Crucial move towards new tariff regime

Date: 11/12/1997

By Mark Turner

THE European Commission could move a crucial step closer next week towards reducing “crippling” EU trade restrictions on Russian and Chinese imports by recognising both as market economies.

A key report due be examined by the full Commission next Wednesday (17 December) calls for fundamental changes in the way Union officials determine whether to impose import tariffs on cheap Russian and Chinese products.

At present, the Commission decides whether the price of a product from a non-market economy is fair by comparing it with prices of similar goods in an analogous market economy. Both Russia and China argue that this system does not take account of their natural competitive advantage, does not recognise recent free market reforms and, in practice, amounts to trade protectionism.

Under the new regime, which must be approved by highly sceptical national governments, the Commission would remove both countries from its list of non-market economies but retain the right to apply the 'analogue' price test for certain sectors. The move would be particularly crucial for Russia, which is furious at the Union's continued insistence on its non-market status.

About 10&percent; of all Russian exports to the EU are affected by anti-dumping regulations and critics say Moscow is being unfairly penalised. “There are currently 60 anti-dumping cases against China and 16 against Russia. Given the difference in the two countries' size, this is hugely stacked against Russia,” said an official from the European Parliament's Russia committee.

Moscow's anger reached an all-time high recently when the EU pulled out of a Russian steel pipes deal at the last minute.

According to the country's mission to the Union, the agreement fell through because the Commission demanded guarantees from the Russian government on the price and volume of future steel pipe exports. Moscow claims this was unrealistic as it contravened the Russian constitution, which enshrines free market principles.

The new system would mark a symbolic change in the EU's approach to Russian anti-dumping cases. But it remains unclear what impact the Commission proposals would have in practice, given that many sectors will continue to be subject to the analogue test.

“It is obvious that a number of industries are still subsidised, for example, through cheap energy,” said a Commission official. “They will still be treated as non-market.” Neither is it clear whether protectionist EU states such as France will accept the proposals even as they stand. “We expect the Council to resist this strongly,” said the official.

But Moscow insists it will be satisfied with nothing less than a full recognition of Russia's free market status, fearing that otherwise the anti-dumping regulations will leave decisions too open to abuse.

“Only a full exemption of Russia from the non-market system will suffice,” warned Russian diplomat Edward Borovikov. “Otherwise, the problem will deteriorate further. If the situation is not improved, there will be a very strong statement from the Russian government and its president.”