Anti-dumping Off the Rails: The European Union’s Practice to Alleged Input Dumping

Abstract

For several decades the EU has adjusted the normal value of certain goods in anti-dumping investigations upward, consequently increasing the applicable anti-dumping duties, based on assertions of raw material input dumping in the country of export. Typically adjustments are founded on the assessment that raw materials are sold at a lower price in the domestic market as compared to export sales through so called dual pricing schemes. In the case of certain imports from Russia to the EU, adjustments to normal value are usually based on the premise that energy intensive industries in Russia benefit from input dumping of natural gas. Following its accession to the WTO, Russia has challenged the EU´s practice for violating the EU´s WTO obligations. In the review of its trade defence instruments in 2018, the EU reinforced mechanisms to reprimand alleged input-dumping, despite earlier findings by the WTO dispute settlement body that adjustments for the cost raw material inputs are generally not permitted. In this article it is argued that the EU´s practices are problematic also in relation to cost adjustments based on alleged energy input dumping. Next to the circumstance that WTO rules and jurisprudence do generally not support this practice, the EU´s current approach selectively discriminates against alleged energy input dumping in certain countries, potentially violating not only anti-dumping rules, but also rules of non-discrimination.

Measuring distortions in international markets: Below-market energy inputs

“…Yet dual-pricing practices returned to the fore during the WTO negotiations over the accession of new energy-exporting Members. When Saudi Arabia acceded to the WTO, for instance, it committed to limiting the dual pricing of natural gas liquids by requiring operators to recover their full production and investment costs, as well as to make profits in the ordinary course of business (WTO, 2005 [16]).…”

“…15 Recent OECD work on government support in industrial sectors has, for example, found energy-intensive firms based in MENA countries to display strikingly high profit margins and rates of return on their assets (OECD, 2021 [6]), a finding which might be related to the prevalence of below-market energy in the region. 16 Artificially high margins reduce in turn the need for governments to help companies through other means, be they government grants, tax concessions, or below-market finance. This shows the importance of considering government support in all its forms in order to paint an accurate picture of market distortions across countries and sectors.…”

“…Egypt) 15. These firms could be deemed 'latent zombies' in that below-market energy keeps them profitable even though they might otherwise exit the market absent government support 16. In a 2011 note on the Saudi cement sector, financial services provider Aljazira Capital found, for example, that: "Saudi cement companies receive natural gas at a subsidized rate of USD 0.75/mmbtu from state-owned Saudi Aramco.…”