Price cartel paper-chase to continue

Date: 28/11/1996

By Chris Johnstone

NORTH American papermakers are pressing the European Commission to drop the long-running combination of quotas and tariffs which are keeping their products out of the EU.

They argue that lifting the trade barriers would produce immediate benefits for European consumers by injecting new competition into the industry and pushing down the price of paper for newspapers, magazines and stationery.

Europe's biggest papermakers are still subject to a cartel probe by EU competition watchdogs investigating why newsprint prices soared by more than 20&percent; in a short period between 1993 and 1994.

That inquiry is continuing as more evidence arrives in Brussels and new letters are sent to some of the 40, mostly Scandinavian, companies under scrutiny.

Just seven Scandinavian firms supply 75&percent; of Europe's news-print and the EU is the world's second biggest producer and consumer of paper products.

After hearing nothing from Union officials, most of the companies involved in the Commission investigation and the sector's lobby group, the Confederation of European Paper Industries (CEPI), had begun to assume that the cartel paper-chase had reached a dead end. They have always maintained that the steep price rise was a normal feature of a highly-cyclical market.

But Commission officials have confirmed that the investigation is continuing and Swedish paper producer Stora says rumours are circulating that the Commission might be focusing its cartel suspicions on producers of technical office papers used for some fax machines and airline tickets.

The North American lobby has a simple solution. “If you are really interested in competition, you must drop tariffs,” says William Henson Moore, president of the American Forest and Paper Association.

The association is backing a Canadian government proposal, to be tabled at next month's World Trade Organisation ministerial meeting in Singapore, to bring forward the date for the abolition of all paper duties from January 2004 to January 1998. The plan has also won the support of the US government.

Canada is particularly keen on a change. Its exporters of newsprint hit the ceiling on the quota of duty-free paper they are allowed to sell to the EU in September and have since been paying a 5.3&percent; tariff.

Although US newsprint producers usually fail to exceed their duty-free quota, they nevertheless complain that their Union customers suffer from the administrative burden of keeping track of what they have bought from abroad.

The US paper industry believes its exports could rise by around 1 billion ecu between 1998 and 2000, and by about 2 billion ecu a year after 2004 if the Canadian proposal is accepted.

Its association points to a report by the Swedish Federation of Industries which warns that administrative costs involved in the collection of European tariffs will exceed revenues by 2000.

EU tariffs of 7&percent; on coated paper, used for magazines and high-quality writing paper, have had a far more serious effect on US and Canadian producers. They have been effectively excluded from the Union market while European exports pour into North America without hindrance, capturing around 7&percent; of the US market alone.

The North American industry is upbeat about the chances of winning EU support for the Canadian tariff proposal, with powerful European publishers lobbying in its favour.

It also claims support from Sweden, and says that Finland has been won round to the proposal, albeit on rather Machiavellian grounds. Lobbyists claim Finland is willing to accept a WTO deal on paper if it gets a cut in duties on semiconductors imported into Europe, to benefit Finnish telecommunications giant Nokia.

However, Finnish trade officials deny any link between the two dossiers. “We are not in favour of an accelerated process to abolish the tariffs,” said one.

The CEPI opposes any new concessions to the American industry, pointing out that it has already benefited from tariff changes agreed during the Uruguay Round world trade talks and in further negotiations over the enlargement of the EU to include Sweden, Finland and Austria. “The European Commission line is the same as ours and I do not expect it to change,” said a CEPI spokesman.