Written by 4:33 pm European Union

EU Steel Safeguards found to be WTO-inconsistent; European Commission to amend them

On August 24, the European Commission (“Commission”) made public its intent to implement the recommendation and ruling from the World Trade Organization (“WTO”), and bring the safeguard measure on certain steel products (“Steel Safeguards”) into conformity with the WTO Agreement on Safeguards and the GATT 1994.

The Commission also invited interested parties to submit comments by September 14, 2022.

The Commission’s notice follows the WTO’s ruling on DS595, whereby Turkey challenged the European Union’s Steel Safeguard measures before the WTO Dispute Settlement Body (“DSB”) in 2020. The WTO’s final panel report was circulated on 29 April 2022. On 31 May 2022, the WTO DSB adopted the Panel report with a recommendation for the EU to bring its measures into conformity.

The two inconsistencies that the WTO found concern:

– Article XIX:1(a) of GATT: the original safeguard measure had not sufficiently explained how the increase in imports took place as a result of the unforeseen developments that had been identified. Also, the measure had not identified the GATT obligations whose effect resulted in the increase in imports; and

– Article 4.1(b) of the WTO Agreement on Safeguards: the panel found that two central elements of the determination of a threat of serious injury were not ‘based on facts’: first, the finding that the domestic industry was ‘in a fragile and vulnerable position’, despite its improved performance and, second, the finding that a further increase in import volumes in the future would bring about serious injury to the domestic industry.

This is a positive development for EU importers and third-country exporters who have been contesting the Steel Safeguards since they were originally imposed in 2019. Interested parties may now use the WTO’s Panel Report to support that the Steel Safeguard measures are WTO-incompatible ab initio, and there are no retroactive remedies that could apply to render them WTO-compatible or to remedy the injury that the measures caused. We therefore foresee a great influx of comments and hearings by interested parties and sovereign Governments before to Commission to argue that the Steel Safeguards should be terminated.

In order to effectively comply with the WTO ruling, the Commission may need to revise its safeguard duty adoption criteria and procedures, and potentially be forced to terminate the existing Steel Safeguards forthwith.

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