making it difficult for it to be seen as openly endorsing WTO panel rulings 
adverse to the interests of US domestic industry.  

1.2. 

Russia, Ukraine and Belarus 

A  notable  development  in  2004  has  been  the  significant  increase  in  trade  defence 
activity by Russia, Ukraine and Belarus. In 2004, Belarus initiated 4 safeguard cases 
on  a  variety  of  products  whereas  Russia  and  Ukraine  each  had  2  investigations.  In 
addition,  in  2004  both  Russia  and  Ukraine  initiated  for  the  first  time  anti-dumping 
proceedings  against  EC  exporters  on  respectively  stainless  steel  and  screw 
compressors.  

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A  major  problem  in  these  proceedings  has  been  the  lack  of  transparency  and 
disclosure of information. Another specific concern, highlighted in last years’ report, 
is these countries’ continued use of erga omnes safeguards to deal with increases in 
imports brought on by regional trade liberalisation initiatives, i.e. inside the CIS area. 
The Commission has been very active in these cases and has engaged in numerous 
discussions with the authorities to improve the transparency of the proceedings.  

As a result of the general increase in EC exports to Russia and Ukraine – augmented 
by  enlargement  -  these  cases  have  caused  significant  preoccupation  amongst  EC 
exporters. They have voiced concern that these trade measures are used to promote 
national  industries.  EC  Member  States,  in  particular  Poland  and  the  Baltic  States, 
have on several occasions raised the issue as to the respect of international trade rules 
by these countries, especially in the wake of their entry to the WTO. 

1.3. 

China 

Although last years’ report predicted a rise in the number of trade defence measures 
taken by China against the EC, 2004 has not confirmed this trend. China has made 
relatively little use of trade defence against the EC, and only 7 EC products were in 
2004  subject  to  actions.  However,  globally  China  is  increasingly  resorting  to  TDI, 
especially  in  the  chemical  sector.  For  instance,  EC  companies  exporting  to  China 
from  other  Asian  counties  are  frequently  involved  in  Chinese  anti-dumping 
proceedings.  China‘s  significant  economic  growth  rate  has  not  been  met  with  a 
corresponding  increase  in  imports.  EC  trade  deficit  is  still  growing,  partly  because 
EC exporters generally continue to face a number of significant hurdles to penetrate 
the Chinese market.  

1.4. 

India 

India remains one of the largest users of TDI world wide, but year 2004 has seen the 
lowest number of cases against the EC initiated by India in a number of years. The 
number of new investigations was only 3 in 2004 compared to 7 in 2003. The WTO 
dispute brought by the EC at the end of 2003 on 27 anti- dumping measures imposed 
by India against EC exporters is likely to have had an impact on India’s general anti-
dumping practice. In parallel to the consultation process, India engaged in a number 
of reviews of existing AD measures against EC producers. Some of these measures 
have as a result been terminated in the first months of 2005. 

1.5. 

Latin America 

A slight decrease in trade defence activity has been noted in 2004 as compared with 
the  previous  year.  Argentina,  which  normally  accounts  for  the  major  part  of  trade 
defence  activity  directed  against  the  EC,  did  not  initiate  any  new  investigations  in 
2004.  It  is  likely  that  the  economic  recession  following  the  2002  devaluation  has 
acted  as  a  natural  deterrent  to  imports.  However,  Argentina  carried  out  expiry 
reviews of three existing CVD measures against EC exports of processed agricultural 
products  (wheat  gluten,  canned  peaches  and  olive  oil)  which  at  the  end  of  2004 
resulted in the extension of the measures in spite of strong opposition by the EC. The 
EC is pursuing all three cases at the WTO where consultations are scheduled for July 
2005. 

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2. 

Sectors 

2.1. 

Agriculture 

In  terms  of  sectors  affected  by  trade  defence  measures,  special  mention  should  be 
made of agriculture. There continue to be  a high number of CVD actions targeting 
EC  exports  of  processed  agricultural  products,  e.g.  olive  oil,  processed  fruits  and 
vegetables, sugar, and derivatives of cereals. Of course, the EC does not contest the 
fact  that  agricultural  subsidises  exist  or  that  such  subsidies  may  be  subject  to 
countervailing duties. However, the mere existence of subsidies should not justify the 
imposition  of  CVD  duties  without  any  deeper  analysis  of  whether  indeed  the 
subsidies in question have benefited the exported product. In many of the CVD cases 
initiated in 2004 (e.g. olive oil, canned peaches) third countries have alleged that the 
exported  agricultural  products  automatically  benefit  from  subsidies  granted  to  the 
individual farmers and not to the exporters of the processed products. The EC has in 
2004  devoted  particular  attention  to  these  cases  to  ensure  that  any  CVD  action  by 
third countries is based on a full demonstration that the exported goods have clearly 
benefited from such aid.  

It should be noted that the wide ranging reforms of the Common Agricultural Policy 
undertaken by the EC since 2000 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  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” of the benefit from 
farming  to  processed  goods  should  make  it  more  difficult  for  third  countries  to 
countervail the aid schemes concerned. 

2.2. 

Steel and chemicals 

After  intense  activity  in  the  steel  sector  following  the  US  safeguard  in  2003,  this 
sector  has  experienced  a  quiet  year  in  2004.  Due  to  the  continuous  demand  world 
wide for steel in particular from China, there have been few cases involving steel in 
2004  except the remaining  high number  of  AD and  CVD  duties in force in the US 
and  two  notable  Russian  cases,  i.e.  the  safeguard  case  against  large  diameter  pipes 
and  anti-dumping  case  against  stainless  steel.  As  noted  in  the  previous  years,  the 
chemical and pharmaceutical sector continues to be one of the sectors most affected 
by trade defence measures. 

PART III: CONCRETE RESULTS 

Year  2004  has  seen  several  positive  results  for  EC  exporters  targeted  in  third  country 
proceedings.  A  number  of  important  cases  have  been  terminated  without  the  imposition  of 
measures,  while  in  other  cases  measures  have  been  withdrawn.  The  Commission  has  been 
heavily  involved  in  all  these  proceedings  and  this  shows  that  active  and  direct  involvement 
can have a significant impact on the outcome of TDI proceedings launched by third countries. 

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The following key cases deserve to be mentioned: 

•  India:  termination  of  AD  investigation  into  imports  of  coated  paper  from  the  EC  and 

Indonesia; 

•  Australia: termination of AD and CVD investigations on olive oil from Greece, Italy and 

Spain; 

•  Russia: exclusion of EC from safeguard measures on white sugar; 

•  Turkey: termination of 5 safeguard investigations without measures; 

•  Korea: termination of AD investigation on particle boards from Belgium, Italy and Spain; 

•  United States: termination of the CVD duties on corrosions resistant steel rods from Italy 

It goes without saying that the involvement of the Commission and Member States in these 
cases has not been the only factor which resulted in a positive or improved outcome for EC 
exporters. Active monitoring of all important cases and constant intervention in support of EC 
exporters coupled with a regular dialogue with third countries’ TDI authorities helps creating 
the conditions for finding acceptable solutions for EC exporters. 

As  regards  relations  with  Member  States  on  third  country  measures,  the  Commission  has 
through out 2004 continued to look for ways to improve co-ordination. Member States either 
directly or through their representations in third countries are an important asset to alert the 
Commission to problems encountered by EC exporters abroad, establishing contacts between 
Commission  services  and  EC  exporters,  or  raising  problems  on  specific  TDI  actions 
bilaterally with third countries. 

The  contact  network  between  the  Commission  and  Member  States,  formalised  by  the 
establishment of special Member State contact points, has proven very useful to disseminate 
information  on  third  country  cases  (e.g.  on  new  investigations,  imposition  of  measures  or 
WTO action on TDI matters) and to enable swift action when EC interests are at stake. As of 
1 May 2004, this “contact list” was extended to include the new Member States. In general, 
the direct communication with Member States has been particularly useful when the products 
targeted  are  of  very  particular  nature.  For  instance,  in  the  case  of  the  anti-dumping 
investigation opened by Ukraine into imports of screw compressors, Member States managed 
to locate the exporters concerned just before the expiry of the deadline set by the Ukrainian 
authorities. This enabled the exporters to participate in the investigation procedure. 

Discussions  have  also  been  undertaken  in  the  course  of  2004  with  EC  industry  to  identify 
what additional steps can be taken by the EC to improve communication. Concrete steps have 
already been taken with respect to Small and Medium Sized Enterprises (SMEs) where DG 
TRADE  has  made  available  on  its  website  a  set  of  guidelines  for  SMEs  when  they  are 
targeted in third country trade defence actions1. 

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(http://europa.eu.int/comm/trade/issues/respectrules/tdi_sme/faqs.htm) 

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PART IV: GENERAL ISSUES WITH THIRD COUNTRIES 

3. 

Typical shortcomings 

3.1. 

Low standards of initiation 

The problems identified in last year’s report continue to be the same. Although there 
are  variations,  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. 

3.2. 

Insufficient transparency 

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 or a decision 
is proposed. 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.  It  is  increasingly  noted  that  some  investigating  authorities 
consistently  invoke  confidentiality  reasons  for  not  making  proper  disclosure,  even 
when this information is not of a confidential nature. Consequently, exporters do not 
have all the necessary elements to defend themselves in these proceedings.  

Paradoxically,  some  third  countries  seem  unable  to  guarantee  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 anti-dumping investigations, where parties are required to 
submit information of a very sensitive nature. 

3.3. 

Abuse of trade defence instruments 

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”,  intended  to 
counter  unexpected  surges  in  imports.  The  reason  probably  lies  in  the  fact  that 
safeguard  investigations  are  less  demanding  and  less  costly  than  anti-dumping  or 
anti-subsidy investigations since they do not require gathering information abroad or 
on spot verifications; safeguard measures enable a country to seal off imports from 
all sources, even when the injury can be traced to one country or a specific group of 
countries. 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. 

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PART V: CONCLUSION 

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 in the 
context of the Doha Development Agenda pushing for the application of higher standards in 
anti-dumping and anti-subsidy investigations (e.g. harmonisation of investigative procedures 
and reduction in costs). 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 on better ways of carrying out investigations and applying 
TDI rules. This contributes to achieve better understanding of each other’s practices. 

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 
increasingly viewed by third countries as a “model to emulate” (“Vorbildsfunktion”), due to 
the  high  standards  applied  in  trade  defence  matters.  Typically,  the  EC  finances  two  such 
training  seminars  a  year,  with  a  variable  number  of  other  events  paid  by  the  third  countries 
concerned.  This  exercise  allows  DG  Trade  to  “coach”  third-country  officials  in  order  to 
improve  their  investigative  methods.  Since  2001,  seminars  have  so  far  taken  place  in 
Thailand, Indonesia, Ukraine, China, Russia, India, Pakistan and Romania, just to mention a 
few. In 2004, seminars were held for officials of Korea, Argentina, Russia, China, Vietnam, 
Turkey, Ukraine and Romania. 

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