The Political-economy Analysis of Anti-dumping Policy in the Eurasian Economic Union

I. Introduction

The imposition of the anti-dumping measures on the goods coming to the Eurasian Economic Union's market is ultimately a political move. The Eurasian Economic Commission's decision shall be adopted by the Intergovernmental Council of the Union. The member states' decision to vote for or against a particular case of anti-dumping measure depends on the trade preferences formed within the territory of each state. The anti-dumping investigation of the Commission is criticized because of its limited public participation. This has led to suspicion that the Commission's decision regarding the trade defense policy is not a merely technical decision, as it is written in the Treaty[1], but rather it is based on political considerations. This paper will argue that even though, formally, the anti-dumping measures are the mere technical decisions of the Commission, empirical studies reveal that the national interests of the members states are excessively involved in the process of decision making. Firstly, we will look at two opposing arguments regarding the supranational nature of anti-dumping policy of the EAEU. Then, we will defend the dominance of the national interests in the policy making process through examining empirical evidence and using the political-economy theories.

II. Anti-dumping policy in the EAEU

To begin, we should first look at which instances the anti-dumping measures are applied in the Eurasian Economic Union. According to Annex 8 of the EAEU Treaty (2014) and WTO agreement[2], the Commission shall apply anti-dumping legislation if two requisites are met. Firstly, the product is considered to be dumped if it is sold at the price less than "normal value"[3]. Secondly, the dumped product shall cause or threat to cause material injury to the Union's industry. If these two requisites are found, the Commission can start investigation process on the basis of application of the interested parties within the Union. During the investigation period, the Commission shall send questionnaires to all stakeholders and hold public hearings in order to possess more information for a fair decision (Treaty on the Eurasian Economic Union 2014). In most cases, the Commission decides in favor of applicants by imposing anti-dumping duties on foreign exporters (Eurasian Economic Commission 2019). In theory, the Commission has exclusive competence in the Union's trade policy. The following two opposite perspectives will examine whether it is true in practice.

III. Community interests and national interests in trade policy

This part will examine perspectives for and against the supranational nature of antidumping policy in the Eurasian Economic Union. The first argument is that the Eurasian Economic Commission applies protective measures on external trade if and only if it brings benefits to the Community as a whole. When deciding whether to impose an anti-dumping measure on imported goods from third parties, the Commission considers possible economic effects on each stakeholder. After conducting careful cost-benefit analysis based on information given by the concerned parts and weighing the various interests against each other, the Commission decides whether the imposition of proposed measures will be in the interests of the community (Nordstrom 2011,6). Thereby, it can be presumed that despite a finding that the dumped imports have caused material damage to the Union's industry, the Commission may decide not to impose protective measures if doing so benefits community interests. For instance, the Commission had decided to terminate the anti-dumping measure on the microwave ovens imported from the third-party countries as a result of active involvement of the consumers' union (The Eurasian Economic Commission 2019). This example shows that the opponents of the anti-dumping legislation have to prove legislation's unfairness in terms of benefits to stakeholders in order to prevent or cancel the duties. Moreover, advocates of this perspective would argue that community interests are defined merely from the economic effects of the proposed measure, thus without taking into account broader aspects such as foreign policy, domestic politics, etc (Nordstrom 2011, 11). However, if such aspects were considered, the technical nature and precision of the investigation would be limited. Therefore, this perspective argues that, given its supranational competence, the Eurasian Economic Commission decides on antidumping policy in way which is the most beneficial to the community and free from political elements, and thus from participation of member states in the decision making process.

The opposing perspective argues that the national interests take place in the decision-making when it comes to trade preferences of the member states. In order to explain how national preferences determine the policy outcome, we shall look at the liberal intergovernmentalism integration theory. Within the framework of Putnam's "two level" game, Andrew Moravscik argues that the national interests are the products of domestic political process within the state (Moravscik quoted in Bache et al. 2014,13). Furthermore, he argues that the governments take these national preferences formed by the domestic actors to the international stage for negotiation (Moravscik quoted in Bache 2014,13-14). For this reason, when the imposition or non-imposition of trade protective measures contradicts with the trade preferences of a single member state or a group of members states, the national interests in trade policy, more likely, will prevail over community interests. In the following part, we will examine a number of evidences and look at exhaustive literature review that will support this perspective in the EAEU framework.

IV. National interests in trade policy

We will use domestic politics as independent variable to show that the trade policy of the EAEU is guided by national interests, rather than the supranational community interests. The Eurasian Economic Union is the union of unequal member states. More precisely, only Russia constitutes the Union's 87% of GDP and 80% of its population, as opposed, for example, to Germany that constitutes 21% of the EU's GDP and 16% of its population (Guicci 2018, 3). These figures obviously speak in favor of Russian dominance in the Union. Furthermore, there is tendency that other member states of the EAEU - Kazakhstan, Belarus, Armenia, and Kyrgyzstan - are adjusting their custom tariffs in order to converge to the Russian level, which is another instance of dominance of the Russian interests in the Union. Since the Russian economy dominates owing to its size, geographical disposition, and enormous number of concerned domestic actors, it is more likely that the trade protection legislation of the Union will be formed around the interests of Russia while neglecting those of other member states. To give empirical evidence, after looking at the anti-dumping decisions[4] of the Commission for 2018 and 2019 years, we conclude that 23 out of the 27 adopted anti-dumping measures of the EEC were initiated exclusively or partially by the concerned parties in Russia (The Eurasian Economic Union 2019). That is, as Russia has production facilities in many economic sectors, the Russian producers, who face import competition, will lobby the EEC for more anti-dumping legislation.

Yet, despite the dominant position of the Russian economy, the votes in the EEC voting is distributed equally among the member states[5]. This implies that the dominance of Russian interests in anti-dumping policy of the Union is a product of active lobbying by Russian interest groups. Thus, to explain how the trade preferences of the Union are formed by domestic politics of each member state, we will put lobbying in the center of political economy. We had already concluded that the member state's position regarding cases of anti-dumping measures matches with the preferences of its interest groups. As the WTO data[6] on custom tariffs shows, the member states of the EAEU have relatively high tariffs, making the Union's trade preference more protectionist. This can be explained as a consequence of import-competing producers being stronger and lobbying more actively than export-oriented producers of the Union. For the empirical evidence, the EAEU exports to the EU more than it imports from the EU with trade surplus of 68 billion euro (Guicci 2018, 7). That is, the import of finished goods[7] from the EU to the EAEU's market are constrained because producers of the like-products in the EAEU have lobbied the Commission and national authorities for protective measures.

The imposition anti-dumping duties on imported goods create benefits for the import-competing producers; however, it diffuse the costs to all other concerned parties, e.g. consumers, importers, and other producers. Usually, the biggest users and initiators of protective measures are trade associations from sectors with small number of large companies as it is easier for them to overcome common action problem (Guicci 2018, 11). As our study shows, most of the trade barrier initiators are the companies in sectors of heavy industry and specializing in raw materials, chemicals, and metal industry[8]. Furthermore, we need to consider another independent variable which is the geographical disposition or geographical concentration of these associations. In other words, since the above mentioned economic sectors are not evenly diffused across the Union, the support for an individual case of anti-dumping measure is thus concentrated geographically. Accordingly, when the Commission decides in favor of trade barriers, individual states may be indifferent or even opposed to the decision as the result of varying preferences across the member states.

The states are usually prone to oppose the anti-dumping duties on the goods for which they do not have production facilities. For example, Kazakhstan had blocked the Commission's decision on imposing anti-dumping duties on herbicides from the European Union which was initiated mainly by the Russian producers of herbicides (The Eurasian Economic Commission). Kazakhstan's position was derived from dominant trade preferences within its territory. That is, domestic production of herbicides in Kazakhstan cannot meet the needs of its agricultural sector[9], thus imposing anti-dumping duties on importers will increase the price of herbicides making the Kazakh consumers worse off.

Another independent variable which contributes to dominance of national interests in trade policy is the inter-institutional dynamics. We will examine the departments within the Eurasian Economic Commission and the relations of the EEC and the national authorities. On the one hand, one of the main purposes of the Commission is to liberalize trade within the Union and with third parties (The Eurasian Economic Union Treaty, 2014). On the other hand, the Department for Internal Market Defense uses trade protective measures to restrict imports from third parties, thus reducing the volume of external trade. Within the framework of principal-agent theory, this controversy is explained by the willingness of the member state principals to give the competence to negotiate foreign market access to one agent, while delegating control over the trade protection policy to other agents. Therefore, the national authorities bring their national preferences to the community level by institutionalizing the way how the domestic parties influence the supranational institutions of the Union.

Moreover, despite the exclusive competence of the EEC in trade policy, it works closely with the member states. This contributes to the significant role of the Intergovernmental Council, which has to approve the Commission's decision on anti-dumping measures. That is to say, the measures proposed by the Commission shall be unilaterally adopted if the antidumping requisites are met. Yet, the Council may not accept the Commission's decision. Therefore, the inter-institutional dynamics shows that the Commission's legislation can be dismissed by national authorities if their interests are threatened.

V. Conclusion

This paper has examined the independent variables, which is domestic politics and inter-institutional dynamics, leading to the dependent variable, which is the dominance of national interests over the community interests in the decision-making process of trade policy. The national authorities of the member states have done great work in delegation of negotiation of foreign market access to the Commission, that has exclusive competence in trade policy. The trade policy of the Union is formed in accordance with trade preferences of interest groups within the territory of each member state. That is, both the Commission and the national governments, or the agent and principals, do not have their independent trade preferences, but rather they expect those domestic concerned parties to overcome the collective action problem and influence the outcome of policy.

Furthermore, we assumed that Russia has acquired its dominant position in the decision-making process as a result of active lobbying of the Commission by the Russian interest groups. Therefore, the Commission will serve for the interests of the country, whose interest groups are stronger and lobby the most actively. Since lobbying at the level of the EAEU varies across the member states due to the size of economy and thus the number of lobbying individual firms, the national interests of larger states prevail over those of smaller states. For this reason, we conclude that despite its supranational structure, the Commission cannot purely serve for the community interests.

REFERENCES

Bache, Ian, Simon Bulmer, Stephen George, and Owen Parker. 2014.Politics in the European Union. Oxford: Oxford University Press.

The World Trade Organization's Consolidated Tariff Schedules. 2019. Retrieved from https://www.wto.org/english/tratop_e/tariffs_e/tariff_data_e.htm

The Eurasian Economic Commission. 2019. Retrieved from https://docs.eaeunion.org/en-us/Pages/AllDocuments.aspx#npbdocume ntresponsibletaxid=%5B%7B%22id%22%3A%22a75c1639-2587-4aec-83eb

Agreement on implementation of Article VI of the General Agreement on tariffs and trade. April 12, 1979. Retrieved from https://www.wto.org/english /docs_e/legal_e/19-adp_01_e.htm

Nordstrom, Hakan. 2011.The Political Economy of EU Anti-dumping Policy: Decoding Member States Votes. Institute for International Economic Studies. Retrieved from https://www.wto.org/english/res_e/reser_e/gtdw_e/wk shop11_e/nordstrom_e.pdf

Guicci, Ricardo. 2018. The Eurasian Economic Union: Analysis from a trade policy analysis. Berlin Economics. Retrieved from https://berlin-economics.com/wp-content/uploads/2018-05-29_Presentation-EAEU_Moscow.pdf

Treaty on The Eurasian Economic Union. May 29, 2014. Retrieved from http://www.un.org/en/ga/sixth/70/docs/treaty_on_eeu.pdf

APPENDIXES

Appendix 1

The decisions of the Eurasian Economic Commission on anti-dumping duties

The name of goods on which anti-dumping duty was applied

The individual firms who initiated the investigation

Flat-rolled steel products, aluminum alloy wheels,

"Литейно-Механический Завод СКАД", ООО КИК,

Optical fiber for cables, electrodes

ЗАО "СОКК", ИНКАБ, ВОЛС

Steel railway wheels

"Проммашкомплект", "Kazakh Railways"

Herbicides, chemicals

"Астана Нан", Фирма «Август», АО «Щёлково Агрохим», ЗАО «Август-Бел»

Source: The Eurasian Economic Commission's Legal Portal

[1] The Eurasian Economic Union Treaty

[2] Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, 1994

[3] the domestic price in the exporting country is used as a benchmark (EAEU Treaty, annex 8)

[4] Appendix 1

[5] The Eurasian Economic Union Treaty, Annex 1

[6] The World Trade Organization's Consolidated Tariff Schedules

[7] mostly chemicals, pipes, tubes, and manufactured metal products

[8] Appendix 1