WTO - PRINCIPLES OF TRADE DEFENCE INSTRUMENTS

WTO - PRINCIPLES OF TRADE DEFENCEto the EU unfairly.
INSTRUMENTS Agreement (“ASCM Agreement”)
            The World Trade Organisation            The Agreement on Subsidies and
(WTO) agreement contains three principles of tradeCountervailing Measures (ASCM) addresses two
defence instruments. The principle of trade defenseseparate but closely related topics: multilateral
is also one of the areas of the European Union (EU)disciplines regulating the provision of subsidies
Common Commercial Policy. These are the(financial assistance given to an enterprise by a
anti-dumping, anti-subsidy and safeguard instruments.government) and the use of countervailing measures
             The WTO provides a disputeto offset injury caused by subsidised imports.
settlement procedure for the resolution of disputesMultilateral disciplines are the rules governing whether
over the use of the instruments. The UK is party toor not a subsidy may be provided by a Member.
all the WTO trade defence instruments, namely theThey are enforced through the WTO dispute
Anti-Dumping Agreement, the Agreement onsettlement mechanism. Countervailing duties (CVDs)
Subsidies and Countervailing Measures and theare a unilateral instrument which may be applied by a
Agreement on Safeguards. The purpose of all theseMember after an investigation by that Member and a
agreements is to ensure consistency in the use ofdetermination that the criteria allowing the application
trade defence instruments by all WTO members.of CVDs, as set out in the ASCM, are satisfied.
Agreement on Anti-Dumping            The Agreement forbids export
 Dumpingsubsidies and subsidies contingent on the use of
            Dumping occurs essentially when adomestic over imported goods. Other subsidies are
company's sales price for a certain product is higherpermitted but subject to the right of other WTO
on the domestic market than on an export market.Members to challenge them in individual cases and,
This is usually only possible if a certain degree offollowing an investigation in accordance with the
international market segregation exists. If theprovisions of the Agreement, to impose
exporting producer had a comparative advantagecountervailing duties on the subsidised products
vis-à-vis the producers in the importing country, thiswhere they cause injury to domestic suppliers. The
would, in open international markets, not only lead toAgreement also provides for much greater
low export prices but also to low prices on thetransparency through a system of notifications and
domestic market of the exporter. If the exporter isreviews of measures.
operating from a protected domestic market it may            It is important to note that the
be able to compensate low revenues generated byAgreement does not apply to trade in agricultural
low priced exports through the unnaturally high profitproducts, where export subsides is common in some
margins obtained at home.countries. There are also special rules for developing
 Anti-dumpingcountries which provide some scope for the
            Anti-dumping is designed to allowmaintenance of export subsidies under certain
countries to take action against dumped imports thatconditions.
cause or threaten to cause material injury to the Agreement on Safeguards
domestic industry. Goods are said to be dumped Safeguards
when they are sold for export at less than their            The rationale behind both
normal value. The normal value is usually defined asanti-dumping and anti-subsidy is that countries are
the price for the like goods in the exporter’sentitled to take action in cases of unfair foreign
home market.competition. Safeguards carry no such accusation
 Agreementthat the competition is unfair. Safeguards are
            The Agreement ondesigned to protect countries from unforeseen
Implementation of Article VI of the Generalsurges in imports that cause or threaten to cause
Agreement on Tariffs and Trade 1994, theserious injury to the domestic industry.
Anti-Dumping Agreement (AD), governs the Safeguard measures
application of anti-dumping measures by Members of            Safeguard measures, which may
the WTO. Anti-dumping measures are unilateralbe applied to imports that increase in such quantities
remedies which may be applied by a Member afterand are made under such conditions as to cause or
an investigation and determination by that Member inthreaten to cause serious injury to the Community
accordance with the provisions of the ADindustry, provided there is a Community interest to
Agreement, that the dumped imports are causingdo so. At the request of a Member State or at the
material injury to a domestic industry producing theCommission's own initiative, an investigation may be
like product. Measures usually take the form ofinitiated on the basis of which measures may be
additional duties but occasionally take the form of anapplied on a case-by-case basis. Industry may not
agreement by the exporters of the product indirectly request the introduction of these measures.
question not to sell that product below a certainThese measures must respect the WTO Agreement
price.on Safeguards.
            The Agreement sets out certainAgreement
substantive requirements that must be fulfilled in            The Agreement on Safeguards
order to impose an anti-dumping measure, as well ascontains the rules for application of safeguard
detailed procedural requirements governing themeasures provided for in Article XIX of the General
conduct of anti-dumping investigations and theAgreement on Tariffs and Trade 1994.
imposition and maintenance of anti-dumping measures.            Major principles of the Agreement
A failure to respect either the substantive orwith respect to safeguard measures are that such
procedural requirements can be taken to themeasures must be temporary; that they must be
WTO’s Dispute Settlement Body and theimposed only when the imports are found to cause
offending country may be required to bring theor threaten serious injury to a competing domestic
measure into conformity with the Agreement andindustry; that they be applied to imports from all
face retaliation if it fails to do so.sources on a non-selective basis; that they be
 Agreement on Subsidies and Countervailingprogressively liberalised while in effect; and that the
MeasuresMember imposing them may be required to
Subsidycompensate the Members whose trade is affected.
            A subsidy is deemed to exist,  Conclusion
firstly, if there is a financial contribution by a            As a general rule, trade defense
government or if there is any form of income oractions are assessed on the basis of the entire EU.
price support within the meaning of Article XVI ofThis is logical, because the EU has one single internal
the 1994 GATT Agreement and, secondly, if amarket, where all operators from all Member States
benefit is thereby conferred.participate and compete.
There is a financial contribution where:             The WTO trade defence
- a government practice involves a direct transfer ofagreements are incorporated into European law and
funds (grants, loans, equity infusion) or potentialare applied at a European level. The European
direct transfers of funds or liabilities (loanCommission are the investigating authority on behalf
guarantees);of member states. Anti-dumping, anti-subsidy or
- government revenue which is otherwise due is notsafeguard investigations are carried out by
collected (tax credits);Directorate General Trade of the European
- a government provides goods or services otherCommission in response to complaints lodged by EU
than general infrastructure, or purchases goods;industry. Measures are adopted by the Council of
- a government makes payments to a fundingMinisters.
organisation or entrusts a private body to carry out References
one or more of the functions which are normally its1.     
responsibility.2.     
Anti-subsidy3.     
             Anti-subsidy measures were4.     
designed to combat subsidies, which are made5.     
available to manufacturers by public authorities and6.     
which can also distort trade when they help to7.     
reduce production costs or cut the prices of exports8.