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EVFTA commitments on trade remedies (anti-dumping, anti-subsidy and safeguard)?

Question: EVFTA commitments on trade remedies (anti-dumping, anti-subsidy and safeguard)?

Answer: 

Trade remedies (including anti-dumping, anti-subsidy and safeguard measures) allow an importing country to protect its domestic industry against unfair competition (dumping, subsidized) or massive imports of foreign goods that cause significant or serious injury to the domestic industry. These measures are usually expressed in the form of the imposition of additional duties on the imported goods.

According to WTO regulations, in order to apply trade remedy measures, the importing country must conduct an investigation according to strict process and procedures, in accordance with the principles set out in the WTO Agreements on Anti-Dumping (ADA), Subsidies and Countervailing Measures (CVA), and Safeguards (SG).

In the EVFTA, the Chapter on Trade Remedies (Chapter 3) emphasizes compliance with WTO principles and requirements regarding these measures, and adds a number of new and notable commitments such as: (i) Some specific requirements on procedures, application conditions and applicable tariff rates for anti-dumping and anti-dumping measures; (ii) New regulations on bilateral safeguard measures, some additional requirements for global safeguard measures.

• Anti-dumping, anti-subsidy

  • Commitments on process and procedures for conducting anti-dumping and anti-subsidy cases: Competent agencies of the EU and Vietnam must disclose in writing all information and data used to draw conclusions in cases related to the other Party’s products; must allow interested parties sufficient time to make their comments; use English language in exchanging information…

  • New commitments on anti-dumping and anti-subsidy tariff rates: According to the WTO, the highest applicable anti-dumping and anti-subsidy tariff rates are equal to the dumping/subsidy margin, but the WTO recommends that countries "should not be rigid" and " should” apply a lower tariff rate if it is adequate to remove the injury to the domestic industry (commonly referred to as the “lesser duty” rule). This requirement in the EVFTA is not different from that in the WTO, but emphasizes the obligation to consider the application of "lesser duty". Specifically, instead of just encouraging like the WTO, the EVFTA requires Vietnam and the EU to "make effort to ensure" the application of this rule.

  • Commitments on conditions for application of anti-dumping and anti-subsidy measures: According to the WTO, in order to apply anti-dumping/anti-subsidy measures, the importing country needs to demonstrate the simultaneous existence of all three conditions: (i) Goods imports are dumped/subsidized by a margin above the minimum; (ii) There is serious injury or threat of serious injury to the domestic industry of the importing country and (iii) There is a causal link between the dumping/subsidy of the imported goods and the injury to the domestic industry. However, according to the EVFTA commitments, even if the above three conditions are demonstrated, Vietnam and the EU shall not impose anti-dumping/anti-subsidy measures if available information from the investigation concludes that the application of such measures is not in the "public interest".

Currently, Vietnam laws on anti-dumping and anti-subsidy do not have regulations about this "public interest" condition. Therefore, in order to fulfill this commitment, after the EVFTA comes into effect, for anti-dumping and anti-subsidy investigations against EU imports, Vietnam has to ensure that the "public interest" is taken into account before applying relevant measures; for the investigation cases against goods imported from other markets, Vietnam does not need to consider "public interest". On the EU side, its related laws already require that "public interest"  must be considered when applying anti-dumping and anti-subsidy measures.

The condition of “public interest” in the EVFTA is expected to benefit EU exporters (including Germany) in the event that Vietnam conducts anti-dumping or anti-subsidy investigations because this Article makes the application of anti-dumping/anti-subsidy measures more difficult. Likewise, the interests of Vietnam’s importing businesses and groups using imported products will be more considered.

• Safeguard

In addition to the global safeguard measures under the WTO, the EVFTA has a new commitment on bilateral safeguard measures which can be used for the first 10 years from the entry into force of the Agreement. Bilateral safeguard measures are only allowed to be applied if imports increase under the effect of tariff reduction of the EVFTA and must ensure compliance with strict requirements as follows:

  • Conditions of Application: Increased imports from the other Party due to the tariff reduction under the Agreement cause serious injury to the domestic industry;

  • Procedures of Investigation: In addition to the provisions of the WTO on safeguard investigation, the EVFTA adds the following requirements: (i) Bilateral consultations with the other Party must be made before initiating an investigation; (ii) The investigation period is 01 year; (iii) In special cases, a provisional safeguard measure may be applied during the investigation but not for more than 200 days.

  • Form of safeguard: Safeguard measures can only be under the following forms (i) temporarily suspending tariff reduction as committed in the Agreement, or (ii) increasing tariff to a level which does not exceed the lesser of: MFN tariff rate at the time of application of the safeguard measure, or the base rate in the Tariff Schedule of the Importing Party.

  • Method of application: The application period is not more than 02 years, can be extended up to 02 more years; The Party applying the bilateral safeguard measure shall consult with the other Party regarding the compensation within 30 days from the date of application. If, after 30 days of consultations, no agreement on compensation has been reached, the Party against which a safeguard measure has been applied may take a retaliatory measure by suspending tariff concessions but not later than 24 months from the date of the measure being taken.

It should be noted that from the EU's perspective, trade remedy investigations and measures that the EU applies to Vietnamese exports will be implemented throughout the EU territory, regardless of the import of Vietnamese goods into Germany or any EU member state. Likewise, in case Vietnam applies a trade remedy measure to an EU product, the measure will be applied to this kind of product imported from all EU member states, including Germany.

The application of trade remedies by EU and Vietnam

The EU is a frequent user of trade remedies. According to the WTO statistics, from January 1, 1995 (the time the WTO was established) to the end of 2020, the EU initiated a total of 533 anti-dumping cases, 89 anti-subsidy cases and 6 safeguard cases. For Vietnam, the EU initiated 4 anti-dumping cases, 1 anti-subsidy case, and 6 safeguard cases against products such as leather shoes, bicycles, steel pipes, stainless steel fasteners, fiber products... Up to now, the EU has terminated most of the trade remedy measures applied to Vietnamese goods, and is only imposing safeguard duties on some steel products.

On the Vietnamese side, in recent years, trade remedies have been used more frequently. As of October 2021, Vietnam has initiated a total of 16 anti-dumping cases, 1 anti-subsidy case and 6 safeguard cases against imported goods. However, Vietnam has never investigated any products from the EU.

 

EVFTA full text for more information: https://wtocenter.vn/chuyen-de/12778-eu-vietnam-trade-and-investment-agreements 

Source: The Center for WTO and International Trade

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