Court action looms over cotton dumping inquiry

Date: 23/10/1997

By Peter Chapman

THE European Commission is facing court action over its decision to reopen a politically-charged cotton fabrics dumping investigation last spring, just days after member states had rejected calls for punitive measures.

British textile firm Broome and Wellington is spearheading the legal challenge in the EU's Court of First Instance over what it sees as a “blatant abuse of power by the bureaucracy in Brussels”.

The move follows the Commission's decision in May to relaunch a costly dumping investigation into the imports of cotton from China, India, Egypt, Indonesia, Turkey and Pakistan.

The UK textile importer and distributor argues that the Commission illegally bowed to French government pressure to protect a small number of jobs in domestic cotton production, ignoring the broader interests of the sector of EU industry which uses the imported, unbleached 'greycloth' cotton to produce finished textile goods and clothing.

The company says that the Commission decision came as French President Jacques Chirac “appeared to take a personal interest in the imposition of these duties and pushed for a reopening of an inquiry” ahead of the crucial Amsterdam summit on changes to the EU treaty in June. Sources suggested then that France was threatening to scupper the Amsterdam talks unless it won a re-examination of the issue by the Commission.

Lawyers representing the Manchester-based firm said an earlier inquiry, which ended on 20 May, found that any dumping measures would harm the EU 'community interest' because the duties would hike up costs for the 2,500 companies in the EU textile-processing industry.

A majority decision saw northern member states opposed to tough duties on the cotton claim victory against a protectionist coalition of six countries (France, Italy, Spain, Greece, Portugal and Belgium).

These six supported the claims of 30 European weavers of cotton, represented by the Eurocotton lobby, who complained of the harm done to them by greycloth imports.

“Their motivation is to try to eliminate or reduce the effect of cheap imports of greycloths so as to enable them to charge higher prices for their own products,” said Broome and Wellington.

It says EU companies which still weave their own textiles mostly specialise in products for the top end of the market, such as Jacquards, filaments, coloured woven and specialised industrial cloths. It argues that this means “there is little point” in putting in place measures to protect European companies from imports of a vital basic raw material. Between 85&percent; and 90&percent; of this greycloth is already imported.

“With or without the imposition of anti-dumping duties, these specialised cloths are likely to remain in EU production,” added the company.

The firm's Brussels-based lawyers claim the Commission invited Eurocotton to lodge another complaint before the ink had dried on the earlier decision to reject anti-dumping measures.

They argue that nothing had changed in the five days between the decision being taken and the follow-up complaint from Eurocotton, which would have justified the cost of another inquiry. They insist that the Commission should end its latest scrutiny of the imported cotton market.

“There is no need for an inquiry on the issues of dumping and injury since these were not challenged, and there is no need for an inquiry into what is in the interest of the Community, since this was established by a clear majority at the end of May 1997,” said one.

The company points out that dumping inquiries are costly, whether they result in definitive duties or not. They typically take more than a year to complete, yet prices of textiles are often calculated up to 18 months in advance of delivery.

Its lawyers say that any possible measures, whether interim or permanent, on top of legal costs incurred fighting the action, will soon have to be factored into prices.

This puts at risk the 2.5 million jobs in EU companies which process raw materials and turn them into final textile products, as competition hots up from finished and ready-made products imported from outside the Union.

“In the cutthroat business of textiles, where the bottom line is often a margin of only 2-3&percent;, there is absolutely no margin to absorb any anti-dumping duties,” said the firm.