COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union
Date: 2016-11-09
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: World Trade Organisation, anti-dumping legislation, anti-subsidy proceeding, countervailing charge, dumping, import (EU), originating product, third country

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   EUROPEAN COMMISSION  Brussels, 9.11.2016  SWD(2016) 371 final   COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union {COM(2016) 721 final} {SWD(2016) 370 final} {SWD(2016) 372 final}  
 
 
Executive Summary Sheet 

Impact  assessment  on  a  possible  change  in  the  calculation  methodology  of  dumping  regarding  the  People’s 
Republic of China (and other non-market economy countries). 

A. Need for action 

Why? What is the problem being addressed?  
A transitional arrangement, included in section 15 of China’s  Protocol of Accession to the WTO, allowed for a 
specific  methodology  to  be  used  when  calculating  dumping.  Due  to  the  pervasive  distortions  existing  in  the 
Chinese economy, Chinese prices and costs are considered unreliable and the dumping margin is calculated in 
EU Trade Defence (TD) investigations on the basis of prices and costs in a market economy third country (the 
so-called analogue country). Following the expiry of certain provisions of section 15 in December 2016, it may be 
necessary to change this methodology. However, since the distortions in the Chinese economy continue to exist, 
using Chinese prices and costs for calculating dumping would in many cases significantly understate the actual 
level  of  dumping    and  any  measures  imposed  on  that  basis  would  not  be  effective  in  remedying  the  injury 
caused by the dumped imports. This would have a significant negative impact on the competitiveness of the EU 
industry (around 50% of TD measures in force concern imports from China). According to an independent study, 
duty levels could decrease by up to 30 percentage points and put up to around 200.000 EU jobs at risk.   

What is this initiative expected to achieve?  
The  main  objectives  are  to  promote  free  and  fair  trade  and  to  increase  EU  competitiveness,  growth  and 
create/preserve  EU  employment.  Therefore,  whilst  dealing  adequately  with  the  expiry  of  certain  provisions  of 
section 15 of China’s Protocol of Accession to the WTO, the continued effectiveness of the EU’s TDI need to be 
ensured. To that end, it is desirable to provide an effective response to the persisting distortions in the Chinese 
economy  and  ensuring  adequate  remedy 
imports  (i.e. 
dumped/subsidised  imports).  At  the  same  time  strong  ties  with  China  should  be  maintained,  based  on  mutual 
interests.  

injury  caused  by  unfairly 

to  offset 

traded 

What is the value added of action at the EU level?  
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. The EU is required 
to ensure compliance with EU international obligations. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
The impacts of three policy options have been analysed and compared: 
-  Option 1:  (the baseline scenario) which does not consist of any policy changes. This can however not be 
considered as a typical no-change option as certain provisions of section 15 will definitively expire and thus 
the political and legal framework will change. 

-  Option  2:  applying  the  standard  methodology  would  mean  to  treat  China  in  the  same  way  as  any  other 

market economy WTO member, which would significantly weaken the EU’s TDI. 

-  Option  3:  consists  of  a  new  methodology  allowing  to  effectively  capture  the  non-market  distortions  and  a 
further strengthening of the trade defence instruments. Sub-option 3.1 consists of two elements: dealing with 
distortions  and  transition  periods  in  order  to  ensure  the  effectiveness  of  measures  already  in  place.  Sub-
option 3.2 deals with the lesser duty rule and the anti-subsidy element.   

Option 3 (the 2 sub-options combined) is the preferred option. It is best placed in contributing to the objectives 
set out.    

Who supports which option?  

Some  stakeholders  (mainly  industry)  seem  to  prefer  option  1  –  no  change.  However,  the  legal  and  political 
implications of this option may be considerable.  

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Option  2  is  supported  by  some  importers  and  traders.  However,  it  would  weaken  the  EU  Trade  Defence 
Instruments  (  TDI),  reduce  duty  levels  and  thus  increase  import  volumes  at  lower  prices.  It  would  significantly 
reduce competitiveness of the EU industry and put a significant number of jobs at risk. 
Option 3 responds  to the position of many stakeholders, who insist on the continued effectiveness  of the TDI, 
want a legally sound basis for them, and prefer to avoid a deterioration of the relations with China. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?  
Sub-option 3.1 would lead to slightly lower duty levels (by around 4%) as compared to the current methodology. 
Sub-option 3.2 would lead to an increase in duty levels of around 8%. Thus, the economic and social impact of 
the two sub-options in combination, is expected to be neutral. Hence, the current employment levels would be 
maintained.  As  the  macro-economic  impact  of  TDI  is  relatively  small  (2  to  5%  of  total  trade  with  China  are 
affected  by  trade  defence  measures)  it  is  very  difficult  to  quantify  any  environmental  effect  of  a  change  in 
methodology.  It  can  be  said  that  production  in  the  EU  is  more  environmental  friendly  than  in  China  and  that 
increased shipments have a negative effect on the CO2 emissions and carbon footprint.  
The main beneficiary groups are EU industry and employees. The industry’s competitiveness would be ensured/ 
increased and jobs preserved.  

What are the costs of the preferred option (if any, otherwise main ones)?  
The effects of option 3 are mainly positive. Any negative impact may be felt by importers/traders due to slightly 
higher anti-dumping duties in certain cases as compared to current duty levels. However, such negative impact 
is  limited,  because  duty  levels  would  only  increase  slightly  and  in  most  cases  importers  and  traders  have  the 
possibility to switch to other sources of supply (not subject to TD duties).  
No  compliance  costs  are  expected  under  the  initiative,  because  the  investigative  process  (data  collection, 
calculations, etc.) would not change for parties, as compared to current practice.  

How will businesses, SMEs and micro-enterprises be affected?  

SMEs  are  affected  differently  by  TDI,  depending  if  they  are  a  producer,  user  or  importer/trader.  Typically 
products subject to TD measures are products for  industrial users and SMEs and micro enter-prises are often 
not directly concerned. However, in certain sectors (e.g. table ware, bicycles), TD measures can be essential to 
the  survival  of  an  industry,  which  is  the  case  for  larger  companies  and  also  for  SMEs.  Due  to  their  size  and 
specific structure, SMEs tend to be more vulnerable to change and thus SMEs may be impacted more by any 
change in methodology than larger companies.   

Will there be significant impacts on national budgets and administrations?  

No  significant  impact  is  expected  in  this  regard.  Any  increase  in  workload  for  the  investigating  authority  (the 
Commission  services)  due  to  a  new  methodology  is  expected  to  be  offset  by  gains  of  not  using  the  analogue 
country  methodology  any  longer  (investigation  and  on-spot  verification  in  the  analogue  country  would  not  be 
necessary any longer).  

Will there be other significant impacts?  
Option  3  is  expected  to  preserve/increase  the  competitiveness  of  EU  industry.  It  would  also  avoid  any 
disadvantages for the EU as compared to other WTO members (e.g. US, Japan who are not expected to change 
their methodology at this stage). These countries would impose higher duties than the EU (if it were to use the 
standard methodology), which might result in trade deflection to the EU.  

When will the policy be reviewed?  
It is planned to review the policy after five years, which would allow for sufficient time to ensure availability of 
meaningful data.  

D. Follow up 

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