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Karel De Gucht
European Trade Commissioner
Modernisation of Trade Defence – Getting the Job Done
European Parliament, Workshop on Trade Defence Instruments (TDI) Modernization/ Brussels
7 November 2013
Ladies and gentlemen,
In exactly five months and ten days' time, this iteration of the European Parliament will meet for the last day of its last plenary session.
That allows you time to work on important files but it also means prioritisation is the order of the day.
What I would like to suggest to you this morning is that the Commission's proposal to modernize trade defence instruments should be high on your list of priorities, for three reasons:
First, why is this dossier important? Why do we need an effective trade defence system in the first place?
The answer is straightforward. International trade is essential to Europe's prosperity. We cannot grow without world-class companies. And companies do not become world class without being exposed both to the opportunities and the challenges of the international economy.
But the international economy is – relatively speaking – a much more lawless place than the economy within the European Union. It is certainly governed by rules but those rules are not strong enough to prevent companies from dumping or governments from giving out unfair subsidies.
Trade defence instruments – anti-subsidy and anti-dumping measures – are the tools we have to defend our businesses against these unfair practices, restoring balance in place of distortion. They are often the only tool available to industries that need an effective and timely remedy.
If you compare the way trade is regulated within the Single Market and at international level this fact becomes plain. Fair trading practices within the European Union are guaranteed both by the treaties – in particular the four freedoms of goods, services, capital and labour – and by our strong competition rules. These are backed up by 10,000 pieces of legislation which lay the framework for how companies can compete and governments can intervene on the European market.
At the international level we have the multilateral trading system enshrined in the World Trade Organisation. Its enforceable rules are – when compared to many other areas of international law – an enormous achievement and an exceptional one. But WTO rules simply do not compare with what we have within the European Union.
And that is why the concept of trade defence is built directly in to the WTO's own fabric: The WTO agreements recognise the need for them and set conditions for their use.
That is why this whole area of trade defence is important – it is an essential tool and that means it must be made effective in today's context.
Second, why is this dossier urgent?
Because the last time we updated our trade laws was in 1995!
And the world has changed in at least two important ways since then – meaning we can't afford to put this reform off any longer.
For one thing, the world economy is considerably more integrated now than it was then. To take one measure of the intensity of trade: The value of world trade amounted to only 20% of global output that year. In 2010 it was more than 30%. In general terms this more globalised economy means that there is a greater potential for our companies to come face to face with unfair trading practices.
For another, the last decades have seen the rise of what has been called state capitalism. It is frequently used to describe China's system but it can also be applied to Russia and other emerging economies.
State capitalism has two consequences for trade defence. First, it implies that a range of government policies could be used to give an unwarranted competitive advantage to a national company – from trade distortive subsidies to cheap raw materials. This kind of distortion is difficult to act against under the current rules.
Second, in state capitalist systems retaliation by governments against companies who exercise their rights to trade defence is a real issue. This is a difficult and sensitive topic. But it is undeniable that many European companies are unwilling to come forward and make justified trade defence complaints due to fear of consequences for their business. The consequences can be serious for companies that export to or invest in the country in question. In our current system it is not clear how we ensure these companies have a fair shot.
Third, if we fail to act now, we may not be prepared in time for new challenges to come. Next year, the Commission will start working under new procedural rules, and in 2016 China will receive market economy status. I would not advice starting another TDI reform process just then.
That then is why we need modernisation and why we need modernisation now.
But why do we need this modernisation in particular?
Because this legislation balances the interests of producers and importers.
Our proposal makes the system more efficient and more effective. And it makes it more user-friendly for smaller companies in particular – who are often the companies that suffer most from dumping or unfair subsidies. But most importantly it does that in a way that takes all interests into account.
For European industry, it re-enforces their position, by sending a strong signal to our trading partners. The Commission will not tolerate the proliferation of unfair trading practices and will support industry when it is faced with such practices.
For example the proposal removes what we call the lesser duty rule in the cases that are most affected by government intervention: subsidisation and distortions of raw materials markets. What this means in practice is that exporters benefitting from unfair government support of this kind will face higher duties to make sure that government distortions are fully corrected.
It will also protect companies who fear retaliation for cooperating with Commission investigations. Under the proposal, companies would be legally obliged to cooperate with the Commission's ex officio procedure. That means that no government could blame a European company for the launch of the case.
But there are also important parts of the proposal that are of clear interest to importers.
For instance, it would increase transparency by forewarning importers and other affected stakeholders when provisional trade measures are going to be introduced. The proposal would let them know two weeks before provisional duties are introduced and even give them the possibility to plan ahead and to comment. This is good not only for importers but for everyone affected as it will result in more accurate provisional duties.
The proposal would also bring more fairness to importers by reimbursing them when they have paid duties unnecessarily during expiry reviews. As you know well, these investigations – which happen at the end of the normal five year application period of the duties to assess whether the measures are still needed – take 12 to 15 months. During that time importers still need to pay duties. Under the proposal those duties would be reimbursed if the investigation concludes that there is no need to continue the measures.
Last but not least, I know that there have been concerns expressed in the Parliament about the guidelines on TDI that we are currently preparing - at the same time as Parliament and Council consider the legislative proposal for modernisation. Let me stress that the issues addressed in the guidelines do not interfere with the broader review. They have to do with the practices that the Commission follows when implementing trade defence legislation, not the legislation itself. That said, I am committed to present the guidelines to you and to the Council before they are finally adopted by the Commission, and to have a substantive discussion on them. My services are now working on revising the guidelines following a public consultation. I hope that work will be finished very soon.
I hope you will agree with me that now is the time to act.
If we let this legislation lapse we may not have another opportunity for a long time again.
The last time we tried to modernise the system was six years ago. We failed then. Another failure is simply not an option.
So I hope I can count on you to work to get this deal done in the coming weeks and months.
There is support among stakeholders for this proposal. And there is support in the Council for this proposal. So if we all work together there is a real chance that we can reach an agreement at the first reading.
But that will depend on Parliament and Council making this legislation a priority for the remaining months.
I am already encouraged by the progress made in Parliament and I am ready to do what I can to support that.
So I hope we can count on each other to get this job done. Please defend a modern trade defence!
Thank you very much for your attention. I am happy to take your questions.