MANAGEMENT + SYSTEMS
The unintended consequences of trade defence
The ‘law of unintended consequences’ predicates that intervention in a complex system tends to create unanticipated and often undesirable outcomes. For Geoff Hopwood the EU trade defence investigations and measures applied to stainless steel fasteners over the last five years represent a salutary demonstration of that time-honoured concept, as he explained to this magazine.
G
eoff Hopwood served as president of the European Fastener Distributors Association until 2012, when he also stepped down as a director of the British Association of Fastener Distributors. He continues as
chairman of the Hexstone Group of companies, which includes one of the UK’s major stainless steel distributors. All of which has meant a very direct and active personal engagement in the fastener-related trade defence activities of the European Commission over the last five years. “The EFDA has always maintained a very clear commitment to the principles of open and free trade,” says Hopwood. “That has not precluded an understanding that effective, properly targeted and above all correctly evaluated trade measures may be necessary to ensure a level playing field, which is in the interests of the fastener industry and its customers. “One of the key grounds, however, on which I, and my previous
EFDA and association colleagues, have opposed excessive measures to protect EU industry has been the inevitable market distortions and prolonged instability and uncertainty, which is unavoidably damaging to industry.
“ One of the key grounds... on which I ...have opposed excessive measures to protect EU industry has been the inevitable market distortions and prolonged instability and uncertainty, which is unavoidably damaging to industry.”
104 Fastener + Fixing Magazine • Issue 81 May 2013 “Excessive measures were clearly seen in the case of the
extraordinarily and unfairly high tariffs applied to carbon steel fasteners from China in 2009, which have triggered persistent circumvention activity and consequent EU investigations. It was evident from the beginning that the imposition of tariffs that created such an incentive for cheating would result in market disruption to the disadvantage of all law abiding fastener companies, manufacturers or distributors. It is my belief that an appropriate duty level (circa 25%) would have been just as effective in protecting EU fastener manufacturers but would have avoided most of the problems associated with circumvention – a huge benefit to all. “Where importers have knowingly flouted the law there is no
excuse: whether or not one agrees with the basis of the law in the beginning, once it is enacted it should be respected. However, the situation is so complex that much of the avoidance has probably been through ignorance or inability to verify information rather than deliberate intent. That has been compounded by a circumvention investigation mechanism that allows for the backdating of duties to a point when goods are irrevocably en-route to the EU. That will only ever be seen as flouting any form of natural justice and unfairly penalising companies that have, in many, many cases, taken all reasonable care to ensure the legitimacy of their suppliers. While my company and many others have rigorous audit processes we cannot, as the EU can, delve into the accounts and paperwork of another company to determine hidden connections or know the actual figures for their sales or purchases. We can assess the factory’s capability to manufacture the products we need to purchase, but we cannot know the total demand that capacity is supposedly servicing. “The injustice of backdated duties has now raised its ugly head
with stainless steel fasteners imported from the Philippines, which following a circumvention investigation are now subject to anti-dumping tariffs. There is clear evidence that circumvention has taken place, no argument, but it is also clear that respectable and professional European importers, which carried out all reasonable precautions in assessing the legitimacy of suppliers, have been penalised with backdated tariffs. It is difficult to see this as anything other than arbitrary retribution rather than justice. “More importantly with the stainless steel market, though, one has to take a step back to look at a much broader picture
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