BASF Point of View on...
As an international company with integrated global value chains, minimizing trade barriers and tariffs is essential to BASF operations. The company benefits – as do customers – from free trade as any kind of duty represents an indirect tax. BASF strongly believes in the value of open markets and a rules-based global order. We are therefore concerned about current developments in international trade to impose import tariffs on a wide range of products that could affect the chemical industry and its numerous customer industries. We hope governments will, in the end, resolve trade disagreements through sustained multilateral dialogue and in respect of WTO rules.
BASF supports the WTO as a guardian of multilateral trade with an unprecedented dispute settlement system, aimed at ensuring that participants respect the WTO rules.
BASF also supports the negotiation agenda of the WTO. Trade liberalization through multilateral agreements are the preferred manner for liberalizing free trade in the chemicals sector to reduce the cost of inputs and the price of end products and to open access to new growing markets. The chemicals sector is indeed one of the world’s biggest exporters: International trade in chemical products was valued €1.5 trillion in 2016. With today’s integrated value-chains in the production network, BASF can benefit considerably from trade liberalization, both directly through savings in duties and production network optimization, as well as indirectly through a general boost in economic activity that creates demand in our customer industries.
Considering the lack of progress in the DDA Round of negotiations in the WTO, BASF supports bilateral or regional agreements as valid alternatives. Such “bottom-up” process, may also be better suitable to find pragmatic solutions to new emerging issues and new forms of non-tariff barriers, which are currently not covered by the WTO.
We would also be in favor of a plurilateral initiative amongst WTO members for further tariff liberalization in the chemicals sector in case all OECD and leading emerging economies with a substantial chemical production and industry (including China, Brazil and India) are ready to participate.
Well managed trade liberalization enables business including SMEs to organize more efficiently. Increased competition benefits consumers in the form of improved service levels, a greater variety of products or lower prices.
BASF supports comprehensive bilateral or regional FTAs like CETA, the EU-Japan EPA & Nafta as valid alternatives when multilateral negotiations are in deadlock or to deal with issues that are currently beyond the scope of the WTO (WTO+ issues like regulation, standards, dual pricing, export prohibitions… and many others).
Tariff liberalization remains the cornerstone of FTAs but other factors are gaining in importance and are therefore rightfully getting more attention in FTAs. WTO+ issues offer a useful platform for deeper engagement with trading partners and a flexible space for international economic relation management. The ultimate goal is to bring benefits to all trading partners within the WTO framework in the form of economic gains through an overall increased global economy. Furthermore, bilateral FTAs should be structured in a way that they provide the opportunity for interested partners to join at some point.
EU Industry Policy
Industry policy is not a single policy but a truly horizontal issue that covers a broad range of different policy issues like energy and climate, innovation, trade, digitalization, skills, environmental and circular economy policies, relying on smart regulation. It aims at creating a favorable business environment, stimulating jobs & growth in the manufacturing industry, which is the backbone of our economy.
In Europe, the manufacturing sector has shrunk over the last 20 years and now represents 15% of GDP. This is also true for the chemicals industry: despite continued growth, Europe’s share of global sales has declined from 32% to 15%. This decrease is due to several reasons, like the shift of manufacturing to Asia and associated chemicals growth there, or the shift of petrochemicals production to resource-rich countries. However, it is also due to declining competitiveness induced by EU policies hampering innovation and creating regulatory burden and costs on manufacturing. Meanwhile countries like China, India, the Middle East or the US are putting industry at the very top of their political agendas, hereby attracting investments.
Competitive framework conditions in Europe are essential for BASF’s economic success, considering our strong European footprint, both in terms of production and customer markets in virtually all sectors and value chains of the manufacturing economy.
BASF welcomes the EU goal of industrial renewal. However industrial renaissance will not happen by accident. Rather it requires a dedicated integrated strategy and action plan from EU’s policymakers and its member states, to tackle current challenges (e.g. rapid technological change, sustainability challenges, increased protectionism, etc.) by putting in place a suitable regulatory environment, less burdensome and predictable, and in which industrial competitiveness is mainstreamed into all EU and member states policies.
The financial crisis showed that the concept of national sectors and industries is obsolete in a globalized world. Coordinated EU policy responses are needed. Only EU industrial policy that targets both competitiveness and sustainability can achieve the necessary critical mass of change and coordination. In particular, BASF advocates for policies that give innovations a real chance in Europe, ensure competitive energy and raw materials prices, as well as fair and free trade.