1. Global changes and their impact on the chemical industry René van Sloten Trade policy today and tomorrow SCHP ČR conference, Prague, 23 May 2006

2. 2 European Chemical Industry Council (Cefic) about 28,000 small, medium and big chemical companies in Europe about 1.2 million employees about 32% of worldwide chemical production (2004) headquarters of Cefic is Brussels, Belgium homepage: www.cefic.be

3. 2.1 EU chemicals trade balance

4. 4 The Challenges for Europe: Structural Shifts Transformation from Industry Society into Service Society Changes by Information and CommunicationTechnologies Demographic Trends Sustainable Development Global Competition EU Enlargement EU Governance The Challenges for Europe: Structural Shifts

5. 5 Chances and Risks for the European Chemical Industry 123 European Chemical Industry 2015  Market& Customer Orientation  Sustainability Asian Competitors Middle East Competitors GlobalEconomyCustomerIndustries European Authorities Balanced Chemical Policy Incentives for Innovation Non-bureaucratic regulations New Technologies (Opportunities& Threats)  Restructuring  Innovation

6. 6 Market Trends Globalization “World-scale” plants High degree of standardization Increase in trade volume Production in non-traditional countries Sourcing, production and trade is global

7. 7 $505.8 $101.1 $650.3 $70.8 $74.9 $541.5 Size of Regional Chemical Industries, 2003 ($ billion)

8. 8 World Chemical Sales & Trade (euro billion) Average growth p.a. (1991-2004) Output: 5%, Export 8.2% Source: Cefic, ACC, VCI and Global Insight

9. 9 19902000 Developed countries’ share of world chemical exports 83.5%79.3% Developing countries’ share of world chemical exports 16.5%20.7% World chemical exports (billions) $308.8$570.2 Source: UNCTAD Change in Share of World Chemicals Exports

10. 10 Objectives Cefic Provide a favourable trading environment to European Chemical Industry by Improving market access to third country markets Ensuring a balanced trade-regulatory environment Ensuring fair trade

11. 11 Improving market access Multilateral in the Doha Round Reduction of tariffs Reduction of non-tariff barriers Negotiations on trade facilitation Improvement of the WTO dispute settlement system Bilateral and regional trade negotiations EU-GCC, EU-Mercosur WTO Accession negotiations

12. 12 Balanced trade controls Chemical industry subject to many trade and production control regimes (Chemical Weapons Convention, Australia Group, drug precursors, Montreal Protocol) Cefic agrees with controls provided these are instrumental and proportionate to the objectives pursued, not overly burdensome and least trade restrictive Cefic strongly stresses the need for global level playing field

13. 13 Ensuring fair trade Cefic positions: Cefic fully supports the principles of free and fair trade Industry needs trade instruments against unfair trade practices The WTO rules should be implemented in a more uniform and harmonised manner EU Chemical Industry should seek support from Cefic if internationally agreed trade rules are breached (Cefic trade policy service)

14. 14 1.Dumping 2.Injury 3.Causal link 4.Community Interest Anti-dumping: Legal Requirements

15. 15 Role of Cefic 1.Advise Community producers 2.Ensure respect of legal rules 3.Legal/economic analysis of the case 4.Act on behalf of the Community producers 5.Monitoring of the anti-dumping measures in place (i.e. circumvention action, interim review request…) 6.Advocacy activity with the support of the national chemical federations and the EU companies concerned

16. 16 International Council of Chemical Associations (ICCA) Council of chemical industry associations from: Australia, New Zealand, Japan, Europe, North and South America, and South Africa Represent approximately 75% of global chemicals production World chemical production is $1.3 trillion annually and 40% of this is traded internationally Develop industry positions and programs on international issues: health, safety, and the environment; international transport safety; intellectual property; trade policy; elimination of chemical weapons Promote and coordinate Responsible Care® and other voluntary chemical industry initiatives

17. 17 Chemical Industry Sectoral Proposal Chemical Tariff Harmonization Agreement (CTHA) –Voluntary agreement in Uruguay Round –Reduce tariffs to 5.5% and 6.5%, some lines to 0 –51 participants, including new EU members –Pharmaceutical zero-for-zero Doha Round: Elimination of chemical tariffs –Chemicals classified under HTS chapters 28-39 –Maximum flexibility in staging Non-tariff barriers –Export taxes, import licensing, quotas, trigger price mechanisms, discriminatory standards –Regulatory divergence

18. 18 Chemical Industry Sectoral Proposal Country coverage Countries with a viable chemical industry Chemical production of $3 billion or more per year Product coverage HTS Chapters 28-39 with no exceptions Staging Current CTHA participants: 5 years Others Bind all unbound tariff lines Eliminate from bound rates Tariff LevelTime Frame 25% or less10 years more than 25%15 years Maximum flexibility for sensitive products

19. 19 Why Chemical Tariff Elimination? Tariff liberalization benefits chemical industries worldwide Due to the globalized and capital intensive nature of this sector, chemical industries are globally competitive wherever they are located Competitive chemical industries rely on chemical inputs. Countries with low chemical tariffs make themselves more attractive for investment in the chemicals sector Tariff liberalization benefits all sectors Chemicals are inputs into all manufacturing and agricultural production. Lower chemical tariffs reduce input costs and prices of intermediate and finished goods.

20. 20 Why Chemical Tariff Elimination? (cont’d) Tariff liberalization supports economic development Improves access to products that can increase agricultural crop yields and control animal and plant diseases. Improves the competitiveness of downstream producers in domestic and foreign markets. Improves affordability of and access to consumer goods for more people worldwide.