Negotiations concluded this week on yet another free trade agreement, this time between the European Union and New Zealand. Chapter 5 of the EU-NZ FTA is about trade remedies. Section A of that chapter deals with antidumping and countervailing duties. As a trade remedies nerd, I always like to take a look.
The first thing to note is that Section A is excluded from the application of the bilateral dispute settlement mechanism. This is pretty normal for AD/CVD provisions in FTAs. For those of you who are not public international lawyers, such provisions may be binding, but they are not enforceable. The truism that “where there’s a right, there’s a remedy” does not necessarily hold in international law.
On substance, the big picture items relate to “public interest” (Article X.3) and “lesser duty” (Article X.4). Under a public interest test, a country will consider not only whether it may impose an AD/CVD measure (i.e., dumped or subsidized imports are found to cause injury to a domestic industry), but whether it is in its overall economic interest to do so. Under a lesser duty analysis, a country may impose a duty less than the margin of dumping/rate of subsidization, if a lower duty is enough to eliminate the harm to the domestic industry.
It shouldn’t be a heavy lift for the EU and New Zealand to agree to apply these concepts, as both Parties already use them in their trade remedy investigations. It is thus curious how cautiously they are used. In both cases, the Party “should”, “consistent with its domestic law”, apply these concepts. The word “should” is hortatory language, so here not only is there no remedy, but there is arguably no right. Why? Perhaps because the EU has been edging away a bit from the use of a lesser duty, in any event not applying the concept in certain situations, such as AD cases where there are “significant market distortions”. Nevertheless, given the nonapplication of bilateral dispute settlement, the caution is striking.
The remaining provision, entitled “Transparency”, is similarly soft legally. Parties “should” use trade remedies in full compliance with WTO rules, and their trade remedies “should” be based on a fair and transparent system. Pretty minimal. The only legally binding commitments are to make a “full and meaningful disclosure of all essential facts and considerations” (building on a vaguer WTO requirement) and to give each interested party the possibility to be heard (provided it does not unnecessarily delay the conduct of the investigation).
One final provision of interest, Article X.1, states that, for the purposes of Section A, the preferential rules of origin in the FTA do not apply. Countries often apply special rules of origin in AD/CVD cases, but why it was necessary to include a provision about preferential rules of origin here is not clear to me. Any thoughts welcomed.
There has been a fair amount of work on the effects of FTAs on AD/CVD use, including a new study by Tom Prusa, Robert Teh, and Min Zhu in the Journal of International Economics that concludes that AD filings and measures between PTA partners fall dramatically where the PTA contains ‘explicit AD rules”. While I don’t question their conclusions, it’s hard to see how provisions such as those in the EU-NZ FTA would have any significant effect on trade remedy use.
You may ask whether the EU and NZ use AD/CVD against each other in any event. The answer is yes. New Zealand has antidumping duties in place on Greek and Spanish peaches (in the latter case, since 1998). For the moment, the EU does not have measures against NZ. It will be interesting to see whether this changes as the EU gradually opens up to NZ agricultural products.
