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1st Oct 2022

EU countries agree to reinforce trade defence

  • Trade has become a contested EU policy in recent months, speeding up the need for an agreement on reinforced trade tools (Photo: imo.org)

EU states agreed to reinforce the bloc’s trade defence instruments on Tuesday (13 December) in a move hailed as a “major breakthrough”.

Reforming trade defence instruments has become a key priority for the EU recently, as steel overcapacity from China squeezes European businesses and as trade policy has become a key concern for voters feeling left out of the benefits of globalisation.

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The European Commission proposed modernising trade defence instruments in 2013, but the file was stuck in the EU Council, where member states with different trade traditions disagreed over allowing higher tariffs to be imposed for dumping.

EU diplomats agreed to a compromise proposed by Slovakia, the rotating presidency of the EU. It was the sixth proposal put forward by the Slovak diplomats.

There has been a real political push to act, as EU leaders in October agreed on the need to reach an agreement before the end of the year.

One of the key stumbling blocks had been the so-called "lesser duty rule," by which tariffs are imposed at the lowest level possible.

The Slovak compromise suggested keeping the lesser duty rule but suspending it in “some justified cases”, for instance in cases of “state-induced” distortions in raw material and energy.

The compromise sets out that "higher duties can be imposed where there are raw material distortions and these raw materials, including energy, account for more than 27 percent of the cost of production in total and more than 7 percent taken individually, per piece."

The commission will have to prove the "justified cases", where the rule can be suspended.

The Slovak EU presidency argues that the reformed rules can respond better to unfair trade practices, and shield European producers from damage caused by unfair competition.

The commission has also argued that in the case of Chinese steel dumping for instance, the rule has limited EU tariffs to 21 percent, while the US, that has no lesser duty rule, could impose tariffs of 266 percent.

Some countries, like Britain and the Nordic countries, had opposed modifying the lesser duty rule, on the ground that it provided adequate protection for industries.

In a nod to these more liberal trading countries, the agreement extends the predisclosure time to four weeks from two weeks on upcoming measure and duties, giving more time to importers to adjust to the changes.

Peter Ziga, the Slovak minister in charge of trade said the agreement was a “major breakthrough”.

"Our trade defence instruments have remained largely the same for over 15 years but the situation on world markets has changed dramatically. Europe cannot be naive and has to defend its interests, especially in case of dumping. This is a crucial step towards a solid solution that would help EU producers cope with unfair competition and practices,” he said in a statement.

Other measures include shorter dumping investigation periods, which could be launched without an official request by an industry.

The commission welcomed the agreement. Talks between the council and the European Parliament will start “soon”, according to an official, under the Maltese EU presidency to agree on the actual legislation.

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