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The UK and the EU Need a New Approach to Trade Remedies

January 16, 2020 in Economics

By Simon Lester

Simon Lester

Whatever your view is on the merits of the European Union, it would be hard to dispute that it is one of the most innovative international economic arrangements ever created. Its founders had a general vision, but it took a wide range of institutional and policy innovations during implementation to make it all work.

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Seeking institutional innovation

As the UK and the EU undertake the difficult process of undoing their relationship and developing a new one, there will be a need for some additional innovation. Trying to use traditional trade agreement obligations as a replacement for this deep and complex economic relationship will be insufficient.

One area of particular difficulty will be trade remedies, which include tariffs imposed in response to import prices that are deemed too low (anti-dumping duties) and to foreign government subsidies (countervailing duties).

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The term ‘dumping’ is sometimes thrown around loosely in trade policy discussions, but it has a technical meaning that involves a determination of whether the export price of a product is ‘unfairly’ low. A tariff can then be imposed to counteract the impact of this pricing. With regard to subsidies, there is a calculation of the amount of the subsidy, and, similarly, a tariff is imposed to counteract it.

The EU is one of the rare trade agreements that eliminates the use of trade remedies on internal trade. As a result, trade between the UK and other EU countries is not subject to trade remedies.

I have argued previously that tariffs imposed as trade remedies are unnecessary and problematic here, and should be kept out of the UK-EU economic relationship. This relationship would be permanently soured by recurring claims of ‘unfair trade’ by one side or the other.

Nevertheless, trade remedies are an established part of domestic trade policy and are difficult to avoid. Interest groups demand them, and it is hard to have a proper debate over their merits.

The UK has already set …read more

Source: OP-EDS

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