EU trade legislation

What is it?

The European Union wants to ensure fair and equitable trade in relation with third countries.

This is why, over the past years, the EU has been running a fundamental reform of key trade-related rules. The main areas covered:

  • foreign direct investments
  • anti-dumping
  • trade defence instruments

The EU’s new legislative initiatives aim to protect Europe’s producers and businesses from the potential damage which certain trade practices of foreign entities can cause.

At the European Council held in October 2016, the EU leaders reiterated that unfair trade practices need to be tackled efficiently and robustly. 

Screening of foreign direct investments

On 20 November 2018, the Council reached a provisional agreement with the European Parliament on an EU framework for screening foreign direct investments (FDIs). The agreement will be submitted to EU ambassadors for political endorsement.

This will soon allow the EU to coordinate scrutiny of investments from third countries in strategic sectors in order to check that they do not threaten security or public order.

On 9 November 2018, the Council assessed the progress of negotiations with the European Parliament on the screening of foreign direct investments (FDIs).

The objective of this legislative initiative is to protect key European technologies and interests from strategic threats. It would do so by creating a framework at EU level to analyse investments from third countries in strategic sectors. Members states and the European Commission would be able to cooperate to identify investments which could affect security and public order.

Currently, fewer than half of EU member states have legislation in place that allows them to review foreign direct investments.

The proposal put forward by the European Commission in September 2017 aims at enhancing cooperation by defining a set of information to be exchanged and introducing certain time limits.

Horizontal bilateral safeguards

On 28 January 2019, the Council adopted a regulation which enables the application of safeguard measures for trade agreements.

At this stage, the regulation covers the EU-Japan, EU-Singapore and EU-Vietnam free trade agreements. Further trade agreements might be added to the scope.

On 24 October 2018, the EU ambassadors agreed on the Council’s position regarding specific measures to protect particular domestic industries from potentially harmful increases of non-EU imports.

Bilateral safeguard measures are linked to trade agreements and allow the temporary withdrawal of tariff preferences.

Before, this mechanism was proposed separately in relation to each trade agreement.

Under this initiative, such measures would benefit from a consistent “horizontal framework” for their inclusion in new trade agreements.

Infographic – EU trade defence instruments

A new regulation on EU trade defence instruments is set to enter into force by June 2018

Modernising EU trade defence instruments

Anti-dumping methodology

On 20 December 2017, the new EU rules to help protect the European Union against unfair trade practices entered into force.

They had been approved by the Council on 4 December 2017 following the endorsement from EU ambassadors on 11 October 2017.

The updated EU anti-dumping rules will apply to cases where prices of imported products are artificially lowered due to state intervention.

“The new rules will be crucial in ensuring that all our trading partners are selling us their products at undistorted prices, and that fair market competition is respected.”

Urve Palo, Estonian Trade Minister

The new anti-dumping rules have been developed on the basis of a European Commission proposal from November 2016. This document put forward measures such as:

  • removing the former distinction between market and non-market economies when calculating dumping
  • proving ”significant market distortions” between a product’s sale price and its production cost
  • taking social and environmental standards into account when identifying dumping situations

Revision of trade defence instruments

The new rules on anti-dumping run in in parallel with the broader revision of the EU’s trade defence instruments (TDIs).

On 8 June 2018, the new regulation modernising EU’s TDIs entered into force. It had been adopted by the Council in April 2018, following the agreement reached with the European Parliament in December 2017.

The regulation aims to protect EU producers from damage caused by unfair competition, ensuring free and fair trade. It makes TDIs more predictable, transparent and accessible, in particular for small and medium-sized enterprises (SMEs).

The EU’s objective is for anti-dumping and anti-subsidy instruments to be more efficient and better suited to protect EU producers from unfair practices of foreign firms and from any risk of retaliation. At the same time, importers should enjoy greater predictability in terms of changing duty rates, making their business planning easer. The entire system should become more transparent and user-friendly.

Bilateral safeguard measures in trade agreements:

On 24 October 2018, EU ambassadors meeting in the Permanent Representatives Committee (COREPER) agreed on the Council’s position on measures to streamline the inclusion of safeguard measures in trade agreements with a view to guaranteeing their effective and consistent application.

Bilateral safeguard measures linked to a trade agreement (allowing for the temporary withdrawal of tariff preferences) are intended to protect a particular domestic industry from an increase in imports of any product which is causing, or which risks causing, serious injury to that industry.

We are strongly convinced of the political value and economic interest of free trade agreements. But we also want a Europe that protects, and thanks to this legislation we will be better able to safeguard vulnerable products and areas from any temporary negative impact of imports.

Margarete Schramböck, Austrian federal minister for digital and economic affairs and president of the Council

The European Parliament’s committee on international trade voted on its report on 11 October 2018 and announced its decision to enter into negotiations in the plenary on 22 October. Negotiations between the two institutions should start soon with the aim of finding an agreement by the end of 2018.

The EU regularly concludes trade agreements with third countries, most of which include bilateral safeguard clauses or other mechanisms for the temporary withdrawal of tariff preferences or preferential treatment. Up to now, the bilateral safeguard mechanism has been proposed separately in conjunction with each trade agreement. Whereas now, a consistent horizontal framework for the inclusion of such provisions in new agreements is being proposed.

The Council position follows the logic behind the Commission proposal but lays emphasis on the specific nature of some sensitive products and of areas that are particularly vulnerable to the effects of imports, such as the EU’s outermost regions. The Council position also acknowledges the Commission’s need for flexibility in negotiating the inclusion of safeguards in trade agreements with third countries.

Share this article