EU Chemicals Companies Eye Chinese Investments, Not Doha

31.10.2011 -

Europe's chemicals firms can thrive without the successful conclusion of world trade talks as long as they can set up shop in Asia's booming markets, according to an industry executive.

"Trade policy in industry is not so important anymore," Reinhard Quick, who heads the Brussels office of the German Chemical Industry Association, told trade experts and lawyers in Brussels recently.

With no real hope remaining for the Doha round of global trade negotiations, which have reached deadlock after almost a decade of talks, Europe's chemicals industry should avoid costly tariffs by investing in and accessing the booming markets of China, Brazil and India, Quick said.

"If the market share in Asia rises we can invest in Asia or export to Asia. The decline of the European chemicals industry is not a threat, it's an opportunity," he said.

China, India and Brazil have developed a voracious appetite for chemicals for use in sectors from manufacturing to agriculture, cosmetics and construction, according to industry data.

Between 2005 and 2010, China's chemicals consumption grew by more than 23% per year, while Brazil's demand grew 14% every year and India's 12.3%. During the same period German demand grew 4.2% annually, while French and British demand contracted.

Limited European demand combined with immovable tariffs suggests that benefits go to companies established in the growth countries themselves: Europe's share of chemicals sales fell more than a fifth to 23% between 2000 and 2010, while Asian sales have risen more than a third to dominate more than 45% of world sales.

Yet while the chemicals industry is no longer pushing for a global trade deal at the World Trade Organization, originally intended to open up trade and add billions of dollars to world wealth, or even for more limited sector-specific deals, Quick said trade barriers could eventually be cut if the EU and United States teamed up.

"The one thing that could make a difference, with a bit of political might, is a free trade agreement between the EU and United States. That could create some movement and encourage others to bring down tariffs," he said.

Policy makers in Europe and the United States are slowly coming around to contemplating such logic, but any deal is still years away, he said.

The WTO's 153 members have failed to seal a global trade accord known as the Doha Development Agenda, with divisions over who should make concessions exacerbated by a global economic downturn.