Pressure mounts to reform ‘unfair’ EU dumping regime

Date: 29/03/01

By Peter Chapman

Thirty years ago this month, the European Commission inaugurated a regime designed to punish foreign firms that 'dumped' goods priced below the cost of producing them on the common market, thus injuring local producers and jobs. Greek fertiliser makers were the first targets of these 'anti-dumping' regulations - Greece was not then a member of the club.

Now, a looming world recession threatens to create a new wave of complaints from anxious industries vying to stay in business by blocking cheap foreign imports from the former Soviet bloc and Southeast Asia. But critics say the controversial system is crying out for reform.

Filippo Giuffrida, trade advisor to the EU importers' group Foreign Trade Association (FTA), says the anti-dumping rules are a blueprint for protectionism. Importers argue the measures are skewed in favour of domestic producers, are open to abuse and are applied in a way that denies many interested parties a say in proceedings that could have a huge impact on their business.

"I don't blame the Commission," says Giuffrida, whose organisation plans to celebrate the anniversary by teaming up with the distributors' lobby Eurocommerce to propose changes to the current regime. "But EU industry has used very well the anti-dumping procedures in a way that the Commission should not accept."

A key priority, says Giuffrida, is the eradication of rules allowing chain complaints in which producers can re-table grievances citing flimsy new evidence if an earlier request for anti-dumping duties is rejected by Union member states.

Each time the Commission takes a complaint on board, importers face the risk of provisional duties on their goods and loss of market share, even if the claims are subsequently rejected.

"There should be a way for the Commission to say no," Giuffrida argues.

He also wants a change in the rules that allow a section of industry representing only 25% of production of a 'like product' to lodge a complaint. This should be increased to 50%, the lobby insists, as the lower threshold allows small sectors of an industry to launch dumping complaints even if they have failed to respond to falling market prices. Critics say it also encourages complaints that benefit a narrow part of the market and not the EU's interests at large.

Finally, the FTA expert claims there is a vital need for more cooperation between Trade Commissioner Pascal Lamy's department and officials in Mario Monti's competition directorate-general. Lack of such liaison has resulted in firms running a cartel convincing the EU to impose duties on foreign producers trying to get a foothold on their market.

Privately, trade officials admit that the rules, last updated in 1996, are not perfect. But Lamy is quick to rebut criticisms that the EU's anti-dumping instrument is being abused. "We try and use it moderately just to make sure that everybody understands that rules should not be cheated," he says.

Trade lawyers say the Union is unlikely to contemplate a root-and-branch reform of its rules. But they point out that the World Trade Organisation is already ensuring countries and trade blocs - such as the EU - address concerns that they are imposing duties and asking questions later. Recent rulings by dispute settlement panels of the WTO and its ultimate arbitrator, the Appellate Body, have injected a strict legal approach based on global trade accords:dumping duties should be the exception to the rule.

"It makes it easier for companies and countries to make sure the Commission is conducting its investigations properly," says Benoit Servais, a partner at the Brussels law firm Van Bael & Bellis and author of a popular legal tome on the issue. Dan Horovitz, a senior partner at the Brussels office of UK law firm Theodore Goddard and trade practitioner, adds: "We now have a guardian of the guardians. That means authorities will be much more prudent and much more careful not to be so protectionist. They cannot do what they like."

Horovitz says current economic woes will inevitably lead to more anti-dumping complaints. He insists the WTO regime will prevent many of them - resulting in more duties. The trade body rapped its most powerful member country, the US, firmly on the knuckles, calling for it to axe an archaic 1916 law allowing companies to sue firms found guilty of dumping products on the market.

More proof of the power of the WTO's highest tribunal was a ruling against the methods used by the Union in a long-running case involving Indian bed-linen. It said the Commission was wrong to use a method known as 'zeroing' - allowing trade officials to bump up duties by using calculations that ignore individual deals in which there has been no dumping.

The Commission has promised to change its methods in all future cases.

Servais claims officials still have scope to replace zeroing with similar systems. But trade experts say the impact of this ruling will be felt across the globe as administrations from Washington to Delhi change the way they conduct their investigations.

If a new round of WTO talks gets under way in Qatar later this year, the use and abuse of anti-dumping regimes may get tougher - even if measures are not banned altogether. Ironically for critics of the EU's regime, it could be the Europeans and Lamy in particular who push in this direction.

The French trade chief is mounting a charm offensive on developing countries, some reluctant to sign up to the wide-ranging round of market-opening talks.

Cynics see his proposals for freeing up trade with the world's poorest nations in 'everything but arms' as a way to win the support of the have-nots at the WTO negotiating table.

But this is unlikely to be enough to secure poor nations' support. Industries in developing countries attract more than their fair share of dumping complaints.

Putting anti-dumping on the table in Qatar may do the trick.

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