By Andreas Geiger - 07/23/08 06:56 PM EDT
After focusing its attention on “dumped” imports from China and other Asian-Pacific countries in recent years, the EU is once again eyeing imports from the United States. The commodity the two sides used to fight over was steel. The new battle is over biodiesel.
A whole host of issues are at play: food shortages in developing countries, oil supply and demand, protection of rain forests, carbon dioxide emissions. Both the EU and the United States have embraced biofuels as a way to reduce reliance on oil and curb greenhouse gas emissions. Even though Europe has recently expressed second thoughts about mandating production of these new fuels — which can be made from corn, rapeseed, wheat or sugar — European manufacturers continue to push the EU to investigate whether U.S. biodiesel producers receive trade-distorting government aid. That aid, the EU producers contend, allows their American competitors to “dump,” or sell the product below cost, in European markets.
The subsidies in question include federal tax credits and grants to finance biodiesel plants. The specific focus of the latest case concerns the so-called B99.9 blend. In its anti-dumping complaint, the European Biodiesel Board (EBB), which represents companies responsible for 80 percent of EU biofuel production, claims that U.S. subsidies for the blend preceded a rapid rise in exports to EU countries. The result: biodiesel prices here fell 30 percent over the past two years.
The EBB argues that, under U.S. law, producers of the B99.9 blend qualify for subsidies of approximately $320 per ton. The blend is made by mixing pure biodiesel (often cheaply imported from countries like Indonesia or Malaysia) with 0.1 percent or less of regular diesel fuel. This 99.9 percent blend can then be resold in Europe as pure biodiesel, where it is eligible for yet another blending subsidy.
The EBB also claims that the U.S. tax credits prevent EU producers from growing their market share — which they desperately need to do to reach the EU’s ambitious target of achieving a 10 percent share for biofuels in transportation fuels by 2020. (EU officials have said recently they may reconsider that mandate in light of rising food prices.)
If the European Commission determines that the conduct of the U.S. has an “adverse effect” on the Europe’s biodiesel industry, it could impose anti-dumping duties on American biodiesel imports. The European Commission can impose provisional anti-subsidy duties for four months and provisional anti-dumping levies for six months. The EU’s Council of Ministers can then extend those measures for five years.
Peter Mandelson, the EU commissioner of external trade, said the commission “will not under any circumstances tolerate unfair trade, and will pursue vigorously any well-founded complaint.”
American biodiesel manufacturers countered by arguing that the poor performance of the European biodiesel industry is not connected with U.S. exports. The problem, according to the U.S. National Biodiesel Board (NBB), is that the European biodiesel plants use a more expensive feedstock and it is getting pricier. The NBB has accused the EBB of resorting to “a protectionist ploy.’’
The stakes are high for the entire European biofuels industry. Biodiesel makes up 80 percent of the EU’s total production of biofuels. Most of the biodiesel imported by Europe comes from the U.S. The volume of American imports has grown from 7,000 tons in 2005 to more than 1 million tons last year. The NBB now has asked the U.S. trade representative to act. But the decisions in this case will be made within the EU. That doesn’t bode well for NBB; provisional anti-dumping measures turn into definitive measures in more than 95 percent of the anti-dumping cases ruled on by the EU.
Geiger is founder and managing partner of Alber & Geiger, a leading EU government relations law firm with offices in Brussels and Berlin. Before that, Geiger was head of the EU Law Center of Ernst & Young, and president and CEO of Cassidy & Associates Europe. He has written a handbook on lobbying the EU.