This is from the provisionally adopted text of the amended EU AD/CVD regulation (I think I'm stating that correctly, but someone please correct me if I have it wrong!), relating to the use of analogue countries in constructing a normal value:
Article 1
Regulation (EU) 2016/1036 is amended as follows:
(1) In Article 2, the following paragraph is inserted:
“6a. (a) In case it is determined, when applying this or any other relevant provision of this Regulation, that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, subject to the following rules.
The sources the Commission may use include:
– corresponding costs of production and sale in an appropriate representative country with a similar level of economic development as the exporting country, provided the relevant data are readily available; where there is more than one such country, preference shall be given, where appropriate, to countries with an adequate level of social and environmental protection;
(emphasis added)
Note that the regulation says "may use," and also that "where appropriate" leaves a lot of scope for discretion in the application of the regulation. As a result, an "as such" challenge could be difficult here. WTO Members may have to wait for the provision to be applied before bringing a complaint.
So how will this provision be applied so as to give "preference" to "countries with an adequate level of social and environmental protection" as analogue countries? In what situations is it "appropriate" to do so? And can this be done consistently with the AD Agreement? I'm really not sure what the EU authorities have in mind here, so we'll just have to wait and see. I imagine they are hoping that WTO panels and the Appellate Body will give them a fair amount of deference, otherwise there is a good chance they will be found in violation. It's hard to see how such a methodology makes any sense in the context of a calculation of dumping.
(If they changed the regulation to say that social and environmental protection will be a factor in determining whether countries are at a "similar level of economic development," that might make more sense.)
