The European Union, opening up a new transatlantic trade spat, will probe whether soaring imports of US biodiesel break global trade rules because of subsidies, the EU's executive Commission said on Friday. "We have always said that the EU will not tolerate unfair trade practices and will pursue vigorously any well-founded complaint," said Peter Power, a spokesman for EU Trade Commissioner Peter Mandelson.
In April, EU biodiesel producers complained that they were being hammered by US subsidies that were distorting the growing international trade in plant-based fuels.
The Commission on Friday said there was enough evidence to warrant anti-subsidy and anti-dumping investigations. European producers say their US rivals benefit from big subsidies when they blend biodiesel with small amounts of mineral diesel in the United States, creating unfair competition that has put much of EU industry out of business.
The European Biodiesel Board said it was crucial that Europe took measures quickly against the so-called B99 blend imports which it said broke World Trade Organisation rules. "It will be essential that countervailing measures targeting B99 imports are imposed by the EU authorities in a reasonable timeframe," it said in a statement. "In the absence of such measures, the situation of the EU biodiesel industry would become even more critical than it is at present."
But the US biodiesel industry hit back, calling the European complaint a "protectionist ploy." "The allegations of harm levelled by the European biodiesel industry in these trade complaints are baseless," said Manning Feraci, an official at the National Biodiesel Board in Washington. US imports into the EU are larger than from any other country and increased from about 7,000 tonnes in 2005 to about 1 million tonnes in 2007, the Commission said.
US producers deny their exports are behind Europe's problems, pointing to local factors such as biodiesel taxes in Germany and the rising price of the raw materials. They suggest they might retaliate with action of their own, saying EU fuel specifications discriminate against imports.
Feraci did not mention a counter-case specifically, but said the US industry would "employ every tool available to challenge existing EU trade barriers that provide preferential treatment to European biodiesel producers."
Brussels now has up to nine months, until March 13, 2009, to decide whether US imports need to be hit with duties on a provisional, six-month basis, and after a further six months it could extend them definitively, usually meaning for five years. Any proposal by the Commission to impose duties would have to be backed by EU member states.
European producers pointed to US federal excise and income tax credits and a programme of grants to finance increased capacity, plus state-level subsidy programmes, as evidence in the anti-subsidy case, the Commission said.
The Commission wants to encourage the use of biofuels as part of its strategy to tackle climate change. It said the decision to launch the investigations into the US imports was not linked to that policy. Biofuels have come under attack by many scientists and environmental groups that contend their production has contributed to food price inflation, depleted rainforests and failed to save substantial greenhouse gas emissions.
The EU is drawing up criteria it hopes will ensure biofuel it consumes will be sustainable and effective in cutting carbon dioxide emissions. Several non-EU producers, such as Brazil and Indonesia, are watching the process closely amid concerns that tough criteria could pose a barrier to their exports. Biodiesel is the second most important biofuel and is mainly produced from vegetable oils such as soybean oil, rapeseed oil and palm oil. Other feedstocks such as tallow and used cooking oil are also used.
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