- The Washington Times - Sunday, October 30, 2005

Special correspondent John Zarocostas, who is based in Geneva, interviewed Rene Van Sloten, director for international trade and competitiveness at the Brussels-based European Chemical Industry Council.

Question: In the Doha, Qatar, negotiations to lower barriers to global trade, one of the issues on the table is to try to reduce chemical tariffs and, hopefully, eliminate them. What are the prospects of this idea getting the necessary support at the Hong Kong Ministerial summit in December?

Answer: Well, for the idea to fly, a number of critical conditions have to be fulfilled.

The chemical sector’s proposal will only fly if the overall conditions for the round are established. That means we absolutely need one precondition, which is that we make progress on agriculture. Without progress on agriculture, the round will fail.

It also requires all parties in the negotiations, including the developing countries — we mean the more advanced developing countries — to make concessions and be willing to lower the tariffs. If these conditions are fulfilled, if everybody sees the developed countries are willing to make real concessions on agriculture — not just the European Union, but also the United States — then the conditions will be set for overall tariff reductions.

And once the overall tariff reduction formula is agreed [for industrial goods], only then is there a way for chemical tariff cuts. It is an illusion to think that we will have tariff reductions only of certain sectors. We need overall an ambitious tariff-reduction formula — the “Swiss” formula [supported by many countries, including the United States, but so far not by Argentina, Brazil and India] to really bring down the tariffs across the board for all countries.

Q: Assuming you get to that step, one of the critical points mentioned is that you need a critical mass of emerging countries to join. Which in your view are the countries that must come on board?

A: We have identified in our proposal for the World Trade Organization (WTO) some 30 countries that we would like to join this proposal. Those are the countries that have a chemical production exceeding $3 billion.

So on that basis, we have established a list, and it is clear a critical mass of those countries needs to be on board. We need all the major emerging countries — like India, Malaysia, and Indonesia, Brazil — that have a significant chemical industry. From there, we can see how to proceed. If countries have difficulty within the set timelines, maybe we can convince them to the extent we give them more time.

Q: A longer phase-in for developing countries?

A: It depends on the level of their duties.

If your duties are above 25 percent, we’re giving 15 years to come down [to a worldwide] tariff. Ten or 15 years coincides with many of the recent bilateral and regional changes being discussed.

You see the free-trade agreement of the Americas, you see the EU-Mercosur [Argentina, Brazil, Paraguay, Uruguay] one. If you add these up, you pretty much see we’re approaching a tariff-free world for chemicals. So what you still need is to consolidate, bring them all together.

We’ll get there. Countries are not that far off from this objective as they may think, on the basis of their duties. If you see what is happening in practice already, even countries like India, which is often cited, they have reduced tariffs dramatically over the last two years.

Q: Is this being driven by globalization and the need for people to lower the cost of production inputs?

A: Absolutely. This is also the message we are spreading in Geneva to the developing countries, which is to say, “If you want to survive as a global player in the global competition, you cannot afford to penalize your processing industry by raising a higher tariff on your textile industry, your electronics industry, your automotive industry.” They are all in need of lower duties on chemicals. Of course, there is the link with agriculture in the negotiations, but I also believe people need to see their inherent interests in the nonagricultural, market-access negotiation, because by reducing tariffs you make chemicals as an input factor cheaper, and you increase the competitiveness of your overall manufacturing industry.

Q: What are the projections for European chemical exports in 2006? How does it match with what your counterparts are doing in America or Asia?

A: The value of euro has a big influence on this. So far, we are able to maintain our positive trade balance in chemicals at slightly more than 35 billion euros — down slightly from the 40 billion we had two years ago. But still, compared to other regions like the United States, Europe is a major exporter. We are exporting between 25 and 30 percent of our production to the world markets. In the U.S., that part of the export business of domestic production is much lower. So yeah, we are heavily dependent on the trade.

It depends a lot on factors, such as the oil price, the value of the euro. So far, the export business is maintaining well.

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