Gulf states call for controls on aluminium exports to be eased

Date: 17/12/1998

By Chris Johnstone

THE European Commission is coming under pressure from Gulf states to soften its trade protection measures against exports of aluminium.

The United Arab Emirates (UAE) and Bahrain are leading the calls for the EU to lower its 6&percent; import duties before a new trade deal is signed between the Gulf and Europe. That accord is not likely until the year 2000 at the earliest.

The demands from the Gulf states have become increasingly strident as other export markets for their aluminium, especially in the Far East, dry up and lower earnings from sales of oil step up pressure on other industries to contribute to the region's economy. Current aluminium exports to the EU are relatively low, but the Gulf states argue that the high duties are largely responsible for this.

The UAE and Bahrain have invested heavily in building up their aluminium industries in the past decade as part of their policy to diversify and reduce their dependence on oil.

Metal production was targeted as a growth industry because the countries could drawon their low energy costs in what is an energy intensive industry.

The EU is a relatively inviting market since demand is still strong and transport costs from the Gulf are not too exorbitant. Union consumption of aluminium rose by 550,000 tonnes in 1997, an increase of around 11.2&percent; compared with 1996, but has stabilised this year. World prices for the metal are currently depressed, with some international analysts warning that they may fall still lower as companies continue to rely on stocks they have already built up.

The Gulf states argue that other countries have already sealed deals with the EU cutting their import duties. However, the Commission says agreements with large aluminiumproducers and exporters such as Norway have only come about as a result of wider trade accords and cannot be offered separately.

Although trade talks with the Arabic nations are advancing satisfactorily, with fresh talks planned for January or February, no one is expecting a breakthrough which would pave the way for lower tariffs on raw and processed aluminium in the near future.

European producers dismiss the Gulf states' demands. European production has been elatively static over the past ten years, meeting around only 60&percent; of the EU's demand. Production rose to 3.3 million tonnes in 1997, a 3.3&percent; increase on the previous year but lower than the 3.7 million tonnes produced in 1987.

Two factors continue to haunt the European industry: the prospect of a flood of cheap imports from the former Soviet Union and the continuing tendency for firms to move production out of Europe to destinations where energy is abundant and inexpensive.

Exports from the former USSR rocketed from 300,000 tonnes in 1990 to more than 2 million tonnes in 1994, helping to prompt an agreement between the EU, the US, Canada and Russia aimed at cutting overproduction.

Exports in 1997 stood at 2.7 million tonnes following the end of the agreement and delicate integration of former Soviet production in the market.