In their new paper published by the International & Comparative Law Quarterly, Associate Professor Weihuan Zhou and Victor Crochet of Van Bael & Bellis deconstruct the historical and current use of the anti-circumvention instrument and provide suggestions about how countries being unfairly targeted by this instrument can push back and prevent economic risks.
This paper discusses the latest development of the so-called anti-circumvention instrument particularly in the EU. The anti-circumvention instrument is a little-known mechanism devised by the European Communities (EC) (the precursor to the EU) and the United States of America (US) in the 1980s to address the issue of Japanese companies trying to avoid trade defence measures by setting ‘screwdriver’ plants abroad to assemble parts and components of products targeted by trade defence measures at little cost. It was used to extend trade defence duties imposed on imports from Japan to products assembled abroad by using parts originating from Japan.
However, this instrument is now increasingly used to cover not only ‘screwdriver’ plants but also fully scoped downstream factories abroad, resulting in the automatic extension of the trade defence duties imposed on the parent companies to such overseas investments. This expansive (ab)use has profound implications for international investment activities and global supply chains. It is no longer only developed countries’ multinationals which are moving their operations to developing countries, but emerging market companies that are increasingly engaging in production abroad. The anti-circumvention instrument might hinder such investment, the development of countries in need of foreign investment and risk preventing developing countries from accessing opportunities to integrate into the global economy. Therefore, affected governments should consider taking international legal action to bring developed countries to the negotiating table to put a halt to this abuse of the anti-circumvention instrument. The authors suggest that a legal challenge against the anti-circumvention instrument would have a high chance of success. Such legal action could be used as a stepping stone to bring developed countries to the negotiating table and, hopefully, have them agree to put the lid back on the anti-circumvention instrument.
The full paper can be downloaded here.
Associate Professor Weihuan Zhou’s research may be found at SSRN, Twitter @WeihuanZhou, and LinkedIn.
Victor Crochet practices international and European trade law at Van Bael & Bellis. He is a PhD student at Cambridge University.