Brexit Briefing: The Impact of Brexit on Trade Remedies (Anti-Dumping, Anti-Subsidy, Safeguard) in the UK

28/02/2019 12:00 - 433 Views

The EU has a trade defense regime and a large number of trade remedies (anti-dumping, anti-subsidy, and safeguard measures). UK industries at present are protected by these measures.

The purpose of this note is to briefly review what will be the impact of Brexit on these measures, and what industries in the UK and abroad should do to prepare.

There are two main scenarios: the Withdrawal Agreement is ratified; or it is not.

Scenario 1: The Withdrawal Agreement is Ratified

On November 25, 2018, two important texts were endorsed by European leaders at a special meeting of the EU Council:

• The agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (the Withdrawal Agreement);

• The Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom

Both texts need to be approved by the UK Parliament and the European Parliament, before the Withdrawal Agreement can come into force. There is still a significant degree of uncertainty as to whether this will happen, to say the least.

If the Withdrawal Agreement does come into force in the form it is in at the time of writing (or a form similar in the respects, below), then the UK will remain subject to the EU’s trade remedy regime until the end of the transition period (end of 2020, possibly extended to end of 2022), and there is a possibility that the UK would remain under the EU’s regime permanently after that.

Rationale: the Withdrawal Agreement states that: “Unless otherwise provided in this Agreement, Union law shall be applicable to and in the United Kingdom during the transition period.” As there is no express exclusion of the EU’s basic anti-dumping, anti-subsidy and safeguard regulations and the Commission implementing regulations imposing anti-dumping, anti-subsidy, and safeguard measures, the entirety of the EU’s trade remedy environment will remain in place under the withdrawal agreement.

The EU’s trade remedy regime, and the EU’s trade remedies would continue to apply to the UK even after the end of the transition period if the provisions in the ‘Northern Ireland Backstop’ were to apply.

Rationale: the Withdrawal Agreement contains the Protocol on Ireland and Northern Ireland (the Protocol).

The Protocol will only begin at the end of the transitional period if no final agreement has been reached and will apply until the Protocol has been superseded by a new agreement.

The Protocol states that a ‘single customs territory’ will be created comprised of the UK and the Union and the rules set out in Annex 2 to the Protocol shall apply in respect of all trade in goods.

Article 4(3) of Annex 2 states that: ‘The Union's trade defence regime, as well as the Union's Generalised Scheme of Preferences (GSP), shall cover both parts of the single customs territory. The Union shall consult the United Kingdom on any trade defence measures or actions under the GSP regime which it considers taking. At least 6 months before the end of the transition period, the Joint Committee shall set up the procedures for the application of this paragraph.’

On this basis, should the backstop provision apply (they will if the withdrawal agreement is ratified by the UK, and no new agreement is reached at the end of the transition period), the EU trade remedies regime and orders would still continue to apply in some form to the UK.

In short: no or little change, and nothing much to do for business, until a new agreement is concluded between the UK and the EU to supersede the Northern Ireland Protocol (see below).

Scenario 2: Hard Brexit

Should the Withdrawal Agreement fail to come into force, then EU law, including its trade remedies regime, would cease to apply on March 29, 2019, with no transition. This is hard Brexit.

Under such a scenario, the European Union (Withdrawal) Act 2018 would transpose EU law into the UK. But it is likely that the Taxation (Cross-border Trade) Act 2018 (the Customs Act), which contains a skeleton framework for a new UK trade regime, along with associated statutory instruments, will displace the transposed EU rules on trade remedies and maintain only certain remedies.

Maintenance and Review by the UK of Existing EU Trade Remedies

Immediately on March 29, 2019, under scenario 2 above, or when the Northern Ireland Protocol is superseded by a new agreement bringing the UK out of the EU’s trade remedy regime, under scenario 1, the UK will have to operate an independent trade remedies framework.

With this in mind, the UK’s Department for International Trade (DIT) launched a call for evidence in November 2017 on whether existing EU remedies should be maintained in the UK and reviewed to decide the appropriate level of duty once the UK is operating its own independent trade remedies framework.

The DIT’s position was to maintain those remedies that met three criteria: (i) the Government has received an application to maintain those measures from UK businesses which produce products in the UK that are subject to EU trade remedies measures; (ii) that a sufficient proportion of UK business support the application; and (iii) the market share of the UK businesses which produce those products is above a certain level.

Measures which met the criteria would be maintained until the new Trade Remedies Authority (the TRA)[7]would review them based on UK-specific market data, after which the measures would be adjusted if necessary.

In July 2018, the UK Government published a provisional list of the 42 trade remedies it considered had met its criteria and the 72 that had not.

The Government intended to publish a further version of this list (initially by the end of 2018 but this has now been delayed) and also allow an opportunity to appeal. Any appeal will only consider evidence submitted prior to August 24, 2018.

The EU trade remedies that the UK has decided to maintain will then have to be reviewed by the TRA.[8] It is expected that the TRA will review the oldest EU measures first, so as to reach new findings before these measures are set to expire. It is also expected that it will be possible for interested parties to request earlier review if due cause is shown.

All maintained measures will be reviewed. Adjustments to the existing measures could be granted if, for instance, the export price to the UK, and consequently the level of injurious dumping on the UK market differs markedly from the export price and level of injurious dumping previously found by the European Commission for sales to the EU28. Or, it may be that the UK industry is not suffering injury in the same way the EU28 industry was, or that the interests of users have less, or more weight in the UK than they had in the EU28 as a whole. All these could be ground for interested parties, domestic and exporting producers alike, to request a modification, or the termination of EU trade remedies taken over by the UK.

EU Reviews

Brexit will also impact the EU’s own measures. Indeed, these measures were adopted based on an assessment of the dumping/subsidisation, injury and EU interest for the 28 EU member states. The departure of the UK will impact all of these assessments. When the impact is material, there will be grounds for requesting a review of the EU’s measures from the European Commission.

For instance, the dumping margins of sampled exporting producers were calculated based on sales to 28 countries, including the UK. The export price to the EU27 will be different from the export price to the EU28 anytime an exporting producer sold to the UK. A different export price means a different margin. This in turn may impact the assessment of the injury caused by the imports to the EU27, compared to the situation that prevailed for the EU28. If it can be demonstrated that the UK export price was lower (and brought down the EU average) or higher (and increased the EU average) or that injury was particularly concentrated in the UK, or in the rest of the EU27, reviews should be requested.

In the past, when the EU grew to include new member states (the last times in 2004, 2006 and 2013), the Commission has permitted interested parties to request reviews of the EU’s measures. It is expected that the same will happen in this reverse situation, when a member state leaves the Union.

What Should Business Do?

Businesses with reasons to believe that their level of injurious dumping is different in the UK and the EU27 should contact the UK’s TRA has soon as it is operational, and the European Commission straight away, with a view to obtain a recalculation of the duty in the UK, in the EU, or in both places

Source: University of East Anglia