Tensions between Brussels and Beijing on the solar trade subject have been running particularly high ever since reports emerged earlier this month of the European Commission’s plans to impose duties on solar panel imports from China. (See Bridges Weekly, 8 May 2013) The provisional duties are set to average 47 percent, with a range of 37 to 68 percent.

The duties are expected to be approved by early June. The Commission must then determine whether to alter - or revoke - the final duties by December.

These particular duties are aimed at targeting the practice of dumping, which involves companies selling their products abroad at prices below normal market values, causing harm to the domestic industry of the importing country. They are the result of an investigation that the Commission launched last September in response to a complaint by the EU Pro Sun coalition, a group of 25 European solar panel manufacturers headed by the German-based SolarWorld. (See Bridges Weekly, 12 September 2012)

The same coalition of companies that lodged the anti-dumping complaint has also asked the Commission to determine whether China’s producers had received unfair subsidies; the results of that investigation are expected by August. (See Bridges Weekly, 14 November 2012)

The 27-country EU bloc is China’s main export market for solar panels, making up nearly 80 percent of all Chinese export sales, according to European Commission data. In 2011, for instance, the Asian country exported €21 billion worth of solar panels and their main components to the EU.

The US, for its part, already has both anti-dumping and anti-subsidy - also known as countervailing - duties in place on imports of Chinese solar cells, following a separate investigation conducted by the US Department of Commerce last year. (See Bridges Weekly, 10 October 2012)

As Beijing rhetoric ramps up, Berlin warns against duties

Since the news broke of the Commission’s decision, Chinese officials have stressed that the imposition of these duties could have major ramifications for Brussels-Beijing trade ties. Commerce Ministry spokesman Shen Danyang warned last week, for instance, that such a move would “seriously damage” the bilateral relationship.

“The abuse of trade remedy measures in a reckless and arbitrary manner will… do nothing to solve trade frictions and will also impede the progress of economic recovery and severely dampen confidence,” Shen said, in comments reported by Agence France Presse.

The implications of a trade fall-out with Beijing has also caused strains within the EU bloc, with Germany putting pressure on the European Commission to refrain from imposing the measures. The provisional duties, Economy Minister Philipp Rösler said on Sunday, are a “grave mistake.”

“I expect the Commission to do everything to prevent a trade conflict,” Rösler said, in comments reported by Reuters. Referring to China’s warning that the duties would affect bilateral ties, he urged the Commission “to seek a resolution with negotiations and dialogues instead of threats.”

Possible settlement?

Officials close to De Gucht have repeatedly said that, despite the anti-dumping investigation’s provisional findings, he would be open to a negotiated solution.

Rumours of a possible settlement have since emerged, after both the New York Times and Bloomberg reported on Tuesday that Beijing is involved in preliminary discussions with both Washington and Brussels on a solution that would effectively raise the price of solar panels being imported from China through export quotas and minimum prices on equipment.

However, US Trade Representative spokeswoman Carol Guthrie told Reuters on Tuesday that Washington is not yet actively negotiating a joint settlement. EU Trade Commissioner Karel De Gucht, in separate remarks reported by the news agency, has also said that Washington and Brussels have not “teamed up.”

Whether or not the two sides are indeed engaged in any individual discussions with China, however, was unclear at the time of this writing.

EU solar industry remains split

The solar row has also deepened divides within the EU domestic solar industry. While producers of solar panels and cells have long lobbied for the duties in order to level an allegedly unfair playing field, importers of these products that use them further down the production chain have argued that the measures could actually have damaging effects for renewable energy production as a whole.

“If the European Commission acts now against illegal dumping by Chinese solar manufacturers, this industry can survive and prosper,” said Milan Nitzschke, President of EU ProSun, in a statement earlier this month.

“If the EU does not act, EU ProSun predicts a Chinese solar monopoly with disastrous consequences for European manufacturers, suppliers, and customers.”

However, the Alliance for Affordable Solar Energy - a separate coalition of 450 European companies, including raw materials suppliers, installers, and project developers - has argued that the duties could end up hurting the EU job market and negatively impacting demand for photovoltaic products.

“If prices are artificially increased by punitive tariffs, the European solar market would simply come to a standstill with disastrous effects on green jobs,” said Wouter Vermeersch, CEO of the Belgian company Cleantec Trade.

ICTSD reporting; “U.S. and Europe Prepare to Settle Chinese Solar Panel Cases,” NEW YORK TIMES, 20 May 2013; “German minister calls EU move on China solar ‘grave mistake’,” REUTERS, 19 May 2013; “No ‘active’ U.S.-EU-China solar talks under way: USTR,” REUTERS, 21 May 2013; “China warns EU to drop telecom probe, solar panel tax,” AGENCE FRANCE PRESSE, 16 May 2013; “EU not coordinating with Washington on China solar dispute,” REUTERS, 21 May 2013.

Tensions between Brussels and Beijing on the solar trade subject have been running particularly high ever since reports emerged earlier this month of the European Commission’s plans to impose duties on solar panel imports from China. (See Bridges Weekly, 8 May 2013) The provisional duties are set to average 47 percent, with a range of 37 to 68 percent.

The duties are expected to be approved by early June. The Commission must then determine whether to alter - or revoke - the final duties by December.

These particular duties are aimed at targeting the practice of dumping, which involves companies selling their products abroad at prices below normal market values, causing harm to the domestic industry of the importing country. They are the result of an investigation that the Commission launched last September in response to a complaint by the EU Pro Sun coalition, a group of 25 European solar panel manufacturers headed by the German-based SolarWorld. (See Bridges Weekly, 12 September 2012)

The same coalition of companies that lodged the anti-dumping complaint has also asked the Commission to determine whether China’s producers had received unfair subsidies; the results of that investigation are expected by August. (See Bridges Weekly, 14 November 2012)

The 27-country EU bloc is China’s main export market for solar panels, making up nearly 80 percent of all Chinese export sales, according to European Commission data. In 2011, for instance, the Asian country exported €21 billion worth of solar panels and their main components to the EU.

The US, for its part, already has both anti-dumping and anti-subsidy - also known as countervailing - duties in place on imports of Chinese solar cells, following a separate investigation conducted by the US Department of Commerce last year. (See Bridges Weekly, 10 October 2012)

As Beijing rhetoric ramps up, Berlin warns against duties

Since the news broke of the Commission’s decision, Chinese officials have stressed that the imposition of these duties could have major ramifications for Brussels-Beijing trade ties. Commerce Ministry spokesman Shen Danyang warned last week, for instance, that such a move would “seriously damage” the bilateral relationship.

“The abuse of trade remedy measures in a reckless and arbitrary manner will… do nothing to solve trade frictions and will also impede the progress of economic recovery and severely dampen confidence,” Shen said, in comments reported by Agence France Presse.

The implications of a trade fall-out with Beijing has also caused strains within the EU bloc, with Germany putting pressure on the European Commission to refrain from imposing the measures. The provisional duties, Economy Minister Philipp Rösler said on Sunday, are a “grave mistake.”

“I expect the Commission to do everything to prevent a trade conflict,” Rösler said, in comments reported by Reuters. Referring to China’s warning that the duties would affect bilateral ties, he urged the Commission “to seek a resolution with negotiations and dialogues instead of threats.”

Possible settlement?

Officials close to De Gucht have repeatedly said that, despite the anti-dumping investigation’s provisional findings, he would be open to a negotiated solution.

Rumours of a possible settlement have since emerged, after both the New York Times and Bloomberg reported on Tuesday that Beijing is involved in preliminary discussions with both Washington and Brussels on a solution that would effectively raise the price of solar panels being imported from China through export quotas and minimum prices on equipment.

However, US Trade Representative spokeswoman Carol Guthrie told Reuters on Tuesday that Washington is not yet actively negotiating a joint settlement. EU Trade Commissioner Karel De Gucht, in separate remarks reported by the news agency, has also said that Washington and Brussels have not “teamed up.”

Whether or not the two sides are indeed engaged in any individual discussions with China, however, was unclear at the time of this writing.

EU solar industry remains split

The solar row has also deepened divides within the EU domestic solar industry. While producers of solar panels and cells have long lobbied for the duties in order to level an allegedly unfair playing field, importers of these products that use them further down the production chain have argued that the measures could actually have damaging effects for renewable energy production as a whole.

“If the European Commission acts now against illegal dumping by Chinese solar manufacturers, this industry can survive and prosper,” said Milan Nitzschke, President of EU ProSun, in a statement earlier this month.

“If the EU does not act, EU ProSun predicts a Chinese solar monopoly with disastrous consequences for European manufacturers, suppliers, and customers.”

However, the Alliance for Affordable Solar Energy - a separate coalition of 450 European companies, including raw materials suppliers, installers, and project developers - has argued that the duties could end up hurting the EU job market and negatively impacting demand for photovoltaic products.

“If prices are artificially increased by punitive tariffs, the European solar market would simply come to a standstill with disastrous effects on green jobs,” said Wouter Vermeersch, CEO of the Belgian company Cleantec Trade.

ICTSD reporting; “U.S. and Europe Prepare to Settle Chinese Solar Panel Cases,” NEW YORK TIMES, 20 May 2013; “German minister calls EU move on China solar ‘grave mistake’,” REUTERS, 19 May 2013; “No ‘active’ U.S.-EU-China solar talks under way: USTR,” REUTERS, 21 May 2013; “China warns EU to drop telecom probe, solar panel tax,” AGENCE FRANCE PRESSE, 16 May 2013; “EU not coordinating with Washington on China solar dispute,” REUTERS, 21 May 2013.

The Commission has said that it has been gathering evidence for the past year in advance of a possible probe. However, it will hold off on launching the anti-dumping and anti-subsidy investigation for the time being, EU Trade Commissioner Karel De Gucht explained in a statement last week, in order to “allow for negotiations towards an amicable solution with the Chinese authorities.”

In an interview with Reuters on Friday, the EU trade chief specifically cited telecoms equipment makers Huawei and ZTE Corp - two of the world’s largest producers in this field - as being among those that are allegedly dumping their products on the EU market. Europe accounts for 15 percent of the former’s overseas business, according to Chinese statistics.

The probe, if launched, would deal with the hardware used in telecommunications networks across Europe, such as base stations, for instance. It would not deal with mobile phones, antennas, or other smaller products. Chinese exports of these telecommunications products to the EU are valued at just over €1 billion a year, according to European Commission estimates.

EU, China trade tensions on the rise

The news has ramped up tensions between the two trading partners, who are already in the midst of a heated row over the Commission’s plan to impose anti-dumping duties on solar panel imports from China. (For more on the solar case, see related story, this issue) However, EU officials have been quick to quell any suggestions that Brussels and Beijing might be involved in a “trade war,” noting that the solar and telecoms probes are separate processes.

Chinese officials, for their part, have cautioned that the proposed telecoms investigation could have serious effects on bilateral trade ties if the Commission indeed decides to move forward.

The Asian economic powerhouse “does not want to go into a trade war with the European Union,” Commerce Ministry spokesman Shen Danyang told reporters last week, in comments reported by Agence France Presse. However, “any consequences caused must be borne by the party who provoked the friction.”

No timeline for investigation launch, but clock is “ticking”

EU officials have not outlined what would be the deadline for launching an investigation, or if such a deadline is in place. De Gucht has said that he will revert back to the College of Commissioners “in due course,” without specifying further details.

“The clock is ticking,” EU Trade Spokesman John Clancy told reporters last week in response to questions regarding timeline. “We have had an open-door policy for negotiations with our Chinese partners for approximately one year, and we look forward, at this stage, that the Chinese authorities step forward and engage with us in terms of these specific negotiations in a serious manner, because this is currently a very serious situation that we are looking at.”

“We are looking for an amicable solution” from the negotiations, Clancy said, without providing specific details of what such a solution might look like.

Ex-officio case

The investigation, if launched, would be under the European Commission’s own initiative - a rare move, but one that allows for such a probe to occur without requiring an industry complaint to be filed first. This is only done in “exceptional cases,” according to the Commission.

“The reason we have that [ex-officio] system available to us within the WTO framework is to provide [a] shield” for EU producers that could be at risk of retaliation for filing their own complaint, Clancy explained.

The Commission proposed changes to its trade defence rulebook last month that would, among other modifications, allow for ex-officio investigations in cases of likely retaliation that could target economic interests that the EU has in the exporting country.  (See Bridges Weekly, 18 April 2013) In its communication to the European Council and Parliament, the Commission cautioned that these threats “are indeed increasing.”

The standards for the evidence required to launch an ex-officio case under these guidelines “has to be of the same standard as that for the initiation of an investigation following an application by the EU industry,” the Commission said in its draft legislative proposal, among other guidelines. The legislative proposal must be approved by the Council and Parliament.

ICTSD reporting; “Exclusive: EU cites Chinese telecoms Huawei and ZTE for trade violations,” REUTERS, 18 May 2013; “EU escalating telecom dispute to harm trade ties,” XINHUA, 21 May 2013.

With the WTO-established deadline for the US to bring its country-of-origin labelling (COOL) requirements for beef and pork into compliance set for today, Canada and Mexico have both made public comments questioning whether Washington’s planned reforms will be enough to resolve the dispute.

A WTO dispute panel had ruled that COOL - a US government regulation enacted in 2008 - was in violation of Washington’s international obligations at the global trade body in November 2011. The Appellate Body broadly confirmed the ruling last June. (See Bridges Weekly, 4 July 2012). In advance of today’s compliance deadline, Canada has said that it has already prepared a list of US products that it would aim to target in retaliation for US non-compliance, should the WTO authorise countermeasures.

Although US regulators argue that their planned changes - which would require meat to be labelled with information about where an animal was born, fed, and slaughtered - would be in compliance with WTO rules, Canadian Agriculture Minister Gerry Ritz has responded that the proposal “actually makes things worse.” Similar concerns have also been tabled by his Mexican counterpart, Enrique Martínez. The US is expected to release its final proposal today.

ICTSD reporting; “U.S. to introduce stricter rules on meat imports, labels,” CHICAGO TRIBUNE, 21 May 2013; “Canada prepares to target U.S. goods in meat-label spat,” REUTERS, 17 May 2013; “UPDATE 1-U.S. not respecting WTO ruling on meat labelling -Mexico,” REUTERS, 21 May 2013.

EU-India Trade Talks Stumble

Talks between India and the EU last week failed to make significant progress on their long-awaited trade deal, despite the goal of concluding the negotiations in the near future. The Brussels meetings reportedly ended with “substantial gaps,” despite hopes that last month’s ministerial-level discussions could have set the stage for an imminent breakthrough. (See Bridges Weekly, 18 April 2013)

Intellectual property, insurance, and data security remain key sticking points between the two parties, official negotiators cited by Indian newspaper Business Standard have said. Bilateral trade between the two sides hit €79.9 billion in 2011, according to EU statistics, up from €28.6 billion in 2003. Negotiations for a bilateral pact have been ongoing since 2007; if completed, the deal would cover a market of 1.7 billion people.

ICTSD reporting; “India-EU trade talks fail to bridge gaps; ministerial meet unlikely,” BUSINESS STANDARD, 18 May 2013; “EU Trade Talks on ‘Last Lap’: India Commerce Minister,” CNBC, 15 May 2013.

EU Considering Duties on Imports of Biodiesel from Indonesia, Argentina

The European Commission is considering possible anti-dumping duties on imports of biodiesel from Indonesia and Argentina, according to unnamed sources cited by Reuters. The provisional duties could be confirmed as early as next week, pending the final investigation results.

The investigation was launched by the Commission last year, in response to a request by the European Biodiesel Board (EBB), which represents manufacturers accounting for over a quarter of EU biodiesel production. (See Bridges Weekly, 12 September 2012) The EBB has claimed that the two countries, which together make up 90 percent of biodiesel imports into the EU, maintain differential export taxes - in other words, higher export taxes for the raw materials used to produce biodiesel than on biodiesel itself. The group argues that the practice discourages raw material exports in favour of biodiesel exports.

The news comes shortly after Argentina - in a separate development - filed its own complaint at the WTO against the EU and some of its member states over allegedly unfair trade practices involving the importation and marketing of biodiesel, as well as the subsidisation of the 27-country bloc’s domestic market. (See Bridges Weekly, 16 May 2013)

ICTSD reporting; “EU to impose duties on Argentine, Indonesian biofuel,” REUTERS, 19 May 2013.

Sino-Indian Trade Balance in Focus During Chinese Premier’s Visit

How to address the trade balance between China and India was one of the priorities on the agenda during Chinese premier Li Keqiang’s visit to India this week. Li, in his first official foreign trip since assuming office, and Indian Prime Minister Manmohan Singh reportedly made small breakthroughs on trade, but no major agreements were signed.

Despite bilateral trade between the world’s two most populous countries reaching US$66 billion last year, the neighbours have both said that there is potential for more. The two leaders sought to address the sensitive subject of India’s US$29 billion deficit with China in their joint statement issued after the meeting, focusing particularly on pharmaceuticals, IT services, and agriculture.

On his penultimate day in India, Li stressed that he is “confident we have the ability to mitigate the trade imbalance between our two countries,” adding that such a trade surplus was never Beijing’s intention.

ICTSD reporting; “India and China: Building trade and trust,” ALJAZEERA, 20 May 2013; “China offers India a ‘handshake across the Himalayas’,” REUTERS, 20 May 2013; “Beijing Vows to Ease Imbalance with India,” WALL STREET JOURNAL, 22 May 2013.

Beijing has publicly spoken out against the European Commission’s high-profile decision to apply provisional anti-dumping duties on imports of Chinese solar panels. (See Bridges Weekly, 8 May 2013).

“We hope the EU will be cautious about imposing restriction,” Chinese Ministry of Commerce spokesman Yao Jian said following news of last week’s Commission decision, adding that the Asian economy wishes to avoid a “trade war.” However, while advocating for negotiations between the two trading partners to resolve the disagreement, Yao also said that Beijing “will not let Chinese companies be hurt.”

EU member state Germany also prefers an “amicable solution” to the solar row, government spokesman Steffen Seibert said on Monday. China is the EU’s second-largest trading partner, and is seen by many as essential for helping the 27-country bloc to pull out of its recession. The Commission is said to be aiming for a negotiated solution before the December deadline for finalising the duties.

ICTSD reporting; “Germany disputes hard EU stance on China solar panel duties,” REUTERS, 13 May 2013; “China to resist EU over solar panel import tariffs,” MARKETWATCH, 9 May 2013.

Oilsands Row Sparks Renewed EU-Canada Tension

A European Commission proposal to label oil from Canadian oilsands as “highly polluting” has again fuelled tension between Brussels and Ottawa, with Canadian Natural Resources Minister Joe Oliver pledging last week that his country “will defend our interests vigorously” - including possibly tabling a WTO complaint on the matter. The comments come as both parties work to finalise talks for a bilateral trade deal.

Ottawa has previously accused the EU proposal of being in violation of international trade rules and discriminating against Canadian exports. In response, EU Ambassador to Canada Matthias Brinkmann has said that the EU’s policies on the subject will be “non-discriminatory and science based and will stand the test at the WTO.”

However, Oliver expressed confidence that the dispute would not derail the trade pact negotiations between Ottawa and Brussels, saying “these issues are entirely separate.”

ICTSD reporting; “Canada says it may take EU to WTO over oil sands dispute,” REUTERS 8 May 2013; “Joe Oliver not backing down in Canada-EU battle over oilsands,” CBCNEWS, 11 May 2013.

China, Switzerland Finalise Terms for Bilateral Trade Deal

China and Switzerland have finalised the technical terms for a bilateral trade pact, officials said this weekend, after over three years of negotiations. According to a Swiss economic ministry spokesperson cited by the Wall Street Journal, Bern and Beijing officials are expected to sign the agreement - details of which will be published during the summer - in the coming weeks.

According to Swiss media outlets, officials in Bern are waiting for Chinese Premier Li Keqiang’s visit to Switzerland on 24 May to make the news public. No implementation date has been set for the accord, which reportedly covers pharmaceuticals, chemicals, machinery, and watches, among other products.

This is the second trade deal between China and a European country, following last month’s clinching of a pact between the Asian superpower and Iceland (See Bridges Weekly, 18 April 2013). While Iceland’s exports to China last year were US$61 million, Swiss exports in 2011 were US$14.7 billion.

ICTSD reporting; “Watchmakers Eye Timely Boost in Trade Deal,” WALL STREET JOURNAL, 14 May 2013; “L’accord de libre-échange avec Pékin favorable à l’économie Suisse,” RTS, 15 May 2013; “Accord trouvé entre la Suisse et la Chine,” L’AGEFI, 15 May 2013.

EU: Bangladesh Factory Collapse Could Affect Trade Scheme Eligibility

Last month’s factory collapse in Bangladesh - which led to over 1000 deaths - could soon lead to trade implications for the developing country, as questions continue to be raised over the quality of worker conditions. The factory at issue produced garments for major European and American companies, including Swedish retail giant H&M, US retailer Gap Inc., Spanish retailer Mango, and British company Primark, among others.

According to a statement released earlier this month by EU High Representative for Foreign Affairs and Security Policy Catherine Ashton and Trade Commissioner Karel de Gucht, the EU is considering “appropriate action” as a response, including potentially re-evaluating Bangladesh’s eligibility for the EU Generalised System of Preferences (GSP). Such action would be aimed at incentivising “responsible management of supply chains involving developing countries.” Under the GSP’s “Everything But Arms” scheme, Bangladesh currently enjoys duty-free and quota-free access to the EU market.

The US had also been reconsidering its GSP programme with Bangladesh since January due to concerns of worker rights issues, even before the factory collapse made international headlines. The US Trade Representative (USTR) is scheduled to decide next month whether to modify Bangladesh’s status. How much the factory collapse will impact the decision has not been made clear.

Meanwhile, Bangladesh’s government has already responded to such international pressures for industry reform, raising the minimum wage for garment workers and allowing trade union formation without prior permission from factory owners. Several major European retailers that used the Bangladeshi factory have also signed an agreement on Bangladesh building and fire safety. However, the accord has reportedly struggled to find similar support among American companies.

ICTSD reporting; “European, U.S. retailers split on Bangladesh reform plan,” REUTERS, 14 May 2013; “Bangladesh eases trade union laws after factory building collapse,” THE GUARDIAN, 13 May 2013, “Bangladesh Trade Was Under U.S. Review Prior to Factory Collapse,” BLOOMBERG BUSINESSWEEK, 3 May 2013.

The anti-dumping duties are the result of an investigation that the Commission launched last September, in response to a complaint by the European Pro Sun coalition, a group of 25 European solar panel manufacturers headed by the German-based SolarWorld. The same coalition of companies have also filed a separate complaint alleging that China’s producers had received unfair subsidies; the results of that investigation are expected by August. (See Bridges Weekly, November 2012)

The practice of dumping involves companies selling their products abroad at prices below normal market values, causing harm to the domestic industry of the importing country.

EU Trade Commissioner Karel De Gucht met earlier today with other EU Commissioners to agree on the duties, according to Reuters. A formal statement from the EU trade chief had not been made at the time of this writing.

However, De Gucht is reportedly open to the possibility of a negotiated solution, media reports say. Chinese government officials have warned that these duties could hurt Brussels-Beijing relations, as well as having an adverse impact on trade.

In order for anti-dumping duties to be imposed, an investigation must find that there has been dumping by the exporters concerned, and that the EU industry has suffered material injury as a result. The investigation must also show that imposing these measures does not prove more costly to the EU economy when compared to the benefits that the complainants receive from these duties - a benchmark known as the “Union interest test.”

EU member states must next sign off on the provisional duties, which is expected as early as June. The Commission must then determine whether to alter - or revoke - the final duties when they conclude the full investigation in December.

Industry response

The EU is China’s main export market for solar panels, making up nearly 80 percent of all Chinese export sales, according to European Commission data. In 2011 alone, China exported €21 billion worth of solar panels and their main components to the 27-member EU bloc.

The proposed duties have sparked a mixed response within the EU solar industry. While solar panel producers, such as EU ProSun, have long called for measures to level the allegedly unfair playing field, others, such as the Alliance for Affordable Solar Energy (AFASE) - a coalition of 450 European companies- have argued that the duties could have adverse consequences for downstream solar energy producers, such as installers or importers.

“Punitive tariffs - no matter at what level - could cause irreversible damage to the entire European Photovoltaic (PV) value chain,” AFASE said in a statement. “Those levels now reported would cost the EU PV industry and the whole of the EU economy dearly.”

Long-running disagreements

Brussels and Beijing have found themselves repeatedly at odds over the last several months over renewable energy, with China also in the process of conducting its own domestic probes into alleged dumping and unfair subsidies of EU exports of solar polysilicon components to the Asian country.

These disagreements have, in one instance, even made their way to the WTO, with China lodging a complaint late last year regarding local content requirements under renewable energy feed-in tariff programmes in two of the EU’s member states. That case (DS452) is currently in the consultations phase. (See Bridges Weekly, 7 November 2012)

Meanwhile, two separate cases involving the alleged dumping and unfair subsidisation of solar glass, respectively, are also under investigation by Brussels. These were both launched at the request of EU ProSun Glass, an ad hoc group representing over 25 percent of solar glass industry production in Europe. (See Bridges Weekly, 8 March 2013) Those processes are each expected to take several months.

Commission proposal could facilitate future investigations

The European Commission has recently proposed a revision to the way it conducts trade defence investigations, which could - among other changes - make it easier for Brussels to initiate trade investigations without an official request from industry. (See Bridges Weekly, 18 April 2013) Trade analysts have suggested that this could make it easier to undertake more cases involving Beijing, as it could protect European industry from potential retaliation.

The legislative proposal still requires the approval of the European Council and the European Parliament to come into effect. If successful, the Commission has said that the changes would likely not become law until 2014.

ICTSD reporting; “UPDATE 2-EU agrees China solar panel duties in boldest move yet,” 6 May 2013; “EU plans to impose anti-dumping duties on Chinese solar panels,” DEUTSCHE WELLE, 6 May 2013.

Cuba lodges WTO challenge on Australia plain packaging rule

Cuba has filed a formal WTO challenge against Australia’s controversial plain packaging law for tobacco products, officials announced on Monday. The case (DS458) marks Havana’s first dispute at the global trade arbiter, as either a complainant or respondent.

At issue is a measure that requires all tobacco products to be sold in standardised, single-colour, logo-free packaging, with a significant portion of the package being devoted to health warning labels. The legislation, known as the Plain Packaging Act, was approved in late 2011 and took effect in December 2012.

Havana argues that the Australian law appears to be inconsistent with Canberra’s obligations under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), as well as the General Agreement on Tariffs and Trade (GATT) and the Technical Barriers to Trade (TBT) Agreement.

The request for consultations is the first step in the WTO dispute settlement process. Should the parties to the dispute be unable to reach a resolution after 60 days of talks, then Cuba will have the right to ask that a WTO panel be established to hear the complaint.

Australia’s plain packaging legislation has come under fire from other WTO members as well, with the Dominican Republic, Honduras, and Ukraine already having lodged separate complaints over the measure.

The three members have similarly argued that the law is inconsistent with the WTO’s intellectual property rules and could have large negative impacts on local industries. (DS441, DS435, and DS434, respectively). However, Australian officials have countered that the legislation is designed to meet the “legitimate objective” of protecting public health.

While the Ukraine challenge has led to the establishment of a panel, it will likely not be composed until the other complaints also reach that stage, so that a panel can hear the cases jointly.

Compliance time set in US-China steel row

In other disputes news, an arbitrator has established that Beijing will have until the end of July to comply with the recommendations and rulings of the WTO’s Dispute Settlement Body (DSB) in its row with Washington over countervailing and anti-dumping duties on imports of US steel.

The compliance deadline has been set at 8 months and 15 days from when the DSB adopted the panel and Appellate Body reports from this dispute, back in November.

The Appellate Body had confirmed last year that the duties, which were applied to US-produced grain oriented flat-rolled electrical steel (GOES), were WTO-illegal. Specifically, the WTO judges found that China had not followed the procedures outlined in the WTO’s Antidumping Agreement, as well as its Subsidy and Countervailing Measures Agreement, though it did confirm some aspects of Beijing’s approach. (See Bridges Weekly, 24 October 2012)

This particular type of steel is used primarily for power generation, such as in transformers, rectifiers, reactors, and large electric machines, and is manufactured in the US states of Ohio and Pennsylvania. While the steel had benefitted from the 2009 American Recovery and Reinvestment Act and certain state procurement laws, the legality of this support was not the subject of the WTO dispute.

ICTSD reporting.

WTO members have spent the past several months working to extract an abridged package of deliverables from the overall Doha Round of trade talks, which were formally declared at an impasse in December 2011. The proposed “mini-package” would, if completed, include an agreement on trade facilitation, along with agriculture-related components and a few deliverables of relevance to developing and least developed countries.

However, speaking to members at the 11 April meeting of the Trade Negotiations Committee (TNC) - which is tasked with the Doha Round talks - the Director-General noted that the current preparations for the December gathering in the tropical Indonesian island are not moving quickly enough.

“Assuming my diagnosis is right, the stark reality is that the current pace of work is largely insufficient to deliver successfully in Bali,” Lamy said. “This means that without rapid acceleration and real negotiations, it is highly probable that you will not see the deliverables you desire in Bali.”

However, he cautioned against members assigning blame to one another for the slow movement in the talks, stressing that such an attitude would be counterproductive. “Those of you who are tempted to engage in a blame game at this point, do it at your own peril,” the trade chief said.

Members speaking at Thursday’s TNC broadly echoed the Director-General’s concern over the pace of the negotiations, sources familiar with the meeting told Bridges. Many reportedly stressed the need to bring in senior officials - and possibly ministers - in order to provide the political push to move the Bali process forward.

“We’re waiting for a magic show of political will,” one official said to Bridges after the meeting.

Trade facilitation

An agreement on trade facilitation, which deals with easing customs procedures and cutting time at border crossings, would be the centrepiece of any package agreed for the December ministerial. Negotiators are currently working to eliminate the remaining brackets in the current text of such an agreement, which is now on its 15th draft.

Lamy urged members last Thursday to consult with their capitals and ensure that coordination occur among all relevant ministries - not just those that deal with trade - in order to ensure the negotiations succeed. Members should also be able to collectively answer two questions: what the shared level of ambition is in “beefing up” the articles of the General Agreement on Tariffs and Trade (GATT) that deal with trade facilitation, and whether there is sufficient confidence that there will be enough capacity-building available to allow poorer members to take on new disciplines in this area.

Last month, the chair of the trade facilitation talks established a so-called “Friends of the Chair” process to complement the facilitator-led discussions that have been conducted to date, after finding that efforts to whittle down the 600-plus remaining brackets in the draft agreement were moving too slowly. (See Bridges Weekly, 20 March 2013)

This new process is already underway, with the four “Friends of the Chair” - Michael Stone of Hong Kong, Ambassador Mario Matus of Chile, Ambassador Remigi Winzap of Switzerland, and Ambassador Yonov Frederick Agah of Nigeria - reporting to an informal meeting of the trade facilitation group on Monday on their recent efforts in this area.

However, delegates speaking to Bridges noted that it is still too early to tell at this stage what might come from the “friends’” work, noting that more clarity may come from the next trade facilitation “cluster” in May.

Agriculture

Meanwhile, the process to determine which components of the WTO’s farm trade talks should make it into the final Bali package has also faced its own hurdles, Lamy noted - a sentiment that various delegates speaking to Bridges shared.

The items currently being discussed as possible agriculture deliverables include a proposal from the G-20 coalition of developing countries regarding how countries manage tariff rates quotas, or TRQs - which are used by some countries to charge higher tariffs on goods being imported after an initial quota has been filled.

Consultations on the G-20 proposal “have highlighted that members continue to see this as a useful one to explore for possible decision in Bali, even though there are sensitivities in relation to some aspects of the proposal that members have not yet settled,” the Director-General reported on Thursday.

However, Lamy noted, “significant divergences” remain around another agriculture proposal on the table that has been raised by the G-33 coalition of developing countries. The G-33 proposal would ease farm subsidy rules on food stockholding purchases - a suggestion that many developed countries have warned could create dangerous loopholes in WTO rules.

Specifically, some have said the plan would effectively permit members to include unlimited amounts of market price support in the WTO’s “green box” - which is reserved for subsidies that cause no more than minimal trade distortion - and have asked instead whether the existing disciplines would allow members to achieve their food security objectives.

“Frankly, the very essence of this proposal is confusing and concerning,” US Ambassador to the WTO Michael Punke said last week. “It is ironic that this proposal comes under a title of ‘food security’. Even if it did contribute to food security for the two or three countries that can afford the costs to support such a system - and this is debatable - it will certainly create volatility and insecurity for the vast majority of others.”

Many others speaking at Thursday’s meeting also raised questions over whether the G-33 proposal was calibrated to the rest of the negotiations, or whether it went beyond the current mandate. EU Ambassador Angelos Pangratis, for instance, suggested that some of the more far-reaching issues might be better addressed within a wider negotiation post-Bali, rather than as part of an early harvest package.

India, which has been one of the main proponents of the G-33 proposal, reportedly urged members at the TNC to be flexible and look at solutions to resolve their differences on the subject. Members need to have a discussion on the give-and-take, India said, according to sources present at the meeting, with the starting point being the “giving.”

Other proposals, Lamy noted - such as one from the G-20 regarding export competition - are soon expected to be tabled within the agriculture negotiating group.

Developing country, LDC issues

The third “pillar” of a Bali package would include provisions of relevance to developing and least developed countries (LDCs). Those discussions, which have been conducted within the context of the Committee on Trade and Development’s Special Session (CTD-SS), have primarily centred on three clusters of topics: a Monitoring Mechanism, the 28 proposals from the WTO’s 2003 Ministerial Conference in Cancún, and six Agreement-specific proposals involving special and differential treatment (S&DT).

The 28 Cancún proposals were part of a group of 88 proposals aimed at strengthening the S&DT provisions in various WTO agreements. These 28 were agreed in principle ahead of the WTO’s 2003 ministerial conference in Cancún; however, they were ultimately not harvested.

While sources say that discussions regarding six of these proposals are making progress, disagreements have arisen over whether the other 22 proposals should be agreed “as is” - in other words, using the existing language from Cancún - or modified in some respect.

“No one is sure what will happen on the 22,” one official familiar with the talks noted.

Meanwhile, the so-called Monitoring Mechanism under discussion would, if agreed, review the functioning of provisions in WTO rules for special and differential treatment in favour of developing countries. Negotiations on the proposed mechanism date back over ten years; however, disagreements remain over the mandate of such a scheme.

Specifically, sources say, members disagree on whether the mechanism should just be tasked with monitoring, or whether it should be a negotiating body of its own. Members appear to be “more or less agreed” that the mechanism will make recommendations to the appropriate WTO bodies rather than negotiate new proposals, one delegate explained - however, members disagree on what sort of recommendations the mechanism would be allowed to make. Setting constraints on these recommendations is something “some people are not happy about,” the source explained. “[They worry] that to further limit the Monitoring Mechanism can’t be a helpful approach.”

Meetings on the six Agreement-specific proposals - which deal with the Sanitary and Phytosanitary Measures (SPS) Agreement and Import Licensing Agreement - have also continued in recent weeks. However, one source noted that talks in this area have temporarily hit a snag over some new proposals that were tabled in a recent meeting of the CTD-SS.

The prospects for those issues that affect the poorest WTO members are still unclear, sources say, with members still awaiting proposals from the LDC Group on topics such as duty-free quota-free market access, rules of origin, and cotton. Ambassador Steffen Smidt of Denmark has been appointed by Lamy to serve as a facilitator for the LDC component of the Bali package.

How to operationalise the LDC services waiver agreed at the last ministerial in 2011 is another topic that remains undecided, sources say. Members are also examining a possible extension to LDCs’ waiver for implementing the WTO’s intellectual property agreement, given that the current waiver expires this July.

Failure at Bali could spell doom for Doha, some members warn

Various members - including the US, Japan, Norway, and China, among others - stressed last week that a failure to conclude a package in time for Bali could have broader implications for the overall Doha negotiations, and the credibility of the multilateral trading system as a whole.

“If Bali fails, it is hard to imagine how Doha can succeed,” Punke said on the US’ behalf. “It defies logic to believe that, if we fail to deliver on the easier issues, that the WTO is capable of delivering on the more difficult issues - issues at impasse now for more than a decade.”

“No one in this room could bear the consequences of the failure at Bali,” Chinese Ambassador Yi Xiaozhun concurred. “That failure is not only the defeat of the Doha Round, but also the loss of the multilateral trading system.”

Negotiators speaking privately to Bridges noted similar concerns, while expressing hope that a package could still materialise in time.

“We’re increasingly worried that we might not get there, even though we scaled back the ambitions of the package,” one delegate said. However, “people are aware of the perils of going through to the ministerial without a package,” the official added.

Next TNC in May

“Although the odds are not bright today, they are still good enough to warrant a major effort,” Lamy concluded on Thursday. “But to succeed, you need to urgently change course, to be more flexible in your negotiating attitude, to accelerate your substantive work, and to refrain from throwing bricks at each other.”

“These are the ingredients to avoid hitting a wall with undesirable consequences not only for Bali, but more importantly, for the credibility of the multilateral trading system,” the Director-General concluded.

Lamy will be conducting two “green rooms” during the month of May, in order to look horizontally at progress in the three Bali negotiating areas. The next TNC meeting will then be held on 31 May.

ICTSD reporting.

WTO Director-General Pascal Lamy pointed specifically to spillover effects of the ongoing eurozone crisis, while cautioning countries against resorting to protectionist policies in an attempt to shore up domestic growth. Last year saw the slowest growth in trade since 2009 - the highpoint of the global economic crisis - and the second slowest since 1981.

“The threat of protectionism may be greater now than at any time since the start of the crisis, since other policies to restore growth have been tried and found wanting,” Lamy told reporters.

The poor growth figures for the year come as WTO members prepare for their Ninth Ministerial Conference in Bali, Indonesia, this December, which is being touted as one of the best opportunities to achieve progress in the troubled Doha Round of negotiations in some time. (For more on Bali, see related article, this issue.) At last week’s Trade Negotiations Committee meeting, Lamy acknowledged the difficult timing.

“The forecast released yesterday does not paint a rosy picture for international trade in 2013,” Lamy said. “Against this uncertain backdrop, the stakes for Bali are high.”

Lamy stressed that the situation in Europe has highlighted structural weaknesses that cannot be ignored. The Director-General added that developed countries are struggling to strike a balance between short-term growth and restrictive fiscal constraints.

The 2012 figures show that while global trade only grew by 2 percent in 2012, the US and China fared better than most. With a 2.3 percent growth rate, the US almost doubled the 1.2 percent rate for developed economies as a whole. However, Patrick Low, the WTO’s chief economist, cautioned that it is not yet “turn around and take-off time” for the country. China similarly saw relatively high growth in 2012, but exports will continue to be weak as demand for goods lags in Europe.

Developing countries as a whole saw particularly high relative growth over 2012, with the African continent leading the pack. With the abatement of the unpredictability associated with the Arab Spring, growth in Africa surged from -8.5 percent in 2011 to 6 percent in 2012. The next fastest growing regions after Africa were Asia at 3.8 percent; the Commonwealth of Independent States at 3.7 percent; the Middle East at 3.3 percent; South and Central America at 2.6 percent; North America at 2.3 percent; and Europe with a contraction of -0.1 percent.

Longer-term projections forecast stronger growth - 5.2-5.3 percent - for 2014, which is closer to the long-term average.

ICTSD reporting.

Efforts to clinch a planned Brussels-Delhi trade pact saw “renewed progress” this week, following a highly-anticipated ministerial meeting between EU and Indian officials. The two sides have been conducting negotiations for a bilateral deal since 2007.

EU Trade Commissioner Karel De Gucht and Indian Minister for Commerce and Industry Anand Sharma “had a positive meeting which has provided a renewed momentum to bring the negotiations forward,” said John Clancy, spokesman for the commissioner. EU officials said before the meeting that the discussion was aimed less at resolving specific trade issues, but rather at advancing the overall pace of the negotiations before Indian officials shift their focus to domestic elections.

Trade talks between the two sides have struggled over sensitive issues between the two sides, such as automobile import tariffs, services, and information technology.

In a separate meeting this week, Indian Prime Minister Manmohan Singh and German Chancellor Angela Merkel stressed the importance of concluding a “broad-based, ambitious and balanced FTA in 2013.”

ICTSD reporting; “India, EU open new round of trade negotiations on FTA,” THE TIMES OF INDIA, 16 April 2013; “Positive start to fresh India-EU FTA talks,” THE INDIAN EXPRESS, 16 April 2013.

Canada, EU Aim to Clinch Trade Pact by Summer

Brussels and Ottawa are now aiming to conclude negotiations for a bilateral trade pact by summer’s end, Dutch Trade Minister Lilianne Ploumen said last week. Negotiations between the two sides kicked off four years ago, only to face repeated setbacks and delays.

Despite a concerted push to conclude a deal within the early months of this year, a number of issues reportedly remained unresolved between the sides, including agriculture, government procurement, and patent protections for pharmaceuticals. EU and Canadian leaders say, however, that they remain optimistic that an agreement will be soon reached. Observers have also commented that the EU’s planned negotiations for trade deals with Japan and the US, respectively, make it imperative for the pact with Ottawa to be finalised in the near future.

ICTSD reporting; “EU-Canada free-trade agreement could lay groundwork for larger accord with the US,” INDUSTRY WEEK, 14 March 2013; “Speeding Up Mr. Fast,” THE GLOBE AND MAIL, 15 April 2013.

China, Iceland Ink Trade Deal

China and Iceland have completed talks for a bilateral trade pact, officials announced on Monday. The deal is the Asian powerhouse’s first with a European country.

The agreement is expected to give the hard-hit Icelandic economy the opportunity to increase its exports to Asia. Beijing, for its part, is aiming to eventually gain an observer’s seat on the Arctic Council, an eight-nation intergovernmental body promoting economic cooperation in the Arctic region, and thus gain access to nearby shipping lanes.

China-Iceland trade remains relatively small: Iceland’s exports to China reached US$61 million in 2012, while Beijing’s exports totalled US$341 million in the same year. The Aortic nation is not an EU member, though it enjoys access to the bloc’s single market. China will not receive preferential access to the EU as a result, officials have stressed.

ICTSD reporting; “China, Iceland sign strategic free trade agreement,” DEUTSCHE WELLE, 15 April 2013; “Iceland and China Enter Free Trade Agreement,” THE NEW YORK TIMES, 15 April 2013.

Obama Proposes Food Aid Reform

A federal budget submitted by the Obama Administration to the US Congress last Wednesday would - if approved - include a sweeping overhaul of US food aid. Specifically, the proposal would sharply curb monetisation - the sale of in-kind food aid by development organisations tasked with delivering the assistance.

In addition, the proposed reform would expand the ability of the US Agency for International Development (USAID) to help those in need more efficiently through cash transfers and other best practices, thereby increasing the reach of its food relief programmes to four million additional people.

Food aid is one of elements in the WTO’s long-running Doha Round talks. Specifically, negotiators in Geneva have largely been concerned with preventing a displacement of local farmers when food aid enters a recipient country. The proposed reform addresses this by allowing for local and regional purchases of food aid. USAID, however, will still be obliged to spend 55 percent of its US$1.4 billion in total funding for emergency food assistance on US commodities, shipping, and other costs.

Speaking to Bridges, one Geneva-based delegate of a food aid recipient country welcomed the Obama proposal. The budget plan will, however, have to be approved by Congress before the changes can take effect. The food aid programme has traditionally been an important source of revenue for the shipping and farm sectors, at taxpayer’s expense. Budget pressures and record farm incomes have informed the call for reform.

ICTSD reporting; “Obama proposes end of monetized food aid,” IRIN, 11 April 2013; “A compelling reform of the U.S. food aid,” WASHINGTON POST, 16 April 2013.