The UAE has decided to fight back against a decision by its main economic partner the European Union to impose new customs duties on the country’s plastics exports on the grounds the move has no justification.

The Ministry of Economy rebuffed EU claims that the UAE, one of the world’s largest hydrocarbon producers, is subsidising its plastics production and threatened to take the issue to the World Trade Organisation (WTO).

In another statement, the six-nation Gulf Cooperation Council (GCC), of which the UAE is a member, said the country has the right to defend itself against that decision since there was no reason for a new tariff by the EU.

“The UAE will work through official channels to halt the protectionist customs duties imposed by the EU on its plastics imports from the country under the excuse that such products receive direct subsidy from the government and hence they harm local (EU) plastics producers,” the Ministry said in a statement.

“The Ministry will ask the EU Commission, in accordance with WTO agreements, to open an interim review to ascertain the absence of any subsidy on its plastics production, which removes a main element for the continuation of such duties.”

 The EU said this week it had imposed new duties on plastics from the UAE, Iran and Pakistan, saying the three were illegally subsidizing exports to Europe.
The decision means Polyethylene Terephthalate from the UAE, Iran and Pakistan  -- used for bottles and food packaging -- will face EU import duties of 44.02 euros, 139.70 euros,  and 42.34 euros per tonne respectively until 2015.

The Ministry of Economy said it was also studying “all relevant legal aspects” to refer the issue to WTO in order to open direct negotiations with the EU to reach a “compromise that will stop these protection measures.”

Quoted by the semi official Arabic language daily Alittihad, a senior GCC official said the UAE has the right to “reject” the new EU tariff on its plastics exports.
“The UAE competent parties can take the necessary measures to remove the harm resulting directly from the EU tariff decision,” said Mohammed Obaid Al-Mazroui, GCC assistant secretary general for economic affairs.

“The UAE can also resort to the GCC’s Authority for Combating Dumping and Subsidizing, which can refute the EU’s reasons for imposing the new duties…….a final decision on these tariffs can become clearer after a series of procedures, investigations and meetings by committees which can be established by the GCC and the EU within their negotiations.”

The bulk of the UAE’s Polyethylene output is produced by Borouge, Abu Dhabi’s main petrochemicals company which is jointly owned by the government-controlled Adnoc (60 per cent) and Austria’s Borealis (40 per cent).

In a recent statement, Borouge said it was pursuing expansion projects to meet growing demand by its Asian customers despite the global financial crisis.
 
Borouge Chief Executive Officer Abdul Aziz Al Hajri said expansion plans would nearly triple the company’s production to 4.5 million tonnes in 2013 and further expansions beyond that date remains on the cards.

The GCC and the EU have been locked in negotiations for more than 20 years on a free trade agreement (FTA) that could remove most of the European duties on Gulf petrochemical exports and open the door for an industrial investment influx to the oil-rich region to support its economic diversification programmes.

In turn, the agreement will give the EU greater access to GCC markets and ensure its members stable and secure oil supplies in the long term.

The deal has been bogged down by political rifts and GCC officials have blamed the EU for making what they describe as unacceptable demands.

The EU is the GCC’s top economic partner, with their two way trade rising to nearly $132.5 billion in 2007 from $110 billion in 2006 and $107 billion in 2005. But the surplus has remained largely in favour of the EU due to a sharp growth in its exports to the Gulf region and the fact that the GCC’s exports to the European markets are confined to oil, gas, petrochemicals and aluminium.

Official GCC figures showed the trade surplus for the EU hit an all time high of around $54.9 billion in 2007 compared with only about $17 billion in 2006. No data for the following two years is available but trade is expected to have surged in 2008 because of high oil prices before slipping in 2009.