EU justifies its anti-dumping defence tactics

Date: 30/05/1996

By Tim Jones

AT first glance, Chinese bicycles and handbags, South Korean video-recorders and Indian rope would seem to have little in common.

Yet all have been the subject of recent European Commission investigations into allegations that they have been 'dumped' on the EU's market at prices below those which exporters would charge for comparable sales in their domestic markets.

The Union's perceived fondness for applying anti-dumping measures to protect its own industry - usually in the form of duties on the products involved - provokes sentiments ranging from confusion to fury, especially in exporting countries in Asia and the former Soviet Union.

However, the EU is not the only economic bloc to use this weapon. A report commissioned by the Organisation for Economic Cooperation and Development (OECD) last year criticised the US as well as the Union for their respective approaches to dumping.

Far from always causing harm to domestic industry, dumping can actually benefit their economies, said the report, which concluded that anti-dumping measures could distort markets and harm the interests of consumers.

The Chinese government would certainly agree. Over the past five years, Beijing has emerged as the favourite target for anti-dumping measures both in the US and the EU. For Trade Minister Wu Yi, the Union's measures “smack of trade protectionism, indicating that the EU trade policies discriminate against China and are irrational”.

Russia complains bitterly about how it is treated in anti-dumping inquiries while the EU makes strenuous efforts at the political level to bind it into the European economy.

But Commission officials defend their approach.

“They are not a fully-fledged market economy,” said a spokesman for Trade Commissioner Sir Leon Brittan.

“It is difficult to open the floodgates completely until they are and it is justified under World Trade Organisation rules. When one economy is more open than another, it needs to have some defences.”

Even governments which class themselves as trading 'liberals' - Denmark, the UK, Germany, Sweden, the Netherlands and Luxembourg - would not dispute the need for an anti-dumping defence instrument.

Most members of the OECD and a growing number of countries in south east Asia have such defences.

“Any economy that practises an open free trade policy needs an anti-dumping instrument,” says a UK official.

Nevertheless, changes have been made within the EU regarding the use of such measures. Since Austria, Finland and Sweden joined the Union at the beginning of 1995, the liberal camp has been reinforced by one militant (Sweden) and two other new member states who often side with the free-traders.

Moreover, as part of the internal deal to get agreement on the Uruguay Round global trade liberalisation accord in 1993, member states agreed to a series of reforms to anti-dumping inquiries and decisions.

Strict deadlines were set for the Commission's investigations. The period between opening an inquiry and imposing provisional duties on a product can no longer stretch beyond nine months and definitive duties must be agreed by the Council of Ministers within 15 months.

At the same time, the voting system changed completely. Whereas before, dumping decisions were taken by qualified majority vote, they must now be taken by a simple majority. Suddenly, Luxembourg's vote carried as much weight as that of Germany or France.

As a result, voting in a number of key recent cases has been close, with the decisions to impose duties on Asian bicycles, Japanese photocopiers and ferro-silico manganese from Russia and Ukraine taken by an eight-to-seven majority.

The Commission's difficulty in persuading member states to agree on anti-dumping measures came to a head in the recent case of Chinese powdered-activated carbon (see box below).

But while France, Portugal, Greece and Spain will as often as not agree to anti-dumping measures, and the UK, Germany, Sweden, the Netherlands and Denmark will often oppose them, the picture is not quite as black and white as it first seems.

“Classifying countries like that is a slight exaggeration,” said a liberal diplomat.

“In these cases, the French will support nine out of ten and the British will oppose nine out of ten, but they can sometimes swap sides if a vital interest is affected.”

Often, the way member states line up reflects a difference in philosophy about the role of industry.

“You constantly come back to a basic question: is a job making something more important than a job packing something?” said a diplomat.

Although this issue often splits member states across traditional north-south lines, that is not always the case. For example, anything involving dumped steel from Eastern Europe is liable to make the Germans highly protectionist.

Often, however, the liberal member states feel that the reason an industry is suffering has less to do with dumped imports and more to do with the sector's inefficiencies or a generalised fall in demand for its products.

This was the case, they felt, with the request for duties on so-called plain-paper copiers from Japan. They will be effective for two years rather than the normal five-year period, because of member state opposition to the imposition of definitive duties.

The Commission's internal reforms to its anti-dumping investigations have been widely praised, even by those long sceptical of the quality of its work in this field.

Staff numbers in the unit have increased by about 80&percent; to 200, while the same team of investigators no longer looks into both the question of dumping and that of injury to EU industry - to avoid the outcome of one investigation prejudging the result of the other.

Lawyers representing the exporters are highly skilled at minimising the appearance of dumping, often encouraging them to form a joint group to appeal against complaints and advising only those with the smallest dumping margins (the difference between the home market price and that charged abroad once incidental charges are stripped out) to reply to the Commission's questionnaires.

This can fuel frustration among investigators who, once they have established that dumping has taken place, may be tempted to find evidence that EU industry has been adversely affected.

“If you have two teams, then it is not the same team that finds the dumping that has to find the injury. Once you have gone to all the effort to establish that there has been dumping, you are inclined to want to find injury. It is natural,” admits a Commission official.

The next major reform planned is a refinement of the EU interest in establishing duties. The Commission wants to be able to justify measures more thoroughly.

“In the past, this job was done by the voting behaviour of the member states,” said the official.

“We think we should do more to show to the parties and the public that we have a role in this.”