It has been said that 'smooth seas don't produce skilful sailors'.1 And indeed, stakeholders tasked with navigating the treacherous waters of international trade have, over the past year, certainly needed to find their sea legs like at few other times in recent memory.
The escalating trade war between the United States, China and other trading partners continues apace with no end in sight. The latest in a string of US trade measures over the past year includes the announcement by the United States Trade Representative (USTR) in July 2018 that the United States intends to impose a 10 per cent additional tariff on US$200 billion of Chinese imports, covering over 6,000 lines of products and product categories. In addition to the ever-increasing volume and scope of trade affected by United States measures – and retaliatory countermeasures by trading partners – a striking feature of several of the US tariff and quota actions has been the reliance on rarely-invoked executive authorities outside the familiar paradigm of anti-dumping, countervailing or safeguard investigations. For example, in imposing steel and aluminium tariffs in March 2018, the legal rationale relied upon by the United States was 'national security' pursuant to Section 232 of the Trade Expansion Act of 1962 – a provision that had not been invoked since the mid-1970s. In May 2018, the Department of Commerce launched a second investigation based on Section 232 – this time on imported autos and parts. By contrast, the United States instead relied on Section 301 of the Trade Act of 1974 to justify the imposition of a 25 per cent tariff on US$50 billion of Chinese imports. The tariff, which went into effect in July 2018, follows an investigation by the USTR pursuant to Section 301, which concluded that certain Chinese policies relating to intellectual property and technology transfer unreasonably 'burden or restrict US commerce'. The United States' move to impose a 10 per cent tariff on a further US$200 billion of Chinese goods is likewise based on Section 301.
At the same time, Brexit negotiations are proceeding in a furious race against time as the United Kingdom's withdrawal date of 30 March 2019 looms closer. At the time of writing, there is no guarantee that a final Withdrawal Agreement will be finalised and ratified before the deadline, with the result that the EU is urging stakeholders to prepare for both a 'deal and no-deal scenario'. Assuming that the Agreement is ratified by the Brexit date, EU law will continue to apply to and within the United Kingdom for a transition period ending on 1 January 2021. In a joint statement in June 2018, EU and UK negotiators identified key outstanding issues to include:
- agreeing on a 'backstop' to prevent a 'hard border' between Northern Ireland and Ireland;
- the United Kingdom's continued protection of geographical indications;
- data protection;
- settling EU judicial and administrative procedures post-Brexit;
- the consistent application and interpretation of the Withdrawal Agreement; and
- dispute settlement.
At this critical juncture, no scenario is entirely beyond the realm of possibility, including the spectre of the United Kingdom 'crashing out' of the EU without a deal or even calling for a second Brexit referendum.
And, again in the EU, the year was also marked by a substantive overhaul of the Union's trade defence instruments with the adoption of two Regulations amending existing anti-dumping and anti-subsidy law. First, Regulation 2017/2321 introduces a new methodology for calculating normal value in dumping cases for imports from WTO members whose domestic prices and costs are significantly distorted as a result of state intervention. Normal value is usually calculated by using the costs and prices of exporters in their home market. However, where significant distortions are found to exist, the new rules require the Commission to construct normal value on the basis of non-distorted costs and prices. The Commission may use either:
- corresponding costs of production and sale in an appropriate representative country with a similar level of economic development;
- undistorted international prices, costs or benchmarks; or
- domestic costs to the extent that they are shown not to be distorted.
The Commission bears the burden of proof to show the existence of distortions justifying the use of the new methodology. An important feature of the Regulation is that it provides that the Commission may produce reports detailing distortions in a specific country or sector and such reports may be relied upon by complainants in anti-dumping cases. To date, the Commission has produced one country report on China (arguably the main intended target of the new rules) and a second report is underway for Russia. As further discussed in this edition's WTO chapter, it is noted that China has attempted to include the new methodology in Regulation 2017/2321 within the terms of reference of China's ongoing dispute before the WTO Panel in EU – Price Comparison Methodologies.2
Moreover, Regulation 2018/825, adopted in June of 2018, introduces a 'modernisation package' overhauling the way the Commission carries out anti-dumping and anti-subsidy investigations. Some of the key changes include the shortening of the investigation period wherein the Commission must now impose any provisional measures within seven to eight months as opposed to nine months previously. In addition, the Commission will provide an 'early warning' on the imposition of provisional anti-dumping measures during which time provisional duties will not be applied to allow affected parties to adjust to the new situation. The Regulation also provides that the 'lesser duty rule' will no longer be applied in anti-subsidy investigations and will be suspended in certain circumstances in anti-dumping cases. Other reforms include changes to the injury margin calculation method, the taking into account of social and environmental standards in certain investigations and the establishment of a 'help desk' to assist small and medium-sized enterprises in understanding and making use of trade defence instruments.
These are but a sample of the dozens of trade developments and issues analysed in this fourth edition by our esteemed contributing authors from key jurisdictions around the world – including that of the WTO. We are in this context deeply grateful for the continued participation and support from the following authors: Philippe De Baere at Van Bael & Bellis for the WTO chapter, Alfredo A Bisero Paratz at Wiener-Soto-Caparrós for the Argentina chapter, Ignacio García and Andrés Sotomayor at Porzio Ríos Garcia for the Chile chapter, Yuko Nihonmatsu and Fumiko Oikawa at Atsumi & Sakai for the Japan chapter, Lim Koon Huan and Manshan Singh at Skrine for the Malaysia chapter, Fernando Benjamin Bueno and Milena da Fonseca Azevedo at Demarest Advogados for the Brazil chapter, David Tang, Yong Zhou and Jin Wang at JunHe LLP for the China chapter, Dongwon Jung and Sungbum Lee at Yoon & Yang LLC for the Korea chapter, Anzhela Makhinova at Sayenko Kharenko for the Ukraine chapter, Alexander H Schaefer at Crowell & Moring LLP for the US chapter, Nicolaj Kuplewatzky at the Legal Service of the EU Commission and Kiliane Huyghebaert at VVGB Advocaten for the European Union chapter.
We are moreover delighted and honoured to welcome on board the following new and acclaimed contributors: Sergey Lakhno at Integrites for the Eurasian Economic Union chapter, M Fevzi Toksoy, Ertuğrul Canbolat and Hasan Güden at ACTECON for the Turkey chapter, Saurabh Tiwari, Ashish Chandra and Stuti Toshi at L&L Partners for the India chapter and Prudence Smith, Eva Monard, Byron Maniatis, Matthew Whitaker, Patrick Mason Begg Clark, Bowen Fox, Jacqueline C Smith, Lachlan Green, Timothy King Atkins Jr and William Maher at Jones Day for the Australia chapter.
We are, as always, indebted to each of these outstanding practitioners, who have generously taken time from their demanding schedules to share and pass on their insights gleaned from years of practice in the field of international trade. With the pace of developments over the past year, the analyses of these contributors – taking a step back from the stream of daily events – is particularly timely and valuable.
Last but not least we wish to thank our guest editor, Drew Sundberg, for his invaluable assistance in getting this year's manuscript ready for publication. Our former colleague and skilful sailor was kind enough to spend a number of months in Brussels when the perfect trade storm was raging over the old continent. We are therefore immensely grateful for his full dedication and intellectual acumen.