EU Seeks New Trade Deal to Cut Chemical Tariffs

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By Bryce Baschuk

Nov. 29 — The European Union plans to launch new trade negotiations next year aimed at eliminating tariffs on trade in chemical products among a select group of World Trade Organization members.

The EU's trade ambassador to the WTO said Brussels is reaching out to its trade partners to see whether there's any appetite for an accord to cut tariffs on an array of chemical goods, including petrochemicals.

A future chemicals agreement could exceed the value of the WTO's $1.3 trillion Information Technology Agreement and could benefit U.S. chemical companies like Dow Chemical Co., Exxon Mobile Corp., DuPont Co., PPG Industries, Chevron Phillips Chemical, and Praxair Inc.

Global exports of chemical goods reached $1.86 trillion in 2015 and the sector is responsible for 11.6 percent of all exports, according to WTO statistics.

New Plurilateral Prospects

EU Ambassador Marc Vanheukelen said Brussels would contact the incoming U.S. administration to see if there's any interest in Washington for a new chemicals deal.

“We are exploring this with the U.S.,” Vanheukelen said in a Nov. 29 press briefing in Geneva. Vanheukelen said there might also be interest from Australia, Canada, Norway, Iceland, Switzerland, and Turkey, among others.

Over the past few years, WTO members have generally shifted toward plurilateral trade negotiations, which are forged among like-minded countries rather than the membership as a whole.

Plurilateral trade deals extend tariff concessions on a most-favored-nation basis to all WTO members once a critical mass threshold of roughly 90 percent of global trade in such products is covered.

Chinese Participation Essential

China's participation in the deal is seen as essential because Beijing is responsible for $129 billion or 9.9 percent of all global exports in chemicals, according to WTO statistics.

“If they're not on board, you may forget it,” Vanheukelen said. He acknowledged that Beijing is “pretty hesitant” because they are concerned about so-called free-riders to the deal.

Plurilateral deals are unique in that they offer tariff cuts to non-participating WTO members, or free-riders, without requiring them to provide tariff concessions of their own.

The Chinese delegation to the WTO said it “was not in a position to support new plurilaterals or sectorals” during a recent meeting of the WTO committee on market access.

MC11 Deliverable?

The WTO's previous work in the area of chemical tariffs could ideally speed the negotiating process and potentially tee up a final deal for the WTO's 2017 ministerial conference in Buenos Aires, Vanheukelen said.

There is an existing agreement on what tariff lines encompass the chemicals sector “so there need not be a discussion on product lines to be covered by a plurilateral,” Vanheukelen told Bloomberg BNA.

The U.S. and more than two-dozen WTO members are participants in the Chemical Tariff Harmonization Agreement (CTHA), which applies duties ranging from zero percent to 6.5 percent on most chemicals.

The average U.S. duty for the chemical sector is 3.5 percent, according to the Office of the U.S. Trade Representative.

Since 2001, WTO members have pursued a sector-specific agreement to fully eliminate tariffs on chemicals covered by the CTHA that would include non-participants like Brazil, India, Mexico and Russia, among others.

As part of the Doha round negotiations, WTO members also considered proposals aimed at reducing non-tariff barriers to trade in chemical products.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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