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momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
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Argentinian biodiesel taxation: the strange crossover between Americans and Europeans

Christopher Gaudoin, Momagri advisor

November 13, 2017

Biofuel development policies are still debated, and it is obvious that, for the last few months, biodiesel has been the center of discussions. More precisely, the Argentinian biodiesel mostly produced from soy is the support of a strange crossover in which, on the European side of things anti-dumping rights have been lifted whereas on the other side of the Atlantic the opposite was decided.

Argentinian biofuels in Europe

Facts recap: the European Union implemented in 2013 taxes on the importation of Argentinian and Indonesian biodiesels at a rate of 24.6% and 18.9% respectfully, these two countries being accused of selling under their costs of production. The effect was immediate, and the European Union went from over 3 billion dollars of biodiesel imports in 2012, to less than 30 million in 2015. Unhappy, Argentina fought this decision in front of the Dispute Settlement Body (DSB), the instance in charge of dealing with disputes within the WTO. By putting forward in particular the absence of proof to support the dumping accusation, the DSB ruled in Argentina’s favor. Last September, the European Commission then decided to follow the WTO ruling and announced it would lower the customs duty on these products, despite the outcry from industrials and the COPA-COGECA. The consequences for the biodiesel sector were not long to come: Saipol, the branch of Avril-Sofiprotéol, published a news release announcing they would use part-time activity in 2018. These news imports will also weigh on European oleaginous since they’ll reduce this outlet for European rapeseed. And the economic situation of the sector could very well turn out to be even worse if the DSB came, by the end of the year, to the same conclusions on the importation of Indonesian palm oil and that the EU decided to cooperate yet again.

The United States protect their industry

On the other side of the Atlantic, we can observe the opposite evolution. Last August, the United States announced their intention to implement taxes against Argentinian and Indonesian biodiesels (which represent together almost 1.5 billion dollars of imports to the United States) beginning May 2017 (in a retroactive manner) and at a rate of 57% on average. Indeed, they consider that these products are very heavily subsidized (over 70% for Argentina) because the Argentinian government guarantees supply at advantageous prices for biodiesel plants by using a system of low price contingents and an export tax on soybean that is still active. By increasing customs duty, the American federal state followed through on the producers’ procedure with the Department of Commerce and the International Trade Commission last march.

This shields up approach from biodiesel producers is set in a tough context for the actors of the sector, since the detaxation of biodiesel that was in place expired at the end of 2016. The exoneration that benefited directly to fuel suppliers, who are the link on which lies the obligation of incorporating biodiesel and bioethanol in fuels. The fear was great for them to not be able to compensate this loss of fiscal exoneration by an increase of prices for consumers. With the increase of customs duties, the compliance with incorporation rates will imply an increase in the biodiesel price since it seems difficult for the American biodiesel production, which is already having trouble with development, to complete the imports that represent 20% of the domestic needs in a short period of time.

The tough part is the Environment Protection Agency’s who has to decide of incorporation rates from one year to another. If by the voice of its president, Scott Pruitt, it announced that a decrease in the production of biofuels was out of the question, the public consultations are multiplying on the subject. The incorporation rate for ethanol produced from corn has already reached the maximum set out by the 2007 law, the existing margin of manoeuver for biodiesel raising envy, including from producers of other types of biofuels.

Rethinking biofuel policies as agricultural policies for stabilizing markets

In the end, the crossover described here shows that the Americans have no intention of stripping a policy all the more crucial in this era of low prices for agricultural products. The situation is completely different in Europe where the revision of the RED 2 directive on renewable energy is still partly the result of taboos that prevailed during the development of this production at the beginning of the 2000s : at that time when agricultural policies where widely undermined, it wasn’t possible to present these policies has a way to find outlets for agricultural products. To find meaningful and sustainable solutions, it is now necessary to consider biofuels once again as outlets for extremely low agricultural markets and to make thecurrent policy evolve to make it more flexible in order to prioritize food uses while developing a stabilization tool for agricultural markets.

1 http://eur-lex.europa.eu/legal-content/FR/TXT/?uri=uriserv:OJ.L_.2013.315.01.0002.01.FRA
2 https://www.wto.org/french/tratop_f/dispu_f/cases_f/ds473_f.htm
3 http://www.groupeavril.com/fr/communiques/face-la-menace-du-biodiesel-argentin-et-dans-un-contexte-de-marche-fortement-degrade
4 https://www.commerce.gov/news/press-releases/2017/10/us-department-commerce-issues-affirmative-preliminary-antidumping-duty-1

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