EU increases trade protection: Сonsequences for Ukraine

Author : Olena Omelchenko

Source :

According to World Trade Organization, level of use of trade measures in the world recently significantly increased. This is particularly noticeable in steel industry sector - the sector most vulnerable to unfair competition
14:20, 26 October 2016

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Government interventions, massive subsidies and policies that distort prices led to huge overcapacity and ultimately ousting honest domestic producers from their traditional markets.

All the more acute becomes the problem of unfair trade practices by third countries. And the European market isn’t an exception, because it is suffering from unfair competition in the steel, aluminum and other industries.

Recently the Commission was forced to take a record number of anti-dumping and countervailing measures. First of all - in the steel industry, the chemical and related industries, ceramics and mechanical engineering.

For example, according to the European Commission, in the sector of steel EU applies 39 antidumping and countervailing measures. Preferably, measures aimed at goods from China, where overproduction – is a serious problem that leads to massive dumped imports.

Since the beginning of next year, according to WTO rules, the EU will have to recognize China as a market economy under investigation that can cause a range of reviews initiated by China given the new circumstances.

And it certainly pushed the European Commission to urgently reform trade protection.

Tripartite EU approach

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

Reform of the EU can be divided into three areas.

Firstly, the EU refuses to use the calculation methodology to customs duties on the basis of lists of non-market economies so it will not violate WTO rules.

The European Commission will propose a new method to calculate the dumping margin on imports from countries where there are market distortions or where the state has a profound impact on the economy. In its investigation the EU will compare the prices of countries with world prices.

The implementation of this new methodology will include a transition period during which all existing anti-dumping and countervailing measures and also initiated investigations will not be affected.

The Commission will also focus on strengthening anti-subsidy law.

Secondly, the changes will be based on the Commission's proposal to modernize trade defense instruments, developed in 2013, which will increase transparency and efficiency, and provide a reduction in the time procedure of investigation for two months.

EU will refuse to "lesser duty rule" in some cases. According to the EU, the systematic use of "lesser duty rule" goes beyond the basic obligations of WTO anti-dumping agreement.

This will allow the EU to increase the amount of duties and get closer to US practices, using forbidden  duties that foreign producers cannot overcome during the decades.

Third, they set up a bilateral EU-China platform to discuss opportunities to prevent damage due to overproduction of Chinese steel products.

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

Accordingly, for other countries there is a risk of reorientation to cheap products that may be imported freely, including to the market of Ukraine.

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

How should Ukraine react?

Ukraine should implement its own modernization of trade defense instruments, using the experience and achievements of EU legislation to improve methods of calculating margins.

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

The most important is to recognize - the current Ukrainian legislation on trade protection, designed to join the WTO does not meet today's realities.

Special attention should be paid to institutional change. The composition of the Interdepartmental Commission on International Trade changes frequently, which increases the risk of situational decisions or politically motivated. There is also no regulation of the commission’s work.

It is important to improve the system of access to the investigation materials, a register of actions and investigations given the new technology as it exists in developed countries.

Thus, reforming the trade defense instruments in Ukraine is a really urgent need. However, ensuring this reform is possible only with reference to human resource capacity and budget funding.

Related: EU Summit: migration, trade and relations with Russia

Related: The impossible is possible: EU granted trade concessions to Ukraine

Related: European Commissioner for Trade to visit Ukraine on September 29 – 30

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