Baseload, Bioenergy

The Battle Over Argentine Biofuel

Issue 6 and Volume 19.

After years of crying foul, Argentina finally got some good news late last month when a World Trade Organization (WTO) panel ruled that current European Union tariffs and import regulations on imports of Argentine biodiesel should be revamped.

Although the final outcome of the dispute has yet to be resolved — much less an ultimate settlement — Argentina’s biodiesel industry hopes it will be able to re-start biodiesel exports to the EU perhaps as soon as late this year.

The WTO ruled that EU anti-dumping tariffs imposed on Argentine biodiesel imports “weren’t inherently illegal but ruled in favor of Argentina on several counts where the EU inconsistently applied the WTO’s antidumping rules, including how it calculated the tariffs,” Jim Lane reported in the Biofuels Digest. Both sides have 60 days to appeal the decision, Lane noted, which “the Argentines see as good news that may help them re-open the European market that has negatively impacted their biodiesel industry since anti-dumping tariffs were applied in 2013.”

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Image: Huge storage facility for soy beans waiting to be exported from Brazil to the US and Europe. Credit: Shutterstock.

Argentina’s biodiesel products had previously dominated the market in the EU. Some 90 percent of all biodiesel imported into the EU had come from Argentina and Indonesia.

Reuters reported that the EU had argued that Argentina was “dumping” or selling biodiesel at below the cost of production and harming local producers. Anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.

However, the WTO said the EU regulation at the heart of the matter did not violate WTO rules, Reuters reported.

Specifically, the WTO panel rejected Argentina’s claim that a central article of the EU regulation “as such” violated the WTO’s anti-dumping agreement, Reuters noted, but upheld other claims that the EU had acted inconsistently with the pact.

In a statement, the European Biodiesel Board (EBB) said it regarded the panel decision as a first episode in the legal battle engaged by Argentina in the WTO and before the European Court. The government of Argentina, the EBB noted, initiated the proceeding at the WTO level in December 2013, asking for the annulment of the EU anti-dumping measures.

“We see this as excellent news,” Luis Zubizarreta, head of Argentina’s biodiesel industry chamber, CARBIO, told Reuters. “The European Union’s decision regarding Argentine biodiesel was unjust,” he added. “Now we’ll be able to reopen a market that we had developed very well.”

A European Commission (EC) statement after the ruling noted that Argentine companies benefit from an unfair advantage because they have access to raw materials at prices that are artificially low compared to the world market prices available to the EU biodiesel producers. The reason for this, the EC statement noted, is high export taxes imposed by Argentina and Indonesia on raw materials used in the biodiesel production (soya beans and soybean oil in Argentina and palm oil in Indonesia). The WTO investigation, the statement continued, found that the dumping margin for Argentina was as much as 49.2 percent.

Reuters also noted that the EU anti-dumping duties were imposed after then President Cristina Fernandez ordered the seizure of Argentina’s top energy company, YPF, from its previous parent, Spain’s Repsol.

A USDA foreign agricultural service information report prepared by USDA experts working at the U.S. Embassy in Buenos Aires noted that biodiesel production in Argentina is projected at 2.33 billion liters in 2016. Biodiesel in Argentina is almost exclusively made from soybean oil, the USDA report noted, with local investments of over $1.5 billion since 2007, and production capacity reaching a high last year of 5.2 billion liters generated from 38 biodiesel plants.

Until mid-2013, the USDA report noted, Spain was Argentina’s primary biodiesel market. But late that year the EU implemented an average duty of 24.6 percent on Argentine biodiesel due to alleged dumping, which in practice meant closing of the market. In late 2013, the USDA said, Argentine exports were redirected to the United States to supply biodiesel for the East Coast. In 2015, most of the approximately 450 million liters of that Argentine biodiesel was used as heating oil; and was levied with only a 4.6 percent duty.

The EU, once the number one market for Argentine biodiesel exports, the 2015 USDA report continued, is for all practical purposes currently closed due to these continued high anti-dumping duties. Thus, the USDA expects that the U.S. biodiesel market will be Argentina’s most active destination, with predicted exports in 2016 at 750 million liters.

Refocus on Europe?

Even if there is what Argentina considers a forthcoming equitable agreement in the near future, it’s too soon to know if European biodiesel producers will go along with it. Or whether there will be continued appeals by both sides.

For its part, the EBB remains optimistic that it will be successful in convincing the WTO and the European court to recognize the massive damages suffered by the EU biodiesel producers as a result of unfair imports.

The WTO panel’s report is not an outright victory for the Argentinian industry, as many of its claims – together with the request to withdraw the EU anti-dumping duties – have been rejected by the WTO panel, the EBB noted in a statement. However, the EBB reported that it considers the WTO decision only as a first episode in a long, strenuous legal battle over the legitimacy of the EU defense measures.

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Image: Irrigation of a soybean field in Argentina. Credit: Shutterstock.

“Prices of soybeans, the raw material, are more expensive in Europe than biodiesel imported from Indonesia and Argentina,” Secretary General of the European Biodiesel Board, Raffaello Garofalo told Reuters. “It’s like saying steel costs more than a car. It’s impossible to compete.”

A European Commission spokesperson in Berlin told Renewable Energy World that the WTO panel ruling can be appealed by both parties between 20 and 60 days.

“The EU has yet to decide on the best course of action,” said the spokesperson. “Since the panel outcome is an intermediary step, it is too early to speculate on the consequences for our practice as those consequences would very much depend on the exact final rulings.”

However, the USDA report noted that biodiesel exports to the EU aren’t likely to resume until late this year at earliest.