EC Anti-dumping Duties (Hansard, 28 June 1989)

§ Mr. Phillip Oppenheim (Amber Valley)
I start by apologising to my hon. Friend the Minister for keeping him up so late. He is already familiar with the general drift of my arguments, but nevertheless I am glad that he will be replying to the debate, because no one else can defend the indefensible better than he can.
I have always found the concept of dumping rather strange. The idea that companies persistently and consistently sell products into export markets at an uneconomical price, perhaps subsidised by their Governments, in order to drive home industries out of business and subsequently to cream the market with high prices stretches one's credulity. Nevertheless, anti-dumping cases have become increasingly popular recently. That is partly because they make the initiators of such actions appear to be the friends of free trade, especially in an area in which direct and overt forms of protectionism such as quotas and tariff barriers are becoming increasingly popular.
I argue that regulations and laws against dumping are perfectly all right provided that they are fairly drafted. Unfortunately, the European Community's anti-dumping laws are patently unfair and unjust. Those laws as they stand allow the Commission to fine companies involved in so-called dumping even when that clearly has not occurred. The Community's regulations are complex and convoluted, but I shall touch on two of the ways in which they can make it appear that a company or industry has engaged in dumping when it has not.
The first is by so-called price construction. When the Commission investigates supposed cases of dumping, it does not compare the exporting company's domestic price with that charged in the export market. Instead, for a variety of reasons, the Commission constructs prices artificially, and not on a like-for-like basis. When the Commission considers the price charged domestically in Japan, for example, it includes all overheads and marketing costs—but virtualy excludes them in respect of the European market price. The result is that almost inevitably dumping appears to have occurred when it has not.
The second way in which the Commission makes it appear that dumping has occurred is by including in the regulations a provision that a start-up industry that is selling its products at a loss—perhaps because its plant has not yet reached economical capacity—can be found guilty of dumping and have duties imposed upon it even though its export prices may be well above those prevailing on its home market. That is a major disincentive for start-up factories abroad attempting to sell into the European market. Such injustices explain why companies in the colony of Hong Kong, for example, can be said to be guilty of dumping.
It may be thought strange that Hong Kong companies can be accused of dumping. After all, its economy is one of the most open, free and liberated in the world. It is subject to no Government policy, there is little intervention in industry, and virtually no subsidies. The question may be asked as to how small and medium-sized Hong Kong companies can afford persistently to dump 1086 their goods on to the European market. I do not think that they can, yet in recent years the Commission found Hong Kong manufacturers of video tapes, for example, guilty of supposed dumping. It now proposes to investigate imports of denim cloth from Hong Kong, even though they are already heavily protected by the multi-fibre arrangement and Community quotas.
I know that my hon. Friend the Minister will adduce in his defence of the Commission and its anti-dumping regulations the information that the European Court of Justice has ruled in the Commission's favour. Let me point out that all the European Court of Justice has done is say that the Commission has imposed those regulations to the letter. It has not judged the matter on the basis of the justice or otherwise of the regulations.
I suspect that my hon. Friend will also adduce in the Commission's defence the fact that the GATT code supposedly endorses the European anti-dumping regulations. The GATT code is a very vague and broadly drafted document: in many ways it is the lowest common denominator of agreement between GATT members. The fact that it seems to enshrine the concept of the EC regulations in no way makes those regulations just.
Some people would say, "After all, the Japanese have traded unfairly against us in the past; why should we mind if we are putting up a few barriers against them now?". I do not want to dwell on the subject of supposed Japanese protectionism, except to say that in my experience it has often been heavily exaggerated in the west, especially by industrialists and business men, who have not made proper efforts to sell into the Japanese market and who often have not been selling goods of sufficient quality to succeed.
It is also worth reminding ourselves that we in the west are ourselves guilty of large-scale protectionism, not just in Europe but in the United States, which often tries to present itself as the great land of free trade. We have a range of voluntary restraint agreements, export restraint agreements, quotas, tariff barriers and a variety of other mechanisms which, over the years, have spun an entangling web that to a large extent prevents the free movement of goods into our market and the American market.
Those barriers cover goods ranging from textiles—which, of course, are bought by almost everyone in the EEC and America—to high-tech goods such as microchips, computers and cars. Moreover, we in Europe and America have intervened in our own industries, and have subsidised the shipbuilding and car industries particularly heavily. We should remember that when we consider imposing slightly unfair regulations on the Japanese.
The range of protectionist instruments currently in the EEC armoury do not even help our home industries. By protecting industry, we not only reduce competition on our home market—which makes our own companies concentrate on that market to the expense of export markets—but compound the inefficiencies of our industries, and make it far less likely that they will be able to compete on equal terms with Japan and other East Asian countries on the world markets. Such protectionism is a recipe for slow decline.
Anti-dumping duties, in imposing heavy price rises, are effectively a tax on European consumers to the benefit of the industrial lobbies and special interests that are unable to keep up with overseas competition. That, of course, 1087 adds considerably to European prices. I cannot say to what extent anti-dumping duties have added to the price of articles such as photocopiers or electronic typewriters, because the EEC Commissioners are unfortunately less than forthcoming. In fact, they have consistently refused to give any details of the amount of duties that they have raised, notwithstanding the fact that the entire amount goes into the Commission's pocket. I feel that the House has a right to expect the Commission to reveal that information. Its stonewalling attitude makes British Government Departments look profligate with the truth.
The EEC is very much in the news just now. It is being used as a stick by some new converts to the EEC with which to beat our Prime Minister. Some of us who have for long been supporters of the concept of the European Community find that odd. We also dread to think what would happen if the EEC ever got control of many of our national areas of government, such as social policy. If it did, and if it introduced legislation as patently unjust—and released as little information about it—as it does about anti-dumping duties, that would make a complete farce of government, and people would rapidly lose confidence in the EEC.
It is also ironic that many people in Europe are accusing Britain of being anti-European and uncommunautaire. After all, Britain is the most liberal of the EEC trading partners, notwithstanding some remaining trade barriers. Indeed, some Europeans have a bit of a cheek lecturing us on being un-European, when they maintain a whole range of non-tariff barriers against British products such as telecommunications equipment. They should look to liberalising their own markets and creating genuinely internal European markets. If they had made the progress that we have made in the last few years in liberalising our market, they would be on stronger ground when criticising us for being non-European.
I wish to inject some optimism into the debate. There is good news in that the new Commission includes some liberal-minded politicians, particularly Mr. Bangemann, Sir Leon Brittan and Mr. Andriessen, who seems to be standing out against the creation of a fortress Europe—or, rather, a ghetto Europe, as it would become. I understand that they are currently fighting a battle against European industrial interests such as Fiat to try to ensure that there is no EEC-wide car quota after 1992, and I wish them well in their efforts.
Her Majesty's Government have been at the forefront in trying to liberalise trade and reduce tariff and non-tariff barriers and all types of trade barriers. I hope that the Minister will not think me remiss when I say that perhaps we could do a little more to try to push the Commission away from imposing what are patently anti-dumping duties on a whole range of products which do not give any protection or benefit to our industry in the long term and which only impose large price rises on EEC consumers.

§ The Minister for Trade (Mr. Alan Clark)
I congratulate my hon. Friend the Member for Amber Valley (Mr. Oppenheim) on the force and clarity with which he put forward his views. He did so in a manner which we have come to expect from him, being among my hon. Friends the most articulate of the exponents of free trade in its purest form. He pursued his arguments in tonight's debate, as he did in the debate in October of last year, and he loses 1088 no opportunity to draw attention to the strength of his case each month when my Department is scheduled to answer at Question Time.
I welcome the opportunity to clarify the position both regarding the Community's policy in this sphere and the views of Her Majesty's Government. My hon. Friend will agree that an Adjournment debate is not the place or time at which to embark on a detailed critique of anti-dumping policy, but I am ready to do my best to respond to some of the points my hon. Friend made.
As for the Community's legislation, it is appropriate for me to put on record the basis for the Community's present approach, which is regulation 2423/88, which consolidated the earlier legislation. This reflects the principle of GATT article VI and incorporates the interpretive and other requirements of the code.
In a number of respects the regulation is more liberal than GATT requires. Particular examples are the way in which a limit is fixed on the duration of duties and the requirement that they should be set at less than full dumping margin where the injury margin is lower. This is in contrast to United States practice, but of course I am not responsible for American policy and I would not be expected to defend it here. My hon. Friend is right to draw attention to the increasing signs of protectionism in a number of sectors. The United States is edging away from the principle of free trade and moving towards a quite naked and flagrant protectionism in some sectors
Perhaps the most significant departure of Community legislation from the GATT code is the introduction of the concept of the Community interest which certainly, in our view, allows the likely impact on consumers and industrial users, as well as wider economic aspects, to be taken into account before any duty or other remedy is decided upon.
The regulation is a detailed document which lays down the internal Community procedures to be followed. It prescribes at some length the way in which a dumping margin is to be calculated and the factors which are to be taken into account in determining injury. Competence in this field is reserved to the Community under the treaty of Rome. Thus the main responsibility for carrying out the main procedures, including investigations and the determination of dumping and injury margins, is placed upon the Commission. It can also decide on its own authority to impose provisional duties, which are not, however, collected until a definitive duty has been fixed. But at the end of the process it is for the Council of Ministers, on the basis of qualified majority voting, to take the decision whether remedial duties should be applied.
My hon. Friend made a number of general points about anti-dumping cases where the justification is unreal and he implied that some aspects of the evidence are rigged. I use that word in a non-pejorative sense. He made no specific allegations. He referred to examples of goods originating in Hong Kong, but his case would have been stronger had he been able to cite particular examples and to subject the figures to more detailed scrutiny. He has referred to examples that are causing him disquiet. They are being considered by the Community. I hope that he will refer them to my Department where we shall look into them closely.
Over the years the Commission has investigated a steady stream of anti-dumping cases, the majority of which have involved basic or intermediate industrial goods. A significant proportion has concerned imports from state trading countries. My hon. Friend concentrated on 1089 imports from the far east, but the state trading countries are the principal culprits. Price and market disciplines do not operate there, as they do in the liberal Western economies. There has been no major increase in the number of investigations, although that is sometimes alleged. I have a detailed table of figures with which I shall not weary the House, but I shall forward it to my hon. Friend.

§ Mr. Oppenheim
I did not go into great detail about facts and figures, because this is only a short debate. However, I point my hon. Friend in the direction of the photocopier case, the electronic typewriter case and the computer printer case where there are problems with constructive pricing and with the asymmetry of price determination in the exporting and the importing market. Those are three specific cases where regulations have been imposed unjustly.
It is certainly true that there has been no overall increase in the number of cases, but there has been a substantial increase since the mid-1980s in the number of cases against east Asian countries that do not have state trading organisations. Nevertheless, I accept that there has been a reduction in the number of cases against state trading types of organisations and centrally controlled economies.

§ Mr. Clark
That reminds me of a point that is not covered in the text of my reply. My hon. Friend showed a little naivety in his argument. He could not comprehend how an exporter could deliberately target a market, sell under the going rate to achieve market share and ultimately eliminate competition, get a free rate and then adjust prices upwards. That is an accepted commercial strategy. The most notable example was the destruction of the motor cycle industry in parts of the Community, notably the United Kingdom, which was followed by considerable increases in the prices of the predator exporter. However, I do not want to get involved in detailed arguments at this stage. I accept what my hon. Friend says about office equipment. I shall send him more detailed figures and look forward to his further comments.
1090 Anti-dumping is a legal and technical instrument and not a discretionary measure which can be used at will to achieve wider policy aims in the Community context, although some countries, notably the United States, tend to use it in a discretionary way to achieve wider trade policy or protectionist objectives.
The Government's approach has been to subject the Commission's findings to careful examination and, where necessary, to raise questions about the degree of dumping and injury established. We have given particular attention to the remedies proposed and their impact on consumers. We follow the principle, which no doubt my hon. Friend would approve, that GATT provides an instrument for use in defined circumstances: it does not require that action should be taken unless on economic grounds it is justified. Where we disagree with the Commission's proposals, we are fully prepared to say so and, if necessary, to register our vote against them in the Council, as we have done on a number of occasions in the past year.
Whatever may be said about the present GATT framework and the Community's policy, there will continue to be a need for an effective internationally agreed instrument to deal with unfair trading practicies. It will not be sufficient to rely solely on national competition laws. The majority of OECD countries do not, at this time, appear to see the need for any radical change in the present anti-dumping instrument or in its application. We believe that useful work can be done in the OECD in examining the concept of unfair trading and the relevance of present trade policy instruments, but that will take time to bring to completion.
In the meantime, the Uruguay round will, as I have said, provide an opportunity for addressing some of the criticisms and the proposals made by Japan, Korea and certain other newly industrialised economies which feel that the present system needs to be subjected to tighter rules and disciplines. It is unlikely that the Community will wish to amend its legislation until those negotiations in GATT have been concluded.
Question put and agreed to.
Adjourned accordingly at twelve minutes to Twelve o'clock.