Our first article provided an introduction to trade remedies, and here, we look at two fundamental elements used by the Trade Remedies Authority (TRA) in assessing whether to impose trade remedy measures.
The economic interest test and the public interest test. What are they and why are they important?
Both the economic interest test and the public interest test are unique to the UK trade remedies regime.
If neither is met, then no trade remedies will be imposed, even where injury is being caused by dumping, subsidisation, or unforeseen surges of imports.
The TRA is required to consider whether the imposition of measures is in the economic interest of the UK in all trade remedies investigations, and certain reviews of existing measures including transition reviews, expiry reviews and interim reviews. The TRA can only recommend the imposition of a measure to the Secretary of State for International Trade if it considers the measure meets the economic interest test.
The Secretary of State for International Trade will review the TRA's recommendation and will only impose a measure if the Secretary of State considers that it meets the public interest test.
Why do they exist?
The Explanatory Notes to the Taxation (Cross-Border Trade) Bill set out the rationale for the economic interest test:
"The rationale for this [the economic interest test requirement] is that because the effect of measures is to place restrictions on imports, they inherently increase costs on other parties which rely on the affected products, such as downstream users, consumers and upstream suppliers. This ensures that the need to address the injury to UK producers does not disproportionately impact other economic players in the relevant market."
There is no similar rationale provided for the public interest test, although this is the obvious point at which political considerations influence the decision as to whether or not to impose trade remedies measures.
How do they work?
The legislation provides that the economic interest is presumed to be met in a dumping or subsidy case, but not in a safeguards case. The TRA is required to take into account a list of non-exhaustive factors when determining whether the measures are in the economic interest of the UK:
- the injury caused by the dumped/subsidised goods to UK industry in the goods and the benefits to that UK industry in removing that injury
- the economic significance of affected industries and consumers in the United Kingdom
- the likely impact on affected industries and consumers in the United Kingdom
- the likely impact on particular geographic areas, or particular groups, in the United Kingdom
- the likely consequences for the competitive environment, and for the structure of markets for goods, in the United Kingdom
The TRA will evaluate each factor by considering the expected impact on the UK of imposing a trade measure, compared to the impact of taking no action or introducing a different measure.
The presumption in favour of the economic interest being met in dumping or subsidy cases will only be displaced if the negative impacts of the proposed measure on the UK economy are disproportionate to the need to remove the injury caused to UK industry.
In contrast, the TRA will have to positively demonstrate that applying the measure is in the economic interest in a safeguards case.
To accomplish this the TRA will identify affected industries and consumers and gather evidence from them and other relevant groups such as upstream and downstream producers and exporters, as well as publicly available sources such as HMRC, UN's Comtrade, industry publications and employment data from the ONS.
The Secretary of State is then required to review the TRA's decision to ensure it is a 'reasonable' decision. The Government has not published guidance on how the Secretary of State conducts that review, nor on how they will conduct the public interest assessment.
These tests are unique to the UK trade remedies system and can have a decisive impact on whether measures are imposed. This provides an enormous discretion to the TRA and the Secretary of State which is absent in the highly technical and rules-oriented WTO frameworks that underpin trade remedies.
It is therefore crucial that parties make compelling submissions in relation to these two legal tests for the best chance of achieving their desired outcome.
It is uncertain how often the TRA or the Secretary of State consider that the economic or public interest outweighs the imposition of measures in such circumstances, but interested parties should not underestimate the importance of this aspect of an investigation.
The EU operates a 'Union Test' to determine whether a measure is in the interest of the EU overall. In making this assessment the EU will take into account all the various interests as a whole, including the interests of domestic industry and users and consumers.
The Union Test is therefore broader ranging than the Economic Interest Test, and understandably the various interests of all individual member states are relevant.
Unlike the Economic Interest Test, the EU assessment does not include a presumption in favour of it being met, although special consideration is given to the need to eliminate the trade distorting effects of injurious dumping or subsidised imports, and to restore effective competition.
UK producers may take some comfort from the fact that the European Commission has only seldom decided not to impose measures on the basis of the Union Test, although would be wise to continue to give the UK tests adequate thought.
Equally, overseas producers and exporters should give due attention to this as a means to potentially displace a positive finding of injurious dumping or subsidised imports.
Given the gravity of the outcome of these assessments, it is surprising that there is no statutory mechanism or process for interested parties, or the 'public' at large, to make submissions to the Secretary of State on the public interest test.
In fact, once parties have commented on the TRA's draft decision, the TRA's final recommendations have to date remained unknown until the Secretary of State has made a final decision.
As a result interested parties are not able to make informed submissions on the economic or public interest tests to the Secretary of State in response to the TRA's recommendation before a final decision is made.
Lastly, it is a curious feature of the new UK regime that the TRA is given the responsibility to assess whether a measure is in the UK's economic interest. Clearly complex economic analysis of the relevant factors underpins any decision, but the balancing of that analysis would seem more appropriate for political decision makers.
In light of the pending review of the trade remedies framework in response to the recent Steel Safeguards transition review, it would not be surprising to see this aspect come under close scrutiny.
In part three of this series, we break down how to challenge a trade remedies decision.
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