The US Department of Commerce (DOC) today upheld its preliminary findings in a trade dispute between US and Canadian aircraft manufacturers that has immediate implications for the UK as it works to establish a post-Brexit trade remedy regime.
In April 2017 The Boeing Company filed a petition with the DOC alleging that Bombardier, a Canadian aircraft manufacturer, was using subsidies to produce and sell aircraft at below market value, undercutting Boeing’s competitiveness. After six months of deliberation, the DOC today determined that Bombardier had taken advantage of unfair subsidies and sold its CSeries jets below cost, assessing countervailing duties of 219.63% for the former and an antidumping duty of 79.82% for the latter.
The UK government, which unsuccessfully attempted to convince the Trump Administration to hold off on the duties, has sided with Bombardier in an effort to protect 4,000+ Belfast-based workers employed in the manufacture of its aircraft wings and garnered support from the EU in the process. Though today’s decision by the DOC is not the final word in the dispute, the case highlights the importance of establishing a trade remedy regime that protects and promotes UK industry post-Brexit.
The World Trade Organization (WTO) explicitly allows every member country to determine and assess trade remedies designed to offer relief to industries subject to “unfair” competition. These measures consist of anti-dumping duties taken against unfairly-priced imports, countervailing duties levied as compensation for foreign subsidies of imports, and safeguard measures imposed to temporarily protect a domestic industry. However, trade remedies concerning the UK have until now been the remit of the EU, and the UK must now establish an independent regime which is fully operational and responsive to the needs of British industry by the time it leaves the EU.
The Department for International Trade’s (DIT) white paper outlining its vision for post EU trade policy makes reference to establishing a trade remedy regime that is impartial, proportional, efficient and transparent. Additionally, it commits the DIT to developing the ability to identify market access issues for British industry, pursue negotiated solutions prior to formal disputes, conduct formal disputes from beginning to end, and impose retaliatory measures as necessary. While these principles and commitments are necessary, the Bombardier case illustrates the more granular task at hand for UK policymakers as they build a trade policy architecture independent of the EU.
When a US domestic firm like Boeing files a petition alleging that imports have been subsidized and/or dumped, a team of industry analysts, economists, and lawyers from the DOC and US International Trade Commission (USITC), as well as the Office of the US Trade Representative (USTR) and relevant agencies, convenes to determine if imports have been subsidized, if dumping has occurred, and if the domestic industry has been injured as a result of imports. Provided the DOC issues an affirmative finding, tariffs commensurate with the size of the subsidies and/or dumping margin (the difference between the export price and normal value) are imposed. The Harmonized Tariff Schedule (HTS) administered by the USITC is then updated and the Department of Homeland Security’s Customs and Border Patrol assesses the tariffs at the border.
In establishing an impartial, proportional, efficient and transparent trade remedy regime, the UK needs to be mindful of each step in this process. Subject matter experts who monitor portfolios of goods and services representing every UK industry need to be hired and trained to anticipate impending cases or changes in competitive conditions that have a bearing on domestic industry. Similarly, economists who can calculate and model subsidy and dumping margins that adhere to WTO standards need to be retained.
The UK will also need lawyers familiar with playing offense and defense on behalf of industry in bilateral and multilateral trade remedy disputes. Senior civil servants need to be endowed with the power to coordinate these efforts across government departments. A system of effective customs administration, which enforces trade remedies at the border, will also need to be established. And finally, as other commentators have noted, this architecture needs to be in place on day one.
Though a specific date has yet to be agreed upon, when the UK leaves its current trade scheme it is going to inherit a series of existing duties from the EU and immediately decide whether to adopt and enforce in part or in full. As part of that process the DIT has identified 90 anti-subsidy or anti-dumping trade remedies and put out a recent call for evidence requesting that UK “businesses…state whether they support, are neutral to, or oppose the maintaining of those measures”.
Interestingly however, the solicitation explicitly notes that “if a measure does not receive an application to be maintained, or does not meet the required criteria, it will be terminated once the UK begins to operate its independent trade remedy framework.” This puts the onus on UK industry to be informed and proactive about the specific costs and benefits derived from trade policies. Industries in many countries are well aware of the remedies available to them should they seek relief from “unfair” competition. However, UK industry may not fully realize the costs, benefits, and unintended consequences of these remedies given their consideration as part of broader EU industry under the current trade scheme.
The day is fast approaching that the UK government will need to be prepared to independently adjudicate allegations of unfair competition. This recent call for evidence and the Bombardier case illustrate the importance of establishing a trade remedy regime that protects and promotes UK industry and the magnitude of the task at hand.