Policy Positions

Policy Positions

Role of manufacturing
Role of trade remedies
State distortion and non-market economies
Lesser duty rule
Economic interest and public interest
Role of UK Trade Remedies Authority
Transition of existing EU trade remedies

Role of manufacturing
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The view has been expressed that the UK could thrive as a services based economy.  This is not correct.  Manufacturing is a dynamic and driving force in the economy and it matters.  Government has a role in helping manufacturing and trade remedies are a critical part of this.  Protecting manufacturing against unfair trade is in the long term interest of the economy including consumers.
Role of trade remedies
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Trade remedies are a critical component of the UK industrial strategy.  Global markets can become dysfunctional as a result of trade barriers or unfair trading practices.  Subsidised imports create distortions as importers and consumers switch from the domestic or fairly traded products towards the subsidised imports.  Dumping of products occurs because of state distortions or barriers to trade, giving exporters an unfair advantage when competing on foreign markets.  Remedies against dumping and subsidies are crucial in ensuring that the global playing field remains fair.  As the UK enters a period where it will be negotiating new free trade agreements post-Brexit, the UK must have robust trade remedies in place.   The UK also needs to have legislation to adopt safeguards where there are significant market disruptions caused by a surge in imports.  All of these trade remedies are used by the UK’s main trading partners.
State distortions and non-market economies
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To some extent, distortions to import prices caused by state distortions and non-market economy (NME) situations can be countered by robust anti-subsidy remedies (countervailing duties).  However, the WTO subsidy agreement does not permit all subsidies to be countervailed (e.g. a subsidy that is generally available i.e. non-specific is not covered by the agreement).  Anti-dumping is therefore critical in addressing state distortions and NME situations where these distort export prices and global markets.

When prices in the domestic market are abnormally or artificially low due to an alleged distortion, this can result in a lower dumping margin than if domestic prices were not subject to a distortion.  A common practice amongst WTO members when calculating dumping margins in such situations has been to make corrective adjustments to domestic price and cost of production information.  WTO jurisprudence is in flux at the moment but MTRA strongly believes that there are methodologies to make price and cost adjustments in a WTO-consistent way.  Without this possibility, anti-dumping will become an ineffective instrument.  MTRA strongly supports the possibility to use prices from third countries when making adjustments to exporter’s cost data.

The WTO agreement also authorises the use of a special methodology in the case of non-market economies.  In addition, certain countries WTO accession protocols permit the use of a special methodology in relation to calculation of dumping.  All of these options must be maintained by the UK so it can react to WTO jurisprudence as it emerges and ensure that the UK has robust remedies against state distortions and non-market economies.

Lesser duty rule
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In principle, dumping and subsidy margins are a measure of the market distortion.  The lesser duty rule  (LDR) is not mandatory under WTO rules.  Of the 32 main users of anti-dumping, 23 do not have a mandatory lesser duty rule.  For some countries with a lesser duty rule (e.g. Australia and EU), the LDR is only mandatory in certain circumstances.  The EU has amended its lesser duty rule to be non-mandatory where there are raw material distortions.  The EU has also included a minimum profit of 6% and the consideration of imminent future regulatory costs in the calculation of the non-injurious price.  The UK is proposing to have a mandatory lesser duty rule and will not adopt the amendments that the EU has introduced.  MTRA believes that, if the UK has a lesser duty rule, it should apply it in a similar way to the amended EU practice.
Economic interest and public interest
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Most WTO members ( i.e. 27 of the main 32 global users of AD do not have a mandatory public interest test (PIT)).  Of the 5 countries that have a PIT, 2 of them are only mandatory in certain circumstances.  The EU is one of the mandatory PIT users.  There are specific reasons why a PIT is necessary in the EU due to the fact that it is necessary to balance the interests of 28 member states, some of whom agree to impose AD/CVD measures even though they might not have a domestic industry.  Canada is the main other WTO member to have an explicit public interest provision. However, unlike the EU, it is not mandatory in every investigation.  Some academic economists emphasise the ‘benefits’ of cheap imports to the economy (even if unfairly traded), often suggesting that a cost-benefit approach should be adopted in a PIT.  However, this ignores economic and political realities that result in not one WTO member applying a PIT in this way.  A PIT is not about balancing the interests of producers, users and consumers.  Although it is inevitable that an AD/CVD measure will increase the cost of imports, indeed that is the point of the corrective measures, it is in users and consumers interest for effective competition to be maintained.  There are also social considerations (e.g. jobs, regional considerations) that politically are important to consider when taking such actions.  The UK legislation contains an economic interest and public interest test.  The legislation contains a presumption that measures will be in the economic interest unless it can be shown to be otherwise.  MTRA believes the presumption needs to be strengthened to be clear that the economic interest will be met unless the negative impact of the remedy is disproportionate to the positive effect.
Role of TRA
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MTRA supports the creation of an independent Trade Remedies Authority.  The Trade Bill provides for up to 9 members of the TRA including non-executive members.  MTRA believes that the non-executive members should include representatives of UK manufacturing sectors and trade unions in manufacturing.  In addition, the Secretary of State, before appointing non-executive members, should consult the chair, organisations representing UK manufacturing sectors and trade unions in manufacturing.
Transition of existing EU trade remedies
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It is critical that existing EU trade remedies are continued post-Brexit by the UK for their normal duration.  The UK is proposing to continue measures that meet certain tests and will undertake a process of reviewing them to make them UK-specific.  MTRA believes that the existing measures are UK measures. Multi-country regional trade remedies already exist (indeed the EU itself is one) and are WTO consistent.  MTRA believes that, even after Brexit, it is preferable to maintain the existing EU measures as EU27+UK measures.  As long as the standing, dumping, injury and causality have been assessed for the region as a whole, this is consistent with WTO rules.