European industry counterattacks against Argentine biodiesel

Argentina is the world's largest soy producer. Stock photo of soybean silos in Argentina. [Manuel Ochoa/Shuttersotck]

A group representing European biodiesel producers filed a complaint about illegal state aid with the European Commission on 3 November. EURACTIV France reports.

It’s the latest episode in a commercial war between European biodiesel and its South American competitor. In September, the EU removed tariff barriers on biofuel from Argentina, following a WTO complaint. Now the European biodiesel producers’ organisation replies in kind.

“We lodged a complaint about unfair subsidies with the European Commission on 3 November,” said Raffaello Garofalo, secretary-general of the European Biodiesel Board, who hopes the investigation will be opened quickly because of the risks for the European industry.

Contacted by EURACTIV, the European Commission declined to confirm.

However, EURACTIV understands that the opening of an investigation is likely to be announced in November in the Official Journal of the EU.

In addition to a rising market share, Argentina’s biodiesel weighs heavily on prices: it is by far the cheapest on the market.

Citing state aid, the United States imposed this summer an import tariff of nearly 64% on the Argentinian biofuel.

As a result, Argentine biodiesel vessels destined for the American market changed course and sailed to Europe, after the news that European tariff barriers had been lifted. They had stood at between 22 and 25% of the price from 2013 until now.

A complaint against state aid and not dumping

This tariff was based on another legal basis: it had been set up on the grounds of anti-dumping. This time, biodiesel producers believe that Argentinian biodiesel enjoys both state aid and a differential tax treatment, which creates unfair competition.

The world’s largest soybean producer, Argentina has a de facto dominant position on this protein crop, which the entire planet feeds on.

Argentina imposes an export tax on other soybean products, which falls on final buyers, and benefits both producers who incorporate the tax in their selling price and the state which collects the tax.

However, Argentine biodiesel, made from cheap duty-free soybean, is not subject to this export tax. According to European biodiesel producers, this makes it very competitive, whereas it is actually highly subsidised because of this complex mechanism.

The European Commission has 45 days to indicate whether an investigation has been opened but it could also do so much more quickly because of the urgency of the situation: Argentina could literally flood the EU with soy-based biodiesel, which is made from GMOs.

Producers also hope that the Commission plans to register all Argentinian imports from the initiation of the investigation in order to discourage Argentinian exporters.

In addition to the United States, Peru and Australia impose significant tariff barriers on Argentinian biodiesel, making it hard for Argentina to defend its case in the WTO.

“They will not be able to say that the problem is Peru, the United States, Australia and Europe. The problem is Argentina, which has an unfair policy that the EU must stop,” says Raffaello Garofalo.

The EU is negotiating a free trade deal with Mercosur countries (Argentina,  Brasil, Uruguay, Paraguay) and hopes to reach an agreement by the end of 2017. But Brasil insists that there will be no deal unless Europe opens its doors to imports of beef and ethanol, a biofuel made from sugar cane.

Brazil tells the EU 'it won't move' on Mercosur talks without ethanol and beef

Brazil insists that it will not table a new offer as part of the ongoing EU-Mercosur talks until a proposal on beef and ethanol is on the table. EURACTIV Spain reports.

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