Economic interest test
How the TRA applies the economic interest test (EIT).
Businesses wanting to understand trade remedies should read trade remedies: investigating dumped or subsidised goods for information on the investigations process and the actions you need to take.
This guidance uses shortened names when referring to legislation:
- ‘dumping and subsidisation regulations’ refers to the Trade Remedies (Dumping and Subsidisation) (EU Exit) Regulations 2019
- ‘safeguards regulations’ refers to the Trade Remedies (Increase in Imports Causing Serious Injury to UK Producers) (EU Exit) Regulations 2019
- ‘TCBT Act’ refers to the Taxation (Cross-border Trade) Act 2018
This legislation has been amended, including by:
- schedule 19 of the Finance (No.2) Act 2023
- the Trade Remedies (Increase in Imports Causing Serious Injury to UK Producers) (EU Exit) (Amendment) Regulations 2023
Paragraph 25(4) of Schedule 4 and paragraph 23(3) of Schedule 5 to the TCBT Act set out the economic factors that must be considered by the TRA, where relevant, to determine whether applying measures is in the economic interest of the UK.
The economic factors include:
- injury caused to a UK industry by the dumping of the goods or the importing of subsidised goods and the benefits to that UK industry in removing that injury (for dumping and subsidisation investigations only)
- injury caused to UK industry by importing goods in increased quantities and the benefits to those producers in removing that injury (for safeguards investigations only)
- economic significance of affected industries and consumers in the UK
- likely impact on affected industries and consumers in the UK
- likely impact on particular geographic areas, or particular groups, in the UK
- likely consequences for the competitive environment and for the structure of markets for goods in the UK
- other matters that the TRA considers relevant
In dumping and subsidisation investigations, the EIT is presumed to be met unless the TRA is satisfied that the application of the measures is not in the economic interest of the UK. This is in accordance with paragraph 25(3) of Schedule 4 to the TCBT Act.
Therefore, there is a starting presumption that anti-dumping and countervailing measures are in the economic interest of the UK. This is because the TRA will have already found that dumped goods or subsidised imports have caused or are causing injury to UK industry, and the objective of applying measures is to correct that injury. In safeguard investigations there is no such presumption.
A measure is not in the economic interest of the UK if the negative impacts are disproportionate to the positive impacts. The burden of proof is on the TRA to demonstrate that this is the case. It is not enough to simply show that the costs of a measure outweigh the benefits.
The circumstances of a specific investigation are likely to require different approaches to assessing the EIT. The TRA should therefore avoid an overly prescriptive methodology.
Where the TRA has made an affirmative determination (either provisional or final), it must conduct the EIT.
Information relevant to the EIT will be supplied to the TRA at different stages of the investigation process, which are:
- responses to questionnaires sent to interested parties containing questions specific to the EIT
- responses to questionnaires sent to other affected industries and consumers (contributors)
- where applicable, further information supplied by interested parties and contributors after provisional measures have been applied
- any other relevant information supplied to the TRA during the investigation
When the Secretary of State’s decision on provisional or definitive measures is published, it will include the TRA’s findings on the EIT.
As well as being used in new dumping, subsidisation and safeguards investigations, the test is also conducted as part of extension reviews and other types of reviews, where the TRA determines that measures should be varied by extending their duration.
The process is the same in investigations and reviews; however, in reviews, the TRA can consider the EIT conducted during the original investigation and data and evidence on the actual impact of the measures since they have been applied.
The TRA can make use of any data and evidence it considers relevant. The following sources are likely to be the most important.
Questionnaire responses from interested parties and contributors
Most of the data needed for the EIT is unlikely to be publicly available and therefore must be gathered by sending questionnaires to interested parties and contributors. Some of the data gathered for other assessments (such as dumping or injury) may be relevant for the EIT, but it will also be necessary to include some specific questions relating to the EIT.
Outside of interested parties (as defined by regulation 2 of the dumping and subsidisation regulations and regulation 2 of the safeguards regulations) there will be more groups of persons or entities that are likely to be affected by measures and therefore need to be sent questionnaires to gather evidence. These are likely to include, but will not be limited to:
- devolved administrations
- downstream user industries
- distributors
- upstream supplier industries
- consumer groups
- local authorities
- trade unions
These contributors may identify themselves by registering their interest in an investigation or a review. The TRA should also be proactive in identifying and sending questionnaires to groups that are likely to be significantly impacted. This can be done by asking interested parties to identify these groups in their questionnaires. Example prompts include:
- identify any firms that you sell the good to in the UK
- identify your upstream suppliers for production of the good in the UK
- identify any UK distributors of the good
- identify the final consumers of the good in the UK
- identify any other firms or groups in the UK that may be affected, either positively or negatively, by measures on the good concerned
The TRA can contact industry experts, consider industry and other relevant publications, and review previous investigations relating to the industry.
The TRA should consider the resources of the respondents and tailor the questionnaires accordingly. It is likely that some respondents will be small or medium sized firms with limited resources and limited knowledge or experience of trade remedies investigations. Where possible, such firms should receive shorter, simplified questionnaires, to reduce the burden on them. The TRA should also consider providing additional assistance when needed.
Submissions from interested parties and contributors, including oral hearings
As well as responding to questionnaires, interested parties and contributors are likely to make submissions to the TRA which will be relevant to the EIT. Evidence may also be presented at oral hearings. These may be requested by the interested parties or organised by the TRA on its own initiative.
The TRA should consider all arguments and evidence put forward by interested parties and contributors. The validity of the evidence should be assessed to decide whether the evidence should be included in the assessment of the EIT or disregarded. The reasons for this decision should be clearly described when the TRA makes a recommendation.
Other available sources
Further data and evidence may be gathered from other sources, including those that are publicly available. Possible sources are likely to include:
- HMRC data on imports and exports
- production and price data from industry publications
- employment and industrial data from the Office for National Statistics (ONS)
- any other sources that the TRA deems relevant
Where relevant and where the data or evidence is available, the TRA must consider all of the factors set out in paragraph 25(4) of Schedule 4 or paragraph 23(3) of Schedule 5 to the TCBT Act.
These factors are listed below, starting from the most practical. The TRA can consider them in a different order where appropriate.
Economic significance of affected industries and consumers
This part of the EIT involves identifying the industries that will be affected by the proposed measures and assessing the economic significance of these industries.
The TRA should assess the current economic significance of each of these industries in relation to:
Employment information
Employment in the industry, by head count and full time equivalent (FTE), and data on average wages. This information can be gathered through questionnaires, and other sources such as ONS employment data.
Production volumes
Production volumes and value for the like good and the industry overall value-added in production of the like good and value added by the industry overall. This information can be gathered through questionnaires, and possibly from other sources such as ONS data. Care should be taken to ensure that value added calculations are done on a consistent basis to allow for comparison.
UK market share
The market share of the UK industry. This information can be gathered through questionnaires and using other sources such as HMRC trade data. Data on the market share of UK industry will also have been provided in the application for the market share test.
Value and volume of exports
The value and volume of the UK industry’s exports of the like good. This information can be gathered through questionnaires and using other sources such as HMRC trade data.
Distribution of firms and small and medium enterprises (SMEs)
The size distribution of firms, the number of SMEs, market share of SMEs and proportion of production in the industry that is accounted for by SMEs. This information could be gathered through questionnaires, however the TRA may have to be more active in identifying and seeking responses from SMEs, perhaps by contacting trade bodies or local authorities.
Consumer information
The final consumer goods that could be affected by the proposed measures and the characteristics of the consumers of these goods, including income, age, gender and anything else considered relevant. It may be possible to gather this information through questionnaires to consumer groups, however, it is likely that the TRA will have to actively seek information and make use of alternative sources.
Other relevant factors
Any other indicators that the TRA deems relevant.
Injury caused to UK industry and the benefits of removing that injury
Consideration of the EIT should include all UK industry, regardless of whether a particular producer is also an importer or has any associations with foreign exporters. This is unlike the injury assessment made under part 4 of the dumping and subsidisation regulations or parts 3 and 4 of the safeguards regulations.
The expected benefit of the proposed measure to UK industry should be assessed by the TRA. This will involve a forward-looking consideration of the proposed measures to be applied and the benefits to UK industry in removing injury.
Impacts that the TRA may consider when assessing economic impact
Expected price increase for the imported goods subject to measures
The direct impact of the proposed measure will be an increase in the price of the imported goods. All other impacts will stem from this price increase. To assess the likely size of this price increase, the TRA may consider:
- the size of the duty that will be applied
- the ability of exporters or importers to absorb the duty given their costs and profit margins
Evidence to inform this assessment may be gathered alongside the cost and price data collected in the dumping or subsidisation assessment.
The impact of this price increase on UK industry
An increase in the price of subject imports should increase demand for the like goods in the UK (and non-subject imports) and therefore benefit UK industry. The TRA should assess the magnitude of this benefit and how it will impact indicators like value added and employment.
The TRA will do this by looking at factors including the:
- extent to which domestic goods (and non-subject imports) can be substituted for the good concerned, which will affect the size of the demand shift
- extent and nature of competition in the market, amongst UK industry, and from non-subject imports, which may reduce the ability of UK industry to benefit from the price increase of subject imports
- capacity of UK industry to meet any increase in demand
- expected price response of UK industry
- expected impact on sales and production in the UK industry
- expected impact on value added in the UK industry
- expected impact on employment in the UK industry
Questionnaires sent to UK industry should include questions relating to their expected response to measures. Evidence from the injury assessment will also be relevant. Other interested parties and contributors can also be asked questions about using alternative sources and the expected response of UK industry.
Likely impact on affected industries and consumers
The TRA should assess the expected impact of applying measures on the other identified industries and consumers, compared to if they are not applied. This will involve a forward-looking consideration of the measures to be applied and their impact, quantified where possible. The TRA can consider:
impact on downstream user industries
The price increase of subject imports and likely increase in price of both domestic production and non-subject imports will increase costs to downstream user industries. The TRA should assess the impact of this increase in costs, and the impact on indicators such as value added and employment. The TRA may do this by looking at various factors including:
- size of the expected price increase of subject imports, non-subject imports, and domestic production
- significance of the like goods or goods concerned as a proportion of total production costs
- availability and price of substitute goods, which may reduce the impact of price increases for the like goods and goods concerned
- ability to switch suppliers in response to price increases – if users are tied into contracts or are unable to quickly change suppliers, then price increases could be more significant
- ability of UK industry to meet demand from downstream users for specific good types or qualities
- expected price response of the downstream industry as a result of their increased costs, taking into account the ability to absorb the cost based on their existing costs and profit margins
- expected impact on sales and production
- expected impact on value added
- expected impact on employment
Questionnaires sent to user industries could include questions relating to their expected response to measures.
Impact on consumer welfare
Price increases may eventually pass onto final consumers. To the extent that this can be identified, the TRA should aim to assess the cost to consumers. This will be dependent on:
- the size of the expected price increase based on the expected pass through of cost increases – the extent of this will be dependent on various factors including competition in intermediate and final markets, and the ability of firms in the supply chain to absorb any increases in costs
- availability of substitutes
- the extent to which the good or goods are necessities, and therefore the extent to which consumers can respond to any price increase by switching consumption to other goods
- the ability of consumers to absorb the price increase based on their income
- the expected impact on consumer welfare
Impact on other affected industries such as upstream suppliers, distributors or importers
Various other industries may have been identified as being impacted by measures, either positively or negatively. The TRA should aim to assess the magnitude of the impact, particularly in relation to:
- expected impact on sales and production
- expected impact on value added
- expected impact on employment
Evidence for this assessment may be gathered through questionnaires sent to these industries.
The following inputs are likely to be required, for at least the UK and the country subject to the proposed measures:
- bilateral trade flow data – available from HMRC trade statistics
- data for production consumed domestically in the UK – this can be gathered from questionnaires
- price data – this can be gathered from questionnaires
- tariffs – applied tariffs are available from HMRC
- elasticity of demand – this can be estimated or the TRA may make use of existing estimates
- elasticity of supply – this can be estimated or the TRA may make use of existing estimates
- elasticity of substitution – this can be estimated or the TRA may make use of existing estimates
The output of this modelling analysis will be the estimated net welfare effect of the imposition of measures on the UK economy. This will be expected to be negative, but the magnitude of the negative effect could be compared to other more qualitative factors. It may also be used to calculate a ‘cost per job’ figure, based on comparing the expected employment gains in the UK industry with the expected net cost to the economy.
Likely consequences for the competitive environment and for the structure of market
The TRA should assess the state of competition in the UK market and the expected impact of applying measures compared to if they are not applied. The objective of this part of the EIT is to make sure that the competitive environment is not adversely affected by the proposed measures – the TRA can consider short-term impacts against long-term impacts, using a more qualitative assessment of:
1. The existing structure and state of competition in the market - the TRA should assess how the market currently functions and the degree of competition including:
- market shares and market concentration – each firm’s (both domestic and foreign) share of the UK market could be calculated to assess the degree of market concentration – a high degree of concentration may indicate a lack of competition
- pricing behaviour of firms in the market to assess the degree of price competition – a lack of movement in prices may indicate a lack of competition
- the profitability of firms to determine if supernormal profits are being earned, which may indicate a lack of competition
- level of innovation, range of goods and quality
The evidence for this assessment will come primarily from questionnaire responses.
2. Any existing issues harming competition in the market - the TRA can consider any existing issues affecting competition which might include:
- high levels of market concentration
- high barriers to entry
- capacity constraints limiting the response to changes in price or demand
- common ownership issues vertically or horizontally e.g. of competitors, suppliers, distributors
- significant buying power over supplier
- coordination or collusion between producers
- potential predatory behaviour
- weak customer responsiveness e.g. because of high switching costs or a lack of information
Evidence of such issues is likely to largely come from responses to questionnaires and submissions from interested parties and contributors.
3. The impact of applying measures on the competitive environment and structure of the market - the TRA can consider how the application of measures is expected to affect competition in the market by looking at the:
- extent to which measures would exclude the subject imports from the market, and therefore affect market concentration
- ability of other imports, or new UK producers to enter the market in response to the application of measures
- long-term viability of UK industry if measures are not applied, and the impacts their exit could have on competition
The outcome should be, as far as possible, a clear outline of the existing competitive environment and market structure, and an assessment of how applying measures will affect this. If applying measures is expected to have a negative impact on competition, this should be weighed negatively in the overall economic interest assessment, alongside the consideration of other factors.
Similarly, if applying measures is expected to have a positive impact on competition, this should be weighed positively. The existence of competition issues in the market alone is not justification for a failure of the EIT.
Likely impact on particular geographic areas or particular groups
The TRA should assess if the impact of measures is concentrated in particular geographic areas or on particular groups. Evidence for this is likely to come from responses to questionnaires, particularly those submitted by the devolved administrations or local authorities, supplemented by any publicly available regional economic data.
The TRA should consider:
- the extent to which affected industries or consumers are located in particular geographic areas including:
- the production locations of each of the affected industries
- the locations of other functions such as headquarters
- data on employment and added value at these locations
- the economic importance of the affected industries to the particular geographic area including:
- the proportion of employment and added value the industry brings
- the availability of alternative employment opportunities
- local or regional deprivation data, available from ONS or regional offices
- links to other industries in the area
- the impact of applying measures on these geographic areas – in particular, the expected impact on indicators such as employment and value added
- the extent to which the measures will impact particular groups including:
- the main affected groups, which are likely to be particular consumer groups, or possibly particular groups of employees
- data on the characteristics of these groups including income, age, gender and anything else the TRA considered relevant
- the impact of applying measures on these groups – in particular, the expected impact on welfare
The outcome should be, as far as possible, a clear identification of the geographic areas or groups affected by the proposed measures and an assessment of the impact of applying measures for each of these. If the costs or benefits of applying measures are expected to be concentrated in particular regions or on particular groups, this may be given more weight than costs that are more dispersed. This should particularly be the case where the affected industries are highly important for the region’s economy, or the region is deprived economically.
Other factors the TRA considers relevant
There may also be other economic matters that the TRA considers relevant in particular cases. These should be considered and weighed alongside the other economic factors as the TRA deems appropriate.
If, having considered all the relevant factors, the TRA considers that the measures will have a negative impact on the UK economy that is disproportionate to the need to remove injury caused to UK industry, then it should determine that the EIT is not met.
In the event that there is significant negative impact, the TRA should consider whether and how varying the proposed measure might be appropriate. This could include:
- limiting the duration of measures to less than the standard 5 years
- applying specific duties or minimum import prices instead of ad-valorem duties
- making a decision that the EIT has not been met only for specific goods
In the investigation report, the TRA should clearly present the evidence that it has considered and its reasoning for reaching its decision.
In new dumping and subsidy investigations where the TRA makes a provisional affirmative determination and intends to recommend a provisional measure, it will conduct the EIT to determine whether the application of the provisional measure would be in the economic interest of the UK. The TRA will advise the Secretary of State accordingly and provide the rationale for its conclusions. The Secretary of State must have regard to the TRA’s advice on whether a provisional measure would meet the economic interest test if the Secretary of State considers it in the public interest to apply a provisional measure.
Before completing a new dumping and subsidy investigation, the TRA will publish its Statement of Essential Facts (SEF). The SEF will set out, amongst other matters, the TRA’s intended final recommendation including any definitive dumping or countervailing measures and, if applicable, alternative options. As part of developing options for measures as part of an overarching recommendation within the SEF, the TRA will also consider whether those options meet the EIT. The TRA will explain whether its recommended measure(s) and any alternative options meet the EIT and provide the rationale for its conclusion in the SEF. The TRA will allow an appropriate period for interested parties and contributors to provide comments on the SEF.
When the TRA provides the Secretary of State with its final recommendation in a new dumping or subsidy investigation, it must advise the Secretary of State whether its recommended measure(s) and any alternative options would meet the EIT and the rationale for its conclusions.
The Secretary of State must have regard to the TRA’s advice on whether the provisional and definitive measures the TRA recommends meet the EIT. However, the Secretary of State is not prevented from imposing measures if the TRA advises that they would not meet the EIT, as the Secretary of State may consider factors the TRA cannot.