INSIGHT: Trade talks just get tougher

29 December 2008 14:45  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Freer trade has been a vital driving force in chemicals for more than two decades and in a time of recession is key to re-starting growth. Yet the stalling of the Doha round of trade talks does not augur well for the future.

Further liberalisation of chemicals trade would boost the entire economy, both the industrial and agricultural sectors, the world’s major chemicals trade associations say. Chemicals tariffs in the OECD (Organisation for Economic Cooperation and Development) countries are already at a relatively low and harmonised level but bringing other tariffs down would help boost globalisation.

The pace of globalisation is already fast and is helping drive the emerging economies in the production, trade and consumption of chemicals. The industry generally believes that a global approach to tariff elimination would be broadly beneficial.

The real danger is that the current round of trade talks – the latest discussion round did not materialise in December as planned – will disintegrate into a series of multinational deals that will eat away at the drive for global harmonisation.

And the trouble is that the way in which current talks are developing suggests that a broader agreement of non-agricultural market access (NAMA) might be settled before passing on to specific sectors like chemicals.

“We believe that a chemical tariff elimination agreement would greatly contribute to raising the overall level of ambition of the NAMA negotiations,” the US, Canadian, European and Japanese, chemical trade associations said earlier this month.

“We suggest to agree on the modalities of and participation in a chemicals tariff elimination agreement at the same time as the broader NAMA modalities, and not subsequent to such modalities as foreseen in the December NAMA text.”

The major chemical trade associations want to see a chemical tariff agreement encompass the OECD countries and the leading emerging economies with substantial chemicals production and what they call a “viable” chemical industry, including Brazil, China and India. They do not want exceptions to product coverage and limited ‘special and differential’ (S&D) provisions that do not undermine the ultimate objective of the agreement. S&D provisions should also be time limited, they say.

The Doha round has stumbled and been revived many times before, but protectionist tendencies are on the rise and only likely to be exacerbated as the world’s economies slip deeper into recession.

The chemical industry in some developing economies understandably does not want to see a global agreement pushed through that ultimately would be to its detriment. Brazil’s chemical industry trade association Abiquim, for instance, earlier this month made it plain that it opposed cuts in import tariffs being sought by the US chemical industry through the US government.

Abiquim director of foreign commerce issues, Rebato Endres, described the latest US proposals as “unfeasible” for the sector.

“We have no means to agree with something like that, especially now that we are all in such a difficult financial situation,” he said, referring to the latest US government proposals.

According to Abiquim, Brazil’s import tariffs on chemicals vary between 2% and 14% but with Mercosur partners some tariffs are as low as 0%.

The Abiquim view demonstrates how tricky the current round of talks has become. The world’s big chemicals players would like to see tariffs reduced in a harmonised way but as trade balances in the emerging economies suffer the task just becomes harder.

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By: Nigel Davis
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