Trade Remedies Can Help to Protect Domestic Firms

Trade remedies, or policy tools to protect domestic industry from imports, are a hotbutton issue amid the global integration. Việt Nam News’ Thu Ngân speaks to Lê Triệu Dũng, director general of the Trade Remedies Authority, about the issue. 

Can you give us an overview of trade remedies in Việt Nam now?

Trade remedies, in general, are trade policy tools that allow a Government to take remedial action against imports of certain products which cause serious injury to a domestic industry in an importing country. 

Such remedies are divided broadly into anti-dumping actions, countervailing duty measures and safeguard measures, all of which are allowed by the World Trade Organisation (WTO) and other international trade agreements, subject to certain disciplines. 

These remedies are triggered in response to different situations and circumstances which may be causing material injury to a domestic industry, helping countries during their trade liberalisation and economic integration processes. 

The trade remedies policy in Việt Nam is now regulated by the Law on Foreign Trade Management and its detailed guideline regulations, which are all in compliance with WTO rules. 

When we are talking about trade remedies in Việt Nam, we normally focus on the enforcement of trade remedies legislation and trade remedies actions against Việt Nam’s exports. 

As a crystalised demonstration of Việt Nam’s active economic integration policy, the number of trade remedies investigations initiated by Việt Nam is very limited.

If we put the figures of trade remedies actions taken by Việt Nam and by its trading partners against Việt Nam’s exports together, it would be a lame comparison. To date, the former numbers just 11 cases comprising six global safeguards measures and five anti-dumping measures. On the other hand, the latter has reached around 140 cases, more than half of which (81 cases) are anti-dumping measures. 

As an economy heavily dependent on foreign trade, trade remedies measures are becoming an important fact that Việt Nam’s policy makers and enterprises need to pay attention to in order to ensure sustainable export growth as well as a sound business environment for domestic production. 

From trade remedies-related lawsuits, what do you see are the strengths and weaknesses of Vietnamese companies?

Though Vietnamese businesses have paid more attention to trade remedies from defence and enforcement perspectives, there are still many shortcomings, both in terms of knowledge and resources. 

According to a survey conducted by the Việt Nam Chamber of Commerce and Industry (VCCI) in 2017, about 15 per cent of the 1,000 surveyed businesses did not know about trade remedies, over 63 per cent knew but did not understand and nearly 20 per cent had limited understanding of these actions. Less than 2 per cent of the respondents had thorough knowledge about trade remedies, while 41 per cent of them said that they could not fully satisfy the conditions for initiating trade remedy cases. 

Surveys by the Trade remedies Authority of Việt Nam show similar results. 

Those surveys have pointed out the following shortcomings of Vietnamese companies with regard to trade remedies: limited knowledge of trade remedies, lack of experience in defence, absence of strategy, and lack of strong determination in using and defending trade remedies cases, and weak and limited financial capacity while the cost of appeals can be high. In most cases, enterprises need to seek support from experienced lawyers during investigations.

These shortcomings can be explained by the fact that most Vietnamese enterprises are small and medium sized (SMEs). However, with accumulated experience in dealing with trade remedies investigations, more associations and enterprises, like those in thefisheries and steel sectors, have built up capacity in dealing with such measures as well as using them to protect their legitimate rights. 

Seeking trade remedy is not easy for Vietnamese companies since over 90 per cent of them are SMEs. What should a company do to prevent being sued by importers and to compete with imported products? 

Using trade remedy measures requires collaborative efforts by enterprises.  Harmonising the interests and benefits of enterprises in a sector to join in a petition is the key factor in helping domestic industry cope with unfair competition from foreign producers.

One of the most important factors in lodging a petition to initiate a trade remedy measure is the ability meet “representative” requirements: for example, the application must be made by or on behalf of domestic industry. 

It means trade remedy measures protect a sector, not a specific enterprise or group of enterprises. Therefore, the investigating authority needs to examine overall information from all related parties such as domestic producers, importers, downstream producers, and the final consumers to make an objective and accurate decision on the case.

On the other hand, trade remedy measures are not a long-term protection: they are only applied to the extent necessary in order to establish the fair competitive environment. 

In both situations — defense and application of trade remedial measures — businesses need to consider trade remedies in their long-term business strategy.

Because of trade tensions between large economies, many companies are making fraudulent use of Vietnamese origin to benefit from preferences. How can Việt Nam prevent this yet remain in the supply chain and attract investment?

Recently, some members of the WTO have increased the use of trade remedialmeasures such as anti-dumping, anti-subsidies and safeguard. 

To ensure the efficiency of these measures, they also actively monitor the trends of imports after the application of trade remedial measures to detect circumvention activities, which include possible fraud in the origin of goods to circumvent trade remedies. If circumvention is found, the countries applying trade remedial measures can extend the scope of trade remedial measures to similar products in countries where circumvention occurs.

So far, there have been 19 anti-circumvention (AC) investigations initiated against certain products from Việt Nam, of which six each were done by the EU and Turkey, five by the US and two by Brazil. Export products facing high risk of AC investigations are steels, plywood and truck and car tyres. 

Việt Nam’s ministries and other agencies have been stepping up efforts to prevent possible fraud of origin and illegal circumvention activities. 

Based on trade remedial investigations and measures by major markets, the Ministy of Industry and Trade (MoIT) has discussed with the VCCI strengthening of the issuance, inspection and supervision of Việt Nam certificates of origin (C/O) for export goods with particular attention to certain products facing a high risk of fraud.

MoIT has also been co-operating with the General Department of Customs to monitor and identify unusual changes in imports and exports to certain markets so that necessary measures to examine, prevent frauds related to the origin of goods to circumvent trade remedial measures which affect Việt Nam’s reputation in general and the benefits of legitimate enterprises in particular can be taken timely.  

MoIT recommends that Vietnamese exporters strictly comply with the rules of origin certification, do not support illegal circumvention activities and co-operate to closely monitor the market to promptly provide information to authorities when there are abnormal signs, which will help Việt Nam’s industries avoid being affected by AC investigations and measures applied by some export markets.

How do you foresee protectionism around the world this year and how will Việt Nam prepare for it?

The WTO has repeatedly issued warnings about the threat posed by protectionism to trade liberalisation and the global trading system. 

According to data from Global Trade Alert, in 2018 there were 226 new trade restriction measures applied to Việt Nam’s exports, which increased by 10 per cent from 2017, and more than double the new supportive measures (111).

Regarding data from Global Trade Alert measures, member countries can self-initiate trade remedial investigations, change the margin calculation methodologies to obtain the highest level of protection for their domestic industries or modify previous investigation practices, leading to unpredictable developments. 

With regard to goods having been subject to anti-dumping or anti-subsidy duties, those members can track the trend of shifting production and trade to neighbouring countries to prevent circumvention of anti-dumping and countervailing duties.

In response to the risk of increasing trade protection, as an economy dependent on foreign trade, Việt Nam has been firm about its active economic integration. 

The Government and business groups have been taking measures to mitigate thenegative impacts of protectionism, including avoiding protective measures by foreign countries through closely monitoring import and export trends to make timely adjustments to business plans and strengthening co-ordination and information exchange between the Government, associations and enterprises.

In addition, actively utilising bilateral and multilateral dialogue channels to handle trade remedial cases has been done as well as promoting information sharing to improve enterprises’ knowledge of import restriction measures including trade remedies  especially when some countries regularly change their policies and investigation procedures, making these procedures stricter and unpredictable.

Last but not least, we have been enhancing research into changes in policies, laws and practices in export markets.

Source: Vietnamnews