© Springer International Publishing Switzerland 2015Christoph Herrmann, Bruno Simma and Rudolf Streinz (eds.)Trade Policy between Law, Diplomacy and ScholarshipEuropean Yearbook of International Economic Law10.1007/978-3-319-15690-3_22
Decision-Making in EU Trade Defence Cases After Lisbon: An Institutional Anomaly Addressed?
European Commission, Legal Service, Office Berl 02/121, Rue de la Loi 200, 1049 Bruxelles, Belgium
The views in this paper reflect the author’s view only and not necessarily those of the European Commission.
The Lisbon Treaty has led to the first major change in trade defence decision making since the adoption of the last consolidated1 anti-dumping and anti-subsidy regulations in 1994, and arguably even since the inception of the trade defence regulations in 1968.2 So far, whilst the Commission was in charge of the administrative investigation procedure from the beginning to the end, the Council adopted the Regulations imposing duties, amending or prolonging duties further to a review (or anti-circumvention) investigation on the basis of a Commission proposal.3 In practice, the Commission was, having conducted the investigation, privy to all the facts justifying proposed measure. The Council on the other hand (only) had at its disposal the duly motivated, but necessarily summarised.4 Commission proposal and any additional explanations given to the Anti-Dumping Committee on which to base its decision to adopt (or not) the Commission proposal.
However, since 20 February 2014, the date of coming into effect of Regulation (EU) No 37/2014 (the “Amending Regulation”),5 definitive trade defence measures are adopted by the Commission, subject only to some transitional arrangements.6 It is therefore timely to consider not only the changes brought about by the Amending Regulation, but also to reflect on the nature of decision making in trade defence more generally. This paper will argue that the changes by the Amending Regulation in fact also address what could be argued to be, or rather to have been, an anomaly in Union decision making.
Decision making for Union Trade Defence Instruments7 has so far been somewhat odd from an institutional point of view. Trade defence regulations imposing, amending or repealing measures are, as regards their nature and scope, of a general character, in that they apply to all the economic operators concerned taken as a whole. However, their provisions are none the less of individual concern to certain economic operators.8 Advocate-General Jacobs thus qualified them as being of a “hybrid” nature.9 They are imposed after an administrative investigation and following an administrative procedure by the Commission as foreseen by the Basic Anti-Dumping and Anti-Subsidy Regulations.10 In that respect, they are more akin to antitrust or state aid decisions11 than to the legislative acts more commonly adopted by Council regulations.12 Yet, the Commission’s role is, as held by the Court of Justice, situated in “the context of the Council’s decision-making process”13 and “forms an integral part”14 of it. In fact, as the General Court commented recently, an anti-dumping regulation is not a legislative act since it is not adopted in accordance with either the ordinary legislative procedure or the special legislative procedure within the meaning of paragraphs 1 to 3 of Article 289 TFEU.15 Yet, trade defence measures—at least measures imposing duties—entail implementing measures in so far as the duties they impose require collection on the basis of measures adopted by national customs authorities,16 and in this sense differ from, for instance, Commission competition decisions.17
The set-up of trade defence decision making was also odd for a number of more general reasons:
Trade defence is part of the common commercial policy18: yet the Treaties and case law, have—for nearly 40 years19—considered that external trade is a Union competence; the setting into practice of this policy rests largely with the Commission,20 even if aspects of the commercial policy, such as international agreements, need to be implemented and thus require Member State involvement.21
Trade defence is about fair trading practices. In the internal market, there is no doubt about the Commission’s exclusive role in enforcing these. Fair trading practices in the Internal Market, in particular the four freedoms of goods, services, persons and capital, as well as competition and state aid rules, are all provided for directly by the European Treaties. These are backed up by thousands of pieces of sector-specific internal market legislation.22 The enforcement of both the Treaties and secondary legislation based on them is the exclusive realm of the Commission as guardian of the Treaties.23
Enforcement of trade defence measures is intricately linked to customs law; yet the Customs Union, and with it customs law, is one of the oldest components of European integration,24 and the Commission’s administrative competence in it very wide.
The division of competences as to trade defence decision making, with a final decision at ministerial level after an administrative investigation by the Commission, contrasts with the situation in a number of third countries such as the US, where Department of Commerce decisions on trade defence are taken at administrative level.25
Hence, Why Was the Trade Defence Decision-Making Process Set Up as It Was Until 20th February 2014?
There has been little attention given to this issue in literature,26 presumably because trade defence law has been analysed more closely from the practical aspect of its actual working, which is of eminent practical relevance,27 rather than from the point of view of institutional theory. Furthermore, imposing trade defence measures by way of regulations can be explained partly by the fact that duties are collected by Member States’ customs authorities which leads to the necessity to have recourse to regulations of a general nature. So this set up may have seemed logical.28 But in fact it was arguably more the result of the Member States’ wish to maintain control over an activity which is considered politically sensitive, and it was not really logical from a systemic point of view.29
Has the Mechanism of Trade Defence Decision-Making Been Problematic?
The least that can be argued is that the Member States’ involvement has been both a blessing and a curse.
Generally, the criterion of Union interest, which gives a large degree of discretion for assessing whether or not imposing a measure is in the overall Union interest, is arguably best determined in taking into account Member States’ views30 and not only the Commission’s case for Union interest based on facts as established during the investigation. Member States’ views can round off this assessment by a more general political assessment. As a result, the measures taken may be seen to be the result of a more carefully calibrated political assessment. This however does not necessarily require the adoption of measures to be made by Council act.
Furthermore, in at least a few instances, measures, which should have been adopted on the basis of the fact-based investigation by the Commission, were not because of Member States’ disagreements. The facts underlying the Eurocoton case illustrate this point: in that case, the Commission submitted a proposal for a Council Regulation imposing a definitive anti-dumping duty on the imports of unbleached cotton fabrics from a number of countries. Yet, the Council found that there was not the simple majority necessary for the adoption of the regulation proposed.31 At the lapse of the maximum 15-months deadline allowed for the Institutions to conclude an investigation, the lack of a majority in the Council resulted in no decision being taken and the procedure being closed without measures. The reason behind the lack of a Council majority, and also for the lack of an outright rejection, was due to disagreement among Member States.32 The Court of Justice considered this not only as a reviewable act, but—logically—construed the Council’s lack of action as equivalent to an implicit negative decision lacking motivation.33 It is difficult to envisage how the Council should have been in a position to motivate its decision, except by changing the Union interest assessment, this inevitably leading to questions as to the factual soundness of the resulting decision34: the Commission will have based its decision on the totality of the facts during the investigation, and the draft proposal for a regulation will have benefitted from an extensive inter-service consultation within the Commission.35 The Council on the other hand, would have been under enormous time pressure to conduct a reassessment of the facts at the very end of the 15-months deadline and, due to the lack of agreement between Member States, necessarily coming to a differently assessment based on the very facts previously assessed otherwise by the Commission.36
Similarly, in the case of Hot Rolled Coils 37 the Commission proposed imposing definitive anti-dumping measures on imports of hot rolled coils originating in Egypt, Slovakia and Turkey. However, the Council did not adopt the proposal within the time limits laid down in the Basic Anti-Dumping Regulation. As a result, definitive measures were not imposed on imports from Egypt, Slovakia and Turkey. On the basis of the principle of non-discrimination, the Commission considered it had, as a result, to refrain from imposing measures on Bulgaria and South Africa.38
An arguably even more striking example is the saga of the measures against Chinese and Vietnamese shoes. In 2005 the Commission started an investigation into shoe imports from China and Vietnam, which led to the Commission adopting provisional duties.39 So far so classic. Then however, the Member States essentially split in those supporting duties to protect their national shoe industry and those opposing duties in order to prevent the import price of shoes to rise and thus harming their retail interests. In order to reconcile the Member States, the Commission displayed creativity in proposing a novel approach to imposing duties by way of compromise: The Commission proposed duties being in place for two as opposed to 5 years, a novel delayed duty mechanism, lower duties than originally proposed and the exclusion of a category of shoes.40
Finally, the investigation into solar panels from China is a recent example of where Member States’ divergent political interests had a heavy influence on the investigation, this leading to the then Trade Commissioner being reported in the press as warning Member States not to be unduly vocal before the Commission could even end its investigation, and calling for the Commission’s role in trade defence to be strengthened.41
The rationale for attributing state aid control to the Commission, is also valid to an extent for trade defence: for state aid, exclusive competence was given in the Treaty of Rome to the Commission due to the necessity to have an independent referee. In order for state aid to be evaluated from an EU point of view, and to maintain a level playing field between the Member States, this task can only be performed by the Commission.42 Also, the interest of Member States in retaining control over an area perceived to be politically sensitive is, whilst understandable from a political point of view, also detrimental to the credibility of trade defence measures adopted: precisely because of that reason, trade defence measures can easily be tainted by the perception of political as opposed to factual motivations, or even simply as protectionist measures.43 The recent solar panel investigation mentioned above was an example of this, and the press reported, among others, Germany as being opposed to the measures, fearing retaliation as China’s largest trading partner in the Union.44
The decision making procedure has been amended in 2004 as a result of the Eurocoton judgement as well as the Hot Rolled Coils investigation. Before the amendment, the Basic Regulations provided for a procedure under which the Council imposed definitive measures by simple majority. However “in the light of recent experience of the application of the Basic Regulations and in order to preserve the transparency and efficiency of the trade defence instruments”,45 it was considered necessary to revisit the way Community institutions work together. Before the amendment, a Commission proposal was only adopted if a simple majority of Member States voted in favour of the proposal. This had the effect that abstentions counted effectively against the Commission proposal. In turn, this could result in a situation where a Commission proposal would not be adopted by the Council due to the number of abstentions. In order to address this problem, the Basic Regulations were amended by requiring a simple majority of Member States in the Council to reject a Commission proposal for imposing definitive measures, and measures were then adopted by the Council unless it decided by a simple majority to reject the proposal within a period of 1 month after submission of the proposal by the Commission.46
This amendment already represented a shift in the balance of decision making. But the real shift had to wait until the Lisbon Treaty.47
The Lisbon Treaty brought about a more general change in decision making in areas in which the decision making takes place by so-called “comitology”. This term refers to procedures under which the Commission executes its implementing powers delegated to it by the legislator with the assistance of so called “comitology committees” made up of representatives of the Member States.48 Comitology was based on Art. 202 EC, third indent, and the idea that the Council could make the exercise of the powers which it confers on the Commission subject to certain procedures.49 The Treaty on the Functioning of the European Union (TFEU) separated formally for the first time all acts that could be adopted by comitology measures into delegated (Art. 290) and implementing (Art. 291) acts.50 The comitology procedure in place until the Lisbon Treaty no longer fitted this new distinction51 and thus had to be reformed.52 As set out in the Amending Regulation, after recalling in Recital 1 that trade defence measures were not subject to the “old” comitology, it was considered
appropriate to amend those basic regulations in order to ensure consistency with the provisions introduced by the Treaty of Lisbon. This should be done, where appropriate, through the granting of delegated powers to the Commission and by applying certain procedures set out in Regulation (EU) No 182/2011 of the European Parliament and of the Council [i.e. the “New Comitology”].53
The Amending Regulation accordingly foresees that the implementation of the basic Anti-Dumping Regulation requires uniform conditions for the adoption of provisional and definitive duties, and for the termination of an investigation without measures, which should be adopted by the Commission in accordance with Regulation (EU) No 182/2011.54