Guest Post: Threat-Based Trade Remedies in the EU: Increasing Use Amid Urgent Climate Objectives
This is a guest post from Florin D. Dascalescu, Senior legal counsel at the European Investment Fund (EIF)
Introduction
This post is based on my recent article published in the Journal of World Trade (JWT),[i] which examines several legal concepts by using as an example the EU anti-subsidy (AS) investigation on imports of new battery electric vehicles (EVs) from the People’s Republic of China (China).
This investigation is of particular interest in my view, because it brings together several issues of systemic relevance: the growing reliance on threat-of-injury determinations in AD/AS investigations, the use of post-investigation period (post-IP) data, the political context of trade defence enforcement, and the limited role played by environmental considerations within the Union interest test.
Considering that the case was charged with broader legal, economic, environmental and geopolitical implications, it is no surprise that the AS measures have been already challenged both in front of the European General Court (by Saic Motor,[ii] BYD,[iii] CCCME,[iv] and Tesla Shanghai[v]) and the WTO DSB (DS626[vi] and DS630[vii]).
Historical Context
Threat-of-injury determinations have traditionally played a marginal role in EU trade defence practice. For several decades, the European Commission showed restraint in imposing measures based solely on prospective injury. This changed in 2009, when definitive duties were imposed on the basis of threat of injury in the investigation concerning seamless pipes and tubes (SPT) of iron or steel from China.[viii] Since then, the Commission has increasingly relied on this preventive tool. Between 2009 and 2024, a series of anti-dumping and countervailing duty investigations resulted in definitive measures based exclusively on threat-of-injury findings. Out of the seven cases, China has been the target in five.
The EV investigation is the most recent and politically salient example of this increasing trend in threat of injury investigations. in our view, threat of injury investigations will not remain an isolated occurrence within the European trade defense landscape. In the current context of growing industrial policies, more WTO members, including the EU, will be inclined to respond through unilateral AD/AS measures based on threat of injury determinations, precisely to avoid that the domestic industry is irremediably hurt. Such trend has been also encouraged by certain US commentators, who advocate for a more assertive and timely use of the threat of injury provisions.[ix]
Procedural Aspects of the EV Investigation
The investigation was initiated ex officio and announced in a highly visible political context, notably during the EU 2023 State of the Union address. This raised questions regarding the boundary between political signalling and the technical independence of trade defence proceedings. Chinese authorities submitted comments to this extent in the AS investigation, arguing that the investigation has been announced without being provided with a proper opportunity for pre-initiation consultations.[x]
Another recurrent feature of recent threat-of-injury cases is the Commission’s use of post-investigation-period data at the definitive stage (in all seven AD/AS investigations based on a threat of injury claim between 2009 – 2024, the Commission used the post-IP Data in its analysis). While such data may confirm the persistence of a threat, its use also requires caution, particularly where import volumes decline after initiation. In threat-based cases, where no actual injury has yet materialised, sustained decreases in imports both in absolute and relative terms (as reflected by statistics) should be given due weight. Should data concerning imports show a significant decrease, this should form one of the arguments against the imposition of measures based on a threat of injury claim.
Subsidisation Findings
A notable aspect of the EV investigation is that a substantial portion of the calculated subsidy benefit derived from subsidised inputs, in particular batteries and battery components. The European Commission (EC) found that upstream support measures conferred significant benefits to EV producers. A large subsidy portion came from the provision of lithium iron phosphate (LFP) batteries and/or LFP for the batteries production for less than adequate remuneration (LTAR). In the Provisional Regulation, for SAIC and Geely, the provision of batteries for LTAR resulted in a subsidy rate of 13.24% and respectively, 10,32 %. For BYD Group, the provision of lithium for the production of batteries for LTAR resulted in a subsidy rate of 7.35%. In the Definitive Regulation, the subsidy rates have been slightly adjusted (see chart below).
Chart : Subsidy Element vs Countervailing Duty Rate
|
Company |
Batteries/lithium for LTAR
(Definitive) |
Provisional
Subsidy
rate |
Definitive
Subsidy
rate |
|
BYD Group: |
7.2% |
17.4% |
17.0 % |
|
Geely Group: |
9.62% |
19.9% |
18.8 % |
|
SAIC Group: |
12.60% |
37.6% |
35.3 % |
|
Tesla (Shanghai) (individual examination) |
4.35% |
-- |
7.8 % |
|
Other cooperating companies |
-- |
20.8% |
20,7 % |
|
All other companies |
-- |
37.6% |
35.3 % |
This raises the question whether a more targeted trade defence response might have consisted in an AS investigation focusing specifically on batteries rather than on the final product. Such an approach would have required an assessment of the extent to which European EV producers depend on imported Chinese batteries, and whether alternative sources of supply are available. The decision to investigate and impose countervailing duties on EVs (finished products), rather than on batteries alone, may therefore reflect broader strategic considerations.
Threat of Injury in AD/AS Investigations
The reason for putting forward a threat of injury claim is simple: the domestic industry should not wait until it is irreversibly harmed in order to submit a complaint.[xi] Indeed, even if the AD/AS measures are imposed, compensation for past losses is not available and the market may already have been permanently altered.[xii] Thus, threat-of-injury claims in AD/AS investigations require a forward-looking assessment and based on existing EU case-law and WTO DSB practice, need to reflect a two-step examination method. Investigating authorities must firstly examine the indicators reflecting the condition of the domestic industry during the IP and secondly determine whether future injury is clearly foreseeable and imminent based on the threat of injury factors. Given the prospective nature of the analysis, such determinations are particularly sensitive to assumptions and projections. The ramifications of a potential erroneous prospective analysis by the European Institutions may be far-reaching, having an erga omnes impact as regards the possibility for EU importers of recovering the AD/AS duties paid.
5. Union Interest and Environmental Considerations
The Union interest test (Article 31 of the AS Regulation) represents the principal avenue through which broader policy considerations may be taken into account in EU anti-subsidy investigations. In the EV case, the EC examined whether it could conclude that it was not in the Union interest to adopt AS measures and examined all the various interests involved, including those of the Union industry, importers, user, suppliers and consumers.[xiii] The GoC raised interesting arguments, starting by mentioning that the initiation of the AS investigation itself was “counterintuitive” for the EU. In particular, the GoC argued that the imposition of AS measures would be against the Union interest as they: (i) would not benefit the Union EV industry and create problems of affordability and availability of EVs, and (ii) would be inconsistent with the EU’s climate and green energy goals. [xiv]
The EC acknowledged the importance of EVs for the green transition, but ultimately concluded that protecting the Union industry from subsidised imports was necessary to preserve its long-term viability, explaining that, in the absence of AS measures, they would be exposed to unfair competition. The analysis remained largely focused on the competitive position of EU producers, with limited engagement with the broader environmental implications of restricting access to lower-priced EVs.
This approach illustrates the limits of the current Union interest test in accommodating environmental considerations. Legislative initiatives such as the Environmental Goods Agreement (EGA),[xv] aimed at promoting environmental protection by improving market access via preferential tariffs trade in favor of “green goods”,[xvi] did not advance. The GoC’s arguments might have had a greater impact, if WTO members had concluded the EGA and agreed on a list of environmental goods expressly including EVs.
The current Union interest test in AS investigations lacks a systematic integration of environmental considerations, raising questions about its adequacy in cases involving "green" goods and thus a need for reform to better align trade defense instruments with the climate objectives. This argument has been already made in the past, several experts proposing an exclusion of the listed environmental goods from trade remedies, generating tangible benefits.[xvii] A more evolutionary application of the Union interest test could allow environmental objectives to be more systematically weighed against traditional trade defence concerns.
6. Concluding Remarks
The EU institutions enjoy a broad discretion in AD/AS investigations by reason of the complexity of the economic and political situations which they have to examine. However, the EU AS investigation on EVs illustrates the challenges inherent in applying measures to strategically important sectors.
It also highlights the increasing reliance on threat-based trade defense measures in the EU, a trend that may increasingly be reflected in the AD/AS practices of other major trading partners.
The EVs case demonstrates the need for greater reflection on how trade defence instruments interact with climate policy objectives, in particular on the adequacy of the Union interest test to address contemporary policy challenges. Any potential reform at EU level would, however, need to be mirrored by other major economies through the recognition – whether in their national AS frameworks or via a reformed WTO Agreement on Subsidies and Countervailing Measures (ASCM) – of legitimate, climate-oriented public support.
* Senior legal counsel at the European Investment Fund (EIF), part of the European Investment Bank (EIB) Group, Luxembourg, undertaking a PhD project on the regulation of subsidies in the EU. The content of this post strictly reflects the personal views of the author. Email: f.d.dascalescu@gmail.com.
[i] Florin Dascalescu, Winds Are Changing: The Rise of Threat-Based Trade Remedies Despite Climate Objectives – The EU Anti-subsidy Case on Electric Vehicles, 60 Journal of World Trade Issue 1, 135 (2026) https://doi.org/10.54648/trad2026006, available at: https://kluwerlawonline.com/journalarticle/Journal+of+World+Trade/60.1/TRAD2026006
[ii] Case T-25/25, Saic Motor and Others v. Commission, action brought on 14 February 2025.
[iii] Case T-24/25, BYD Auto and Others v. Commission, action brought on 14 February 2025.
[iv] Case T-37/25, CCCME and Others v Commission, action brought on 22 January 2025.
[v] Case T-38/25, Tesla (Shanghai) Co. Ltd vs Commission, action brought on 22 January 2025.
[vi] EU – Provisional Countervailing Duties on New Battery Electric Vehicles from China, Request for Consultations by China, WT/DS626/1, 14 August 2024.
[vii] EU – Definitive Countervailing Duties on New Battery Electric Vehicles from China, Request for Consultations by China, WT/DS630/1, 4 November 2024.
[viii] Notice of initiation of an anti-dumping proceeding concerning imports of certain seamless pipes and tubes, of iron or steel originating in the People's Republic of China, OJ C 174, 9.7.2008.
[ix] William Reinsch & Jack Caporal, A Renewed Global Trade System, Toward a New Global Trade Framework, Center for Strategic and International Studies (CSIS 2021) 18; available at: http://www.jstor.org/stable/resrep28661.5 .
[x] Provisional Regulation, recitals 112-113.
[xi] Florin D. Dascalescu, Threat of Injury in Anti-dumping Investigations: Some Comments on the Current Practice at EU and WTO Level, 45 Journal of World Trade, Issue 4, 880 (2011).
[xii] Andreas F. Lowenfeld, International Economic Law, 292 (2nd ed., Oxford Univ. Press 2008).
[xiii] Provisional Regulation, section 7 (Union Interest).
[xiv] Provisional Regulation, recital 180.
[xv] EGA negotiations were launched in 2014; see https://www.wto.org/english/news_e/news14_e/envir_08jul14_e.htm.
[xvi] Petros C. Mavroidis & Damien J. Neven, Greening the WTO: Environmental Goods Agreement, Tariff Concessions and Policy Likeness, 22 Journal of International Economic Law 373-374 (2019).
[xvii] Simon Lester & K. William Watson, Free Trade in Environmental Goods: The Trade Remedy Problem, Free Trade Bulletin No. 54, Cato Institute, 19 August 2013; available at: https://www.cato.org/sites/cato.org/files/pubs/pdf/ftb54_1.pdf; Jonas Kasteng, Trade Remedies on Clean Energy: A new trend in need of multilateralinitiatives, E15 Initiative Background Document (International Centre for Trade and Sustainable Development & World Economic Forum, Geneva 2013) 65-66; available at: https://seors.unfccc.int/applications/seors/attachments/get_attachment?code=JXFKVB1MRUZVKQPM248ESBJRL3Z4UT35;