The EU has initiated anti-subsidy and anti-dumping investigations into imports of biodiesel from the United States. Examination by the European Commission of complaints lodged by European industry found that an investigation was warranted – sufficient evidence was provided of subsidies to the US biodiesel sector, as well as dumping of biodiesel in the European market. The complainant has argued that this has had an adverse effect on the European biodiesel industry. A detailed investigation by the Commission will now determine whether measures are justified under EU trade rules.

EU Spokesperson for Trade Peter Power said: “We have always said that the EU will not tolerate unfair trade practices, and will pursue vigorously any well founded complaint. The Commission will leave no stone unturned in these investigations and will act in accordance with the findings”.

Anti-subsidy and anti-dumping complaints concerning imports of biodiesel from the USA were lodged with the Commission on 29 April 2008. The complaints were lodged by the European Biodiesel Board, which represents the interests of a major proportion of EU producers of biodiesel. Having examined the complaints, the Commission is satisfied that they fulfil the requirements of the EU’s basic anti-subsidy and anti-dumping regulations in order to initiate further proceedings.

With regard to the anti-subsidy complaint, the complainant has provided sufficient evidence of subsidies to the biodiesel sector in the USA. These subsidies would include federal excise and income tax credits as well as a federal programme of grants to finance increased production capacity. Various subsidy programmes would also exist at state level. In regard to the anti-dumping complaint, the complainant has provided sufficient evidence of dumping of biodiesel on the EU market.

The Commission will now investigate the allegations in the complaints. The Commission will make its provisional findings by 13 March 2009 at the latest which it will then present to EU.

Background
Imports of biodiesel into the EU market come mainly from the United States, with other imports accounting for a minor share of the market. Imports of biodiesel from the US have increased from about 7000 tonnes in 2005 to about 1 million tonnes in 2007.



 

Rome Food Summit Calls for $30bn Investment a Year – Soaring Food Prices not Likely to Fall

A major international conference recently concluded with a call to address the complex issues underlying the current food crisis, focusing both on short-term action, such as increasing food aid, and long-term action, such as investing in the agriculture sector in developing countries.

Heads of state, ministers, and other high-level officials from 181 countries attended a summit on climate change, energy and food in Rome on 3-5 June. The UN Food and Agricultural Organisation (FAO) ‘High-Level Conference on World Food Security: the Challenges of Climate Change and Bioenergy’ was a culmination of months of expert-level meetings that assessed the complex causes and effects of the recent rise in food prices.

The Director-General of the FAO, Jaques Diouf, appealed to the international community to commit “US$30 billion a year to enable 862 million hungry people to enjoy the most fundamental of human rights: the right to food and thus the right to life.” To date, participants have pledged US$6.8 billion towards a fund to address hunger and poverty.

UN agencies to expand assistance

UN agencies were encouraged to purchase food locally and regionally “when appropriate.” Regional organisations with emergency food security arrangements were called on to coordinate their efforts to cope with the surge in food prices. The declaration called for countries to ensure the efficient and timely delivery of food aid.

Summit participants also commented on the financial distress of low-income countries that are net importers of food. Some of these countries suffer from balance-of-payment and budgetary difficulties because of the surge in import prices. According to the declaration, and in acknowledgement of a likely sustained increase in food prices, international financial institutions were asked to facilitate an adjustment by providing necessary support, as well as to review debt servicing requirements. The document also mentioned the need for existing financial mechanisms to begin supporting agriculture and environment.

After addressing the urgent need for food assistance and humanitarian relief, the declaration emphasised the need for an appropriate set of policies that support agricultural trade and production. Global market integration, reduced barriers to trade, and capacity building through improved agricultural inputs were particular areas of emphasis.

Successful Doha Negotiations

The Doha round of trade negotiations was explicitly mentioned by Members of the WTO. They reiterated “their willingness to reach comprehensive and ambitious results conducive to improving food security in developing countries.” The declaration went further in reaffirming the “need to minimise the use of restrictive measures that could increase the volatility” of food prices. Negotiations at the WTO have focused on reducing developed country subsidies and improving access to developed country markets for developing country exports. Some argue that lowered barriers to trade and subsidies would spur agricultural production in developing countries.

Critical views

Countries neither arrived at nor departed from the conference with a unified stance on the issues discussed. The declaration proved controversial for some. Argentina, Cuba and Venezuela opposed language in the draft declaration that did not clarify the causes of the food crisis. The reference to “restrictive measures” in trade policies drew the ire of some attendees, causing some to call for its deletion. Also, the absence of initiatives under the UN Framework Convention on Climate Change (UNFCCC) and language against the violations of international laws threatening food security from the declaration caused some consternation. Though some countries remained unsatisfied with the declaration, they did not block its adoption.

Background report on food prices, trade and agricultural production

In a report entitled “Soaring Food Prices: Facts, Perspectives, Impacts and Actions Required” — issued before the summit in Rome — the FAO outlined recent developments in agricultural markets and production, and predicted the impact of rising food prices. The report identified 22 vulnerable countries and recommended a two-pronged approach of addressing immediate food security needs and increasing agricultural production.

The report listed weather-related shortfalls, declining stock levels, and increasing fuel costs as important causes of a decrease in the supply of commodities. Currently, world food stocks are at historic lows and cannot withstand shocks in either supply or demand. Rising fuel prices have increased the price of not just agricultural inputs, but transportation as well. The increase in oil prices has effectively rendered cereals, such as maize, viable for the production of ethanol. Moreover, OECD subsidies of US$11-12 billion have only encouraged the use of cereals for energy.

Emerging markets have long been cited as sources of demand-led increases in food prices. However, the report challenged these assertions by pointing out that China has been a net cereal exporter on average. Although India is a net importer, its cereal imports have consistently declined since the 1990s. Shifting patterns of consumption away from starchy cereals and towards meat and dairy may be strengthening the linkages between commodities, but do not fully explain the rise in food prices. Additionally, financial markets have recently come under scrutiny to help explain the change in prices. According to the report, the ability to spread financial risk, along with liquidity in the financial markets, allowed investors to enter the commodity spot markets in a way that influenced the decisions of farmers, traders, and processors of agricultural commodities. Studies conducted by the IMF and OECD do not draw a wholly causal relationship between commodity prices and speculation. The report considers speculation a contributory factor.

The trend in declining food prices was long blamed for a stagnation and decline in income for many poor farmers. Therefore, the report views the recent rise in food prices as a potential opportunity. An increase in food prices can potentially raise the incomes of small farmers while bolstering international food security. However, an appropriate set of flanking policies is necessary. Both the FAO report and the Declaration on World Food Security suggest that high food prices are here to stay. Drawing a constructive set of solutions from the current crisis will continue to be an important concern for officials in Geneva, Rome, and in national capitals.