It took three and a half years for the General Court in Luxembourg to rule that a now-lapsed three-year safeguard on imports of Indica rice from Cambodia and Myanmar was illegal.
EU judges in essence said that the European Commission had not defined the allegedly hurt industry appropriately, that it had made “manifest errors” in calculating price undercutting and that it violated the rights of defence by not adequately disclosing information on which it based its price adjustment calculations.
Despite the fact that it covers a measure that lapsed in early 2022 after three years as foreseen by the rules, the dense 19-page ruling is nonetheless a milestone in EU trade policy jurisprudence.
Indeed the judgement covers procedures related to import safeguards under the EU’s General System of Preferences regulation and not the EU’s general trade defence instrument rules. It will likely reassure developing country exporters and EU importers relying on the GSP regime.
Cambodia, which sued the EU over the measure, benefits from duty-free-quota-free imports into the EU under Brussels Everything-But-Arms initiative favouring the world’s ‘least-developed’ countries.
The EU has a highly protectionist import regime for rice, which fetches a price of €175 per tonne of imports. Only the world’s poorest countries such as Cambodia and Myanmar have duty-free quota-free access and have grown competitive in this industry in recent years.
In time for GSP regulation update
The ruling is likely to play a role in defining the final shape of the EU’s update to its General System of Preferences regulation.
Negotiations among member states over the renewal due by late 2023 are stuck over mainly Italian qualms about imports of rice from poor countries and Rome’s desire to easily have recourse to the type of import safeguard that was slapped down today by the EU’s judges.
The request for an import safeguard was made at the behest of the Italian government in 2018 which moved to protect the country’s rice industry – indeed its rice millers and not so much its rice farmers.
Protecting industry over farmers
The ruling includes a lengthy exposition of what the rules of origin of the GSP regulation say. On this basis it slaps down the commission’s calculations which exclude from the scope of the measures rice industry groups that import unprocessed or lightly treated rice into the EU for further processing in Europe.
The judges say that the commission “erred in law and made a manifest error of assessment by arbitrarily limiting the scope of its investigation concerning the injury caused to the [u]nion industry solely to millers of milled or semi-milled Indica rice processed from paddy rice grown or harvested in the European Union”.
“The applicants’ complaints concerning the commission’s misinterpretation of the concept of ‘Union producers of like or directly competing products’ must therefore be upheld,” the court concludes.
The judges also find that the commission’s investigating services “did not rely on direct evidence or reliable and relevant circumstantial evidence supporting [their] decision to make adjustments in the context of the undercutting analysis.”
It is not clear at the time of writing what the commission will now do. It could leave the case to rest or seek an appeal out of principle. It might come under pressure to appeal given the nature of the new far-right Italian government.