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Home > Blogs > Anthony Harrington > WTO Bali deal set to boost EU chemicals exports

WTO Bali deal set to boost EU chemicals exports

WTO Bali deal set to boost EU chemicals exports Anthony Harrington

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Until the World Trade Organisation’s (WTO) historic “Accord” in Bali, in November - when all 159 members, for the first time since the organization was founded in 1996, agreed unanimously to lower protectionist tariffs and expedite global trade - it had seemed as if the EU’s chemicals sector was doomed to lose more and more market share to emerging market economies in general, and to China in particular. The EU’s trade body for the chemicals sector, the European Chemicals Industry Council (Cefic), had noted in a report entitled Horizon 2015: Perspectives for the European chemical industry that, although the European chemicals sector consists of some of the biggest names in the industry, it is gradually losing ground to both the Americas and China.

The ground lost to Asia in the market leadership stakes could be dramatic, Cefic warns, unless the EU can somehow turn the tide:

“In 1992, the EU was the world’s largest chemicals producing region, with 32% of world output. Whether the EU retains a significant share of the global chemicals market by 2015, however, will  largely depend on industry and European authorities acting together to take appropriate measures.”

The point that Cefic wants everyone - not just those involved with the chemicals sector - to take, is that this sector impacts upon just about every other facet of the economy, since it is the supplier to virtually all the other sectors. People tend not to realize that chemicals make up about a third of the cost of every automobile manufactured. The same or a similar proportional effect can be traced within other sectors. The latest global breakthrough, 3D printing, which looks to be transforming traditional manufacturing, is indissolubly linked with the chemicals sector. The metal oxide powders that 3D printers use to build up “printed” parts, layer by layer, rely on the partnership between the extractive and chemicals sectors.

Commenting on the WTO's Bali Accord, Hubert Mandery, Director General of Cefic says:

"Chemical exports are part of Europe's economic lifeblood. This deal will make it easier for European customers to supply their customers abroad and lower the cost of trade."

International trade in chemical products was valued at €2.15 trillion in 2012, with total trade activity between the EU and the rest of the world worth some €238 billion. Suppliers face a number of barriers to trade and cumbersome customs procedures rank pretty high up the list, Cefic says. In its statement welcoming the WTO's breakthrough agreement, they asserted that:

"Delays of this sort can hold up industrial production schedules and increase the costs of chemical producers and users by forcing them to hold extra buffer stocks or by extending the time goods are in transit."

European producers often struggle to compete against local producers in emerging markets, despite having superior products to offer, precisely because of the barriers represented by unduly restrictive local procedures, which act as a pseudo tariff, protecting inefficient local producers from foreign competition.

The international Chamber of Commerce estimates that the WTO deal will lower the cost of trade by as much as 10% to 15%, adding around a trillion dollars to global output.

Cefic's Mandery also threw his organization's weight behind the EU's shale gas initiatives. Noting that the European Commission is poised to release a framework for the extraction of shale gas, Mandery pointed out that, in North America, shale gas production has:

"[...] put the New World back on course for energy self-sufficiency, lowered the cost of energy and industrial feedstock and unleashed $100 billion worth of investment in new chemical industry capacity, not to mention billions worth of investment in other sectors."

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Further reading on trade agreements:

Tags: Accord , Bali , Cefic , chemicals industry , energy costs , European Chemicals Industry Council , European Union , globalisation , investment , shale gas , supply chain , trade , World Trade Organisation , WTO
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