EC REQUIRES TARIFFS ON SEVEN SABIC PETROCHEM PRODUCTS

Petrochemical exports from Saudi Arabia no longer qualify for duty free quotas under the European Community's general system of preferences (GSP). These seven Saudi Basic Industries Corp. products no longer qualify for GSP: methanol, styrene, melamine, ethylene glycol, linear low density polyethylene, low density polyethylene, and high density polyethylene. EC requires the Saudis to pay full tariffs on all shipments.

Jan. 14, 1991

3 min read

Petrochemical exports from Saudi Arabia no longer qualify for duty free quotas under the European Community's general system of preferences (GSP).

These seven Saudi Basic Industries Corp. products no longer qualify for GSP: methanol, styrene, melamine, ethylene glycol, linear low density polyethylene, low density polyethylene, and high density polyethylene.

EC requires the Saudis to pay full tariffs on all shipments.

GSP is designed to help developing countries build their industrial infrastructure. In areas where EC imposes tariffs to protect sensitive industries, the GSP allows duty free imports up to a certain monetary level.

But once any imported product from an individual country exceeds 20% of total imports of that product into the EC, a phased withdrawal from the GSP begins.

In the first year, duty free volumes are cut by half, then removed completely. Once the GSP has been removed from one product, other Third World exporters can add this volume to duty free allowance.

An EC spokesman said when a product from any one country exceeds 20% of total imports into the community it is clear that special treatment is no longer needed.

Saudi Arabia is not the only country for which GSP has been removed because of the high volume of imports into the EC. Libya, Romania, Brazil, Hong Kong, and Singapore have lost GSP allowances for various grades of petrochemicals.

FTA OPPOSITION

European petrochemical manufacturers are still lobbying against the proposed free trade agreement (FTA) between the EC and the Gulf Cooperation Council, citing the loss of protection that would entail. GCC members are Qatar, Kuwait, Oman, Bahrain, United Arab Emirates, and Saudi Arabia.

The EC appeared to be prepared to accelerate the negotiations on the FTA after talks last fall. But the deteriorating military situation in the Middle East distracted the GCC side, and progress has been slow.

European manufacturers still object to an FTA on grounds that the lack of similar free trade access to the U.S. and Japan would result in even more petrochemicals entering the European market. It could also lead to GCC members' construction of new capacity targeted specifically at Europe.

Europeans also object to alleged artificially low gas prices charged for petrochemical feedstocks in the Persian Gulf area. In addition, European manufacturers are homing in on plastics waste management and demanding that importers be subject to the same rules on recycling and safe incineration as domestic producers.