The European chemical industry enjoys access to key raw materials at zero or low import duties (e.g. for oil and naphtha). A significant step was the conclusion in 1995 of the Chemical Tariff Harmonisation Agreement (CTHA) in the WTO (World Trade Organisation) Uruguay Round, which brought about a substantial reduction of import duties on chemicals. This approach was crucial for the success of Europe’s chemical industry - where feedstock can make up as much as 60% of the production cost. And this model has proven its worth for all countries which adopted the CTHA when acceding to the WTO.
The issue of fair and secure access to natural resources is of pivotal interest for the European chemical industry, as it is highly dependent on such raw materials and sensitive to artificial price distortions. Europe itself is relatively poor in natural resources, so most of the required materials are imported from other parts of the world and processed in Europe. Fair pricing of raw materials is a vital in order for the European chemical industry to be able to compete globally and maintain Europe as a leading chemicals production location.
Cefic is advocating for more robust global governance under the aegis of the World Trade Organisation. We support European Commission initiatives to obtain better discipline on export taxes/restrictions in the WTO (including through dispute settlement) or in bilateral free trade agreements.
Although the overheated situation on the raw materials market in 2008 has temporarily disappeared owing to the economic downturn, the issue of access to raw materials remains highly important for European industry. This is because our concerns relate not only to prices but also to availability and relative prices. A growing trend is that countries rich in resources are increasingly introducing discriminatory practices, limiting the availability of their raw materials to other markets in order to support their domestic downstream industries.
The European chemical industry is particularly and increasingly hit by practices such as double pricing, export restrictions and export taxes, e.g. for ethylene feedstock, gas, palm oil or key minerals such as fluorspar, yellow phosphorous and rare earths. The chemical industry does not contest the right of countries to decide on the exploitation of their natural resources. However, we do object to countries subsidising their downstream industries by artificially increasing the price on world markets for their competitors.
Cefic contributed to the Commission’s raw materials initiative setting out targeted measures to secure and improve access to raw materials, including renewable ones, for EU industry. The Commission used the input from its public consultation on that initiative as a basis for a new Communication on raw materials, published in February 2011.
Cefic will continue to support the Commission’s vigilant stance regarding the trade aspects of the raw materials issue, backing every endeavour to strengthen multilateral governance.