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“The team was recently visible advising on a number of pharmaceutical cases. Sources agree that the team is “moving in the right direction” and are particularly impressed by its work in the pharmaceutical sector”.

 

EU Strengthens Trade Defense. What Is Wrong with It for Ukraine

27.10.2016

Olena Omelchenko, lawyer at Ilyashev & Partners

Law Firm Source: European Pravda

The World Trade Organization reported significant increase of application of trade measures. It is particularly noticeable in iron and steel industry – the sector, which is the most vulnerable to unfair competition.

Government intervention, large scale subsidies and policies that distort prices led to huge overcapacity and ultimately replacement of bona fide domestic producers and from their and traditional markets.

The problem of unfair trade practices by third countries becomes more acute. The European market suffering from unfair competition in the steel, aluminum and other industries is not an exception.

Recently the European Commission was forced to take a record number of anti-dumping and compensatory measures.

First of all – in iron and steel industry, chemical and related industries, ceramics and mechanical engineering.

For example, as reported by the European Commission the EU applies 39 antidumping and compensatory measures in iron and steel industry. The measures are mainly aimed at goods from China, where overproduction is a serious problem that leads to large scale dumped imports.

From the beginning of the next year, according to the WTO rules, the EU will have to recognize China as a market economy as part of investigations that may cause a range of reviews initiated by China under the new circumstances.

It certainly could not but push the European Commission to urgent reform of trade defense.

Tripartite EU approach

Last week, on the way to secure trade policy in the interests of jobs and competitiveness the European Commission adopted the document, which called on the Member States to support efforts to strengthen and create more reliable trade defense instruments.

Reform of the EU can be conditionally divided into three directions.

Firstly, the EU will refuse application of the duties calculation methodology on the basis of lists of non-market economies in order not to violate the WTO rules.

The European Commission will propose a new method for calculation of dumping margin on imports from the countries with market distortions, or where the state has a profound impact on the economy. In its investigations the EU will compare the prices of such countries with world prices.

Implementation of this new methodology will include a transition period during which all existing anti-dumping and compensatory measures and the investigations that have been already initiated will not be affected.

The European Commission will also focus on strengthening of anti-subsidy legislation.

Secondly, the changes will be based on the Commission’s proposal to modernize the trade defense instruments developed in 2013 that will increase transparency and efficiency and ensure reduction of the investigation procedure for two months.

The EU will refuse the “lesser duty rule” in some cases. The EU believes that regular application of the “lesser duty rule” goes beyond the basic obligations of the WTO anti-dumping agreement.

It will permit the EU to increase the amount of duties multi-fold and get closer to the US practices using illegal duties that foreign producers can not overcome for decades.

Thirdly, the bilateral EU-China platform for discussion of the possibility of prevention of damage due to overproduction of Chinese steel products was set up.

It is expected that in the future the new EU trade defense instruments will protect the European market from cheap products and unfair trade.

Accordingly, other countries risk reorientation of cheap products that may be imported freely, including to the Ukrainian market.

In addition, the new methods of calculation will be applied to all countries, including Ukraine.

In the future it will be almost impossible to challenge application of the EU measures to the Ukrainian products taking into account the weak Ukrainian practice of dispute settlement in the WTO.

How should Ukraine react?

Ukraine should modernize trade defense instruments using experience and achievements of the EU for improvement of legislation and margin calculation methods.

It should be noted that the Ministry of Economic Development is working on the new laws, but until now such modernization is not discussed with the business. Therefore, it is still very difficult to predict their efficiency, even more so – adoption of laws may take time.

The most important is it should be recognized that the current Ukrainian legislation on trade defense drafted for entering the WTO does not meet today’s realities.

It is necessary to adopt regulations, including the procedure for keeping confidential information and immediate obtaining of detailed statistics from the SFSU.

For example, the Law “On application of safeguard measures on imports to Ukraine” does not define the procedure for revision at the initiative of business does not set forth the list of developing countries that should not be subjected to special measures.

The law “On protection of domestic producers from subsidized imports” does not meet the WTO Agreement on Subsidies and Countervailing Measures that significantly complicates the adoption of compensatory measures. The Law “On protection of domestic producers from dumped imports” has a lot of ambiguities and contradictions between articles.

This is not an exhaustive list of comments.

Administration of law also leaves much to be desired. For example, in practice the ministry alone can not monitor and initiate investigations because they can not buy researches of foreign markets and have the resources to gather evidence without public trial.

In addition, the articles on initiation of revision in connection with circumvention of measures do not work, there are problems with return of the previous duty in case of non-application of measures based on the results of investigation. Requirements to petitions lodged by the domestic producers for initiation of investigations are too high as compared with other countries.

Special attention should be paid to institutional changes. The composition of the Interdepartmental Commission on International Trade changes frequently that increases the risk of adoption of situational or politically motivated decisions. There is no rules and regulations of work of the commission …

It is important to improve the system of access to the investigation files, create the register of measures and investigations taking into account new technologies as it exists in the developed countries.

Therefore, reform of trade defense instruments in Ukraine is urgent need rather than desire. However, to ensure this reform it is only possible with increased human resource capacity and budget financing.

 
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