High Level Group on the Competitiveness of the European Chemicals Industry — Final Report

8/9/2019 High Level Group on the Competitiveness of the European Chemicals Industry Final Report

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European CommissionEnterprise and Industry

High Level Groupon the Competitivenessof the EuropeanChemicals Industry Final Report


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High Level Groupon the Competitiveo the EuropeanChemicals Industry Final Report

European ChemEnabler of a Sust


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Final Report of the High Level Group on the Competitiveness of the European chemicals indu

The f ina l rep ort re flects the out com e of the de liberati ons of the High Leve l Group on the CompetitiChem icals Industry in the European Union chaired by Comm ission Vice -President Ver heu gen whwith Comm ission Decision 2007/418/ EC of 14 June 2007 to address issues that deter m ine the comof the Comm unity chem icals industry . In parti cu lar the Group had the tas k to co ndu ct econom icana lysis of the f actors deter m inin g the stru ctura l chan ges in the chem icals industry as we ll as o thinfluen ce its com petiti ve position . Based on th is it had the mandate to fo rmu late a set of se ctor-sre comm endati ons addressed at policy mak ers at the Comm unity and nati ona l leve l, industry anorganisati ons (see Anne x 1 to th is Rep ort ).

A great dea l of additi ona l information on the wo rk of th is High Leve l Group is available on the inteh ttp ://ec.eur opa .eu /enterprise /ch em icals /hlg/hlg2/hlg_ inde x.htm

For spe cif ic questi ons p lease conta ct:

European Comm issionEnterprise and Industry Directorate -Genera lChem icals Unit

B-1049 Brusse ls

E-mail: entr -chem [email protected] opa .euFax: 0032 2 2950281
http://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmhttp://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htmmailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://ec.europa.eu/enterprise/chemicals/hlg/hlg2/hlg_index.htm


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The European chem icals industry is k ey for econom ic de ve lopment and wea lth, provand materia ls and ena bling te chnical soluti ons in virtua lly all se ctors of the econom1.2 m illion and sa les of 537 b illion (2007), it is one of the b igg est industria l sectors aof dire ct and indire ct emp loyment in many regions of the European Union .

The top challen ges for humanity require ne w solutions, many of wh ich can only be impmateria ls and su bstan ces . The wo rld popu lation is esti mated to g row in less than 506.7 b illion to abo ut 9.2 b illion in 2050, co up led with h igh er lif e expe ctan cy andto an extent ne ver experien ced b efore . This has str ong co nse quen ces for all soc

p laces extre mely h igh pressure on available natura l res ources . The way we produ cf unda menta lly chan ge, diversif ying the raw materia l base and redu cing ener gy de mawater , better food and prog ress in hea lth care are all top challen ges . Megatrends lineeds and concerns . They will shape the priorities for resear ch and de ve lopment in The United Nations have proclaimed 2011 as Internati ona l Year of Chem istry to emof ch em istry in sustainin g natura l resources .

Asustaina ble chemicals industry is indispensa ble to address som e of these pressin g glcontinua lly de velops inn ovations , generated by resear ch in chem istry and o ther scienpra ctical app lications. At the same time, it has an important resp onsibility for the mov

use of natura l resources , redu ction of ener gy de mand , polluti on , waste and em issioand , last but not least , for the saf ety of ch em ical produ cts and their app lication .

Traditi ona lly, Europe has been dom inant in chemicals produ ction a position, mark edsurp lus , wh ich h as wea k ened in the past f ew years . Recog nisin g the industry s strate

and India have made su ccess f u l efforts to b uild up large and increasin gly soph isticatNota bly due to their f eedst ock ad vanta ges , co untries in the Midd le East attra ct ve

petr och emicals. Conse quent ly, the EUs share of glob al chemicals produ ction is de creasEurope s com petiti ve position is at risk.

As part of its industria l policy, the European Comm ission esta bl ished this High Lb road ran ge of sta keholders Its rem it was to exam ine the challen ges to the Europe

Conclusions


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situati on f urt her. This increases the need to have a clear picture of the k ey drivers for th

de velopment of the com p lex and vast ly diversied chem icals industry , and as a poinand implementati on of econom ic supp ort measures at European and nati ona l level.

to exp lain these trends and identi f y measures to foster the com petiti ve position of

At its na l m eetin g o n 19 Feb ruary 2009, the High L evel Group end orsed th is rep

follow ing co nclusions :

I. More innovation and research arto securing the uture o the Eurchemicals industry

The move to a more sustainable use of resources1. will require ne w chemical solutiochange m itigati on and other glob al and emer ging en vironm enta l and soc ial chimportant resear ch and de velopment focus in chem istry and related scien ces . The opp ortunities for the European chem icals industry sho uld be f u lly exp loited .

Innovation net wo rk s are an important way to promo te f aster upta k e of inn ovation .2.with gov ern m ents , sho uld set up topical innovation networks to promo te k ey sfoster best pra ctice and experien ce .

Asuccess f ul chemicals industry provides mo re and mo re 3. cross-cutting chemical solutivalue chains. Industry and the pu blic sector at all leve ls sho uld , there fore , stren g

and open inn ovation processes wh ich f acilitate coo perati on across sectors and bo r

While inn ovation is mo re than resear ch and de velopment , the link bet ween resear ch4.scien ces ) and inn ovation is parti cularly strong in the chem icals industry . Overa ll, it the quantity and quality of R&D and the effectiveness of innovation, in parti cuefforts by the private sector. In genera l, companies are urged to review their R&Dplansresear ch prog ramm es to mediu m and long ter m obj ectives The pu blic sector sho uld p


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Comm ission and allp layers involved in the gh t against counter f eitin g and produ ct pincludin g European industry , sho u ld coo perate to f acilitate investi gations and conduagainst counter f eiters in Europe and elsewhere in the wo rld , and de velop pu blic edu

Condence and trust7. f rom co nsu mers , cust om ers and invest ors are of k ey importanmana gement and comm uni cation on chem ical saf ety througho ut the value chain been h igh o n the agenda for many years . The chem icals industry has a diffi cult heritaof its insta llations and pr odu cts . Signicant impr ovements have been ach ieved as

redu ction in accidents and em issions , improved mana gement of produ cts and increamo st dan gerous chem ical su bstan ces with o ther less harmf ul ones . This sho uld formconden ce in the chem icals industry . The industry still needs to increase transpareneff ective dia logue with soc iety , for examp le on the introdu ction of ne w te chnolog iall leve ls are en coura ged to parti cipate in this dia log ue .

Regulation8. has a signicant impa ct on the organisati on and operati on of ch emical coqua lity of leg islation , correct imp lementati on and proper en forcement are not onlythe ach ievement of hea lth and en vironmenta l obj ectives , but also for the com petiti vthe chemicals industry . This app lies espe cially to SMEswh ich f ace parti cular probl emsnu mb er of European and nati ona l regulatory require ments . With its Better Regulation has g iven the h igh est priority to simp lication and improvement of the regulatory In do ing so, it is helpin g to stimu late entrepreneurs h ip and inn ovation . Better reguof the Lisbo n Grow th and Emp loyment Strate gy. EU instituti ons sho uld mov e forwarof the Strate gy witho ut com pr om isin g the EUs en vironmenta l and hea lth prote cconsu ltati on of sta k ehol ders , solid impa ct assess ments , improved comm uni cation by tharmo nised and correct app lication of the agreed ru les are k ey elements of a goo dRegu lation sho u ld form a consistent f ramewo rk, be focused on out com es and provlong ter m perspe ctive .

Education and attracting talent9. are the foundati on of inn ovation and com petiti venres ources needs mo re attenti on and SMEs require spe cial he lp to address sk ills sho

sho u ld step up promo tion of ch em ical and scien ce edu cation , startin g w ith primaryen gineerin g f acu lties sho u ld de ne ne w c urri cu la, includin g entrepreneuria l pr ogwith industry . In preparati on for this, the industry sho u ld intensi f y its efforts to forerequire ments in the sho rt and long ter m at various locations and identi f y expe cted


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or et han ol. Availability and cost of these raw materials are for large parts of theener gy prices , a de cisive cost element strongly inuen cing internati ona l competiti veresources of the ne cessary fossil and rene wable f eedst ock s.

It is there fore of h igh est priority to se cure :

reliable access to oil and natural gas (methane) at competitive prices andof the gas mark et in the EU b y eff ective libera lisati on and by diversi f ying sources

Europe , and

sta ble long ter m electricity supp ly, includin g through lo ng ter m co ntra cts wincreased on site generati on in comb ined heat and power f acilities to cov er the inmany processes .

The 11. high integration of mo st of the European chem icals industry along the prodof its main com petiti ve ad vanta ges . It is this inte grati on wh ich unti l now l arge lyindustry to com pensate for its less f avoura ble f eedst ock position and high er ener gy300 European produ ction sites are located in 30 clusters . The su ccess of these clusa valid comb inati on of k ey assets in p lace , amo ng them shared use of inf rastru cturma jor transp ort mo des and pr oximity to m ark ets and cust om ers . Com panies in wbene t f rom an opti mised cost stru cture and better access to resources . Centra lised pstea m usua lly allows them to lea ve a lower carbo n foo tprint . However, in quite a nuthe industry is still wide ly dispersed and located around h istorical f eedst ock o r enercom plete supp ly ch ain inte gration within clusters is of ten not yet achieved and the iclusters is insuffi cient . Conse quent ly, clusters considered econom ically viable sho ude velopment , while com p lying w ith state aid ru les .

Long distan ce transp ort is the rule in the chemicals sector. Chemical com panies are of12.one can supp ly the whol e European mark et with a parti cular produ ct. Chemical distrib

position in the supp ly chain , ser vicing a wide ran ge of downstrea m users , mo st of

large parts of the industry are located in clusters , the distan ces bet ween these prodgreat . There is a risk that insuffi cient logistics infrastructure and other transp ort bothe ach ievement of stronger clusters . There fore , improving the log istics inf rastru ctuchem ical clusters is important . Cluster p lat formsand initiati ves to foster reg iona l ansuch as the European Chem ical Reg ions Net wo rk can p lay an important role in makshare of road transp ort is too h igh, the de creasin g use of rail sho uld be reversed andclusters are needed In many cases the de velopment of safe and efficient transp ort


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The 14. use of renewable raw materials such as star ch, cellulose, sugar, vegeta ble oils atraditi on in produ cing certain chemicals (e.g. sur f actants , food and f eed ingredients aIn recent years , there has been increasin g com petiti on for these materia ls f rom the pro

ener gy. Incenti ves in the form of subsidies or regulation in the conte xt of agriculture or en

jeopardise esta blished uses of bio-based raw materia ls in the chemicals industry . Policy mto avoid such unwanted side eff ects. Access to suffi cient high q uality rene wable raw m

prices is essentia l for a competiti ve chemicals industry in Europe . The EUshould assess thegained by the eliminati on or redu ction of import tariff s and by the openin g of import quinputs of the various subsectors of the chemicals industry . In parti cular, the tariff for esho uld be reconsidered . With respe ct to en vironmenta lly and socially sensiti ve rene wabmark et openin g sho uld go h and in hand with sustaina bility guarantees with due conWhere ver possible, the EU sho uld strive for internati ona lly agreed standards .

Climate change15. is a glob al problem and the chem icals industry is a glob alised induprodu ction base in the emerging econom ies. This requires a caref ul look at the glob al effRelocatin g parts of the European chemicals industry to regions with lower emission reduonly cause une mployment and loss of econom ic welf are in Europe . It would also incrgas emissions (carbo n lea k age) and pollution if ma jor produ ction capa city of the industr

problematic ener gy mix and low effi ciency in ener gy generati on and use . It is for this reasamendin g the green ho use gas Emission Tradin g Scheme (E TSdire ctive) contains provand it is now crucial to tak e the ne cessary steps for its timely implementati on. In additi oaction by emerging econom ies is needed to mitigate climate chan ge. This would contrlevel playing eld allowing the European chemicals industry to com pete . Europe shoulthe conditi ons for such action. Sectoral agree ments on redu cing green ho use gas emisssavings can be an important way to arrive at the en gagement of industry based in eparti cular to allow these countries to mak e a meanin gf ul contri bution to redu cing emissthe com plexity of sectoral agreements in the chemicals industry , supp ort by allactors to

a successf ul conclusion in as many subsectors as possible is to be welcom ed .

The strong dependen ce on fossil f eedst ock, h igh ener gy use and high emissions of g16.

produ ction of base chemicals require constant efforts to improve the effi ciency of energySuch efforts started long ago and much h as been achieved . While overall chemicals produby mo re than 50% f rom 1990 to 2005, the industry s emissions of GHGde creased by 25Robust and veriable information on emissions and the emission redu ction potentia l imeasures to m itigate climate chan ge. It is also indispensa ble for settin g b en chm ark s fo

European Emission Tradin g Scheme. Closure of current information gaps is of the ut moconditi ons for full exploitati on of the emission redu ction potentia l in Europe includin


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However, their dom esti c mark ets are strongly prote cted , while they bene t f rom low

EU. This raises the questi on whet her continuin g pre f erentia l treat ment of com petitin trade policy is still justi ed for chem icals.

Furt her 18. trade liberalisation through a substantia l redu ction or e lim inati on of tariffbilatera lly would be in the interest of the EU chemicals industry . In the current econom

even mo re important since there is a risk of increasin g prote ctionism. The mo st pway to com e to su ch a libera lisation is through a mu ltilatera l appr oach in the f rameOrganisati on (WTO). In the current Doh a Developm ent Round , th is co uld be ac

ho rizonta l tariff cuttin g agree ment com p lemented by a ne w sectoral agreement for

European perspe ctive , the ne w se ctoral agree ment sho u ld involve all countries witindustry and include all chem icals. The EUs Policy Coheren ce for Development sho

The EU sho uld pursue 19. Free Trade Agreements with k ey tradin g partners , in parti cuWTOp lus agree ments that go f urt her in promo tin g o penness and inte gration thathe mu ltilatera l ne go tiati ons . The se lection of potentia l FTApartners sho u ld be bas The EU sho u ld strive for consisten cy bet ween all FTAs and sho uld aim to ach ieve cotho se agreed bet ween FTApartners and other k ey countries . FTAs need proper enbalan ced and reliable dispute sett lement procedures .

The ch emicals industry acco unts for mo st anti -du m pin g pr oc edures glob ally an20.de velopin g co untries mak e f requent use of th is instru ment . Trade Defence Instrua wider trade pa ck age bein g ne go tiated at WTO level. The EU sho u ld see k to ensureto a glob al level p layin g eld with an alignment of anti -du mpin g pra ctices at wo rlto b e needed to off set the impa ct of un f air trade pra ctices , wh ich c an be parti cu laincludes measures to ta ckle double pricing, export tariff s and below co st pricing. Inin the multilatera l trade ne go tiati ons , there sho uld be no uni latera l wea k enin g o TDI. Parti cular attenti on sho u ld also b e paid to the prolif erati on of pricing m easuresaim to dist ort access to raw m ateria ls (e .g. export tariff s). When addressin g such prpr obl em that these are diffi cu lt to ta ckle under existin g internati ona l trade law. T

continue to promo te the de velopment of per manent ne w WTO ru les addressin g trthe discrim inat ory supp ly of raw materia ls.

Because of glob alisati on , cust om s aut ho rities are required to h and le an exponent21.increase in the volume of trade transa ctions. Additi ona lly, 149 ne w regiona l partners h

no tied to the WTOsince 1995, f urt her com p licatin g internati ona l trade ru les . The cby a variety of ne w safety and se curity risks includin g terr orism The glob al harm


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Table o ContentsC O N C L U S I O N S . . . . . . . . . . . . . . . . . . . . . .

I. More inn ovation and resear ch are k ey to securin g the f uture of the Europeanchem icals industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II. Resp onsible use of natura l res ources and level p laying eld for sourcing enerand f eedst ock are su ccess f actors for com petiti veness and sustaina b ility . . .

III. Competiti ve chem icals industry needs open mark ets with f air com petiti on

I N T R O D U C T I O NI . . . . . . . . . . . . . . . . . . . . .

S E T T I N G T H E S C E N EI I . . . . . . . . . . . . . . . . . .

1. Chem istry and chem ical produ cts : k ey elements in de ve lopment of mo dern

2. Wide ran ge of cust om ers for wea lth of app lications . . . . . . . . . . . . . . . .

3. Industry with variety of produ ct se gm ents link ed by value chains . . . . . . . 4. Chem ical clusters show reg iona l inte grati on in Europe . . . . . . . . . . . . . .

5. Chem icals industry : important emp loyer in the EU with h igh share of SMEs

6. European chem icals industry : sti ll su ccess f u l glob al p layer . . . . . . . . . . . .

7. Glob al com petiti on: challen ge off erin g o pp ortunities not to b e m issed . . .

I N N O VAT I O N A N D R E S E A R C HI I I . . . . . . . . . . . . . .

1. More inn ovation is k ey for a sustaina ble and hea lthy European chem icals ind

2. Resear ch: pillar of ch em ical inn ovation . . . . . . . . . . . . . . . . . . . . . . .

3. Innovation needs trust : improving comm uni cation with sta k ehol ders . . . .

4. K nowled ge is k ey : prote ction of Inte llectua l Property Righ ts (IPR) . . . . . . .


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C L I M AT E C H A N G E P O L I C YV I I . . . . . . . . . . . . . . . .

1. Action on climate chan ge as a business opp ortunity for the European chem ic

2. In a glob alised chem icals industry , glob al action includin g an ade quate en gaof emerging econom ies is essentia l to comb at climate chan ge . . . . . . . . .

3. Europe s chem icals industry has made much prog ress in redu cing ener gy inteand em issions , but f urt her efforts are ne cessary . . . . . . . . . . . . . . . . .

L O G I S T I C SV I I I . . . . . . . . . . . . . . . . . . . . . . .

1. Logistics: of ten ne glected f actor for com petiti veness . . . . . . . . . . . . . .

2. Strong clusters : European asset that merits f urt her supp ort . . . . . . . . . . .

3. Addressin g nu merous bo tt lene ck s in transp ort must be a priority . . . . . . .

G L O B A L I S AT I O N , I N T E R N AT I O N A L C O M P E T I T I V E N E S SI X .

1. European chem icals industry : strong glob al p layer f acing mo untin g pressure

2. Priorities of a European trade policy: promo tin g and sa f eguardin g com petiti vof its chem icals industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Securin g access to raw materia ls in non discrim inat ory conditi ons . . . . . . .

A N N E X I . . . . . . . . . . . . . . . . . . . . . . . . .

Comm ission Decision settin g up the High-l evel Group on the Competiti veness of the Chem icals industry in the European Union . . . . . . . . . . . . . . . . . . . .

A N N E X I I . . . . . . . . . . . . . . . . . . . . . . . . .

M b f h Hi h L l G h C i i


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Chemistry

makes itpossible!


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Last ly, consu m er ch em icals are sold to na l consu m ers . Soaps ,deter gents , per f umes and cosmeti cs represent appr oximate ly 15%of tota l EU chemical sales .

A spe cial f eature of the ch emicals industry is its propensity to inte grate a long v alue ch ains , includin g sho rt distan ces to c ust om er industries wh ere possible. Inte grati on int o cl usters saves co sts and ener gy and

redu ces the need to transp ort dan gerous goo ds .

4.Chemical clusters show regionalintegration in Europe

5.Chemicals industry: impin the EU with high share

In the EU,som e 29,000 ch emical com1.2 m illion equivalent to 4% of tworkforce. Employment in the induover the past ten years . This is due

pro

ducti

vity

, which h

asb

eenf ar

greain produ ction (1.3%).

Employees with m ediu m and highof the wo rkforce. Those with a hig

in nu mb ers , and acco unted for althe rise The chemicals industry s

F I V E I M P O R TA N T S U B S E C T O R S I N T H E C H E M I C A L S I N D U S T R Y

Specialities24%

Consumer chemi15%

Petrochemicals25%

Basic inorganic11%

Polymers25%

Source : Cec Chemdata Internati ona l 2007


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produ ction. Over 35% of this trindustry s inte grati on . Many continenta l and the relevant m This means that traditi ona l f actsize and co sts , b ecom e mo reinvest ment . In additi on , EU cobecause others are rapid ly cat

The European ch em icals indstr ong and su ccess f u l p layer o

537 b illion (2007) it has a 29

EU has a co nsistent trade sur

6.European chemicals industry:still success ul global player

Bet ween 1995 and 2005, glob al ch emicals pr odu ction increased by almo st 40%. Produ ction of ch emicals is no longer limited to industria lised countries . It ta k es p lace in every region of the wo rld , with an increasin gpresen ce in the emerg ing econom ies in Asia. In 2006, Ch ina occ upied the 3rd , and India the 7 th, p lace amo ng the wo rlds b igg est ch em ical

produ cers . Both are on the increase . In petr och em icals, the f eedst ock rich co untries in the Midd le East play an ever mo re important role. Globalmark ets for chemical produ cts are steadi ly growing and the peri od f rom2000-2007 saw a boom w ith China , India and Russia rea ch ing nom ina lannua l grow th rates of produ ction or trade of mo re than 20%. In OECDcountries , grow th is much low er and close ly aligned with g enera l GDPtrends European chem ical produ cers can ta ke ad vanta ge of boom ing

S T R U C T U R E B Y E M P L O Y M E N T S I Z E C L A S S

E X C L . P H A R M A C E U T I C A L S

Mediu mLar

Micro (1-9)Small (10-49)

0

10

20

30

40

50

60

70

80

N of enterprises Sales Empl

% o

f e m

p l o y m e n t s i z e - c

l a s s

61%

23%

12%

4%2%

6%

20%

72%

3%

9%

23%

Source : Eurostat and Cec 2005


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7.Global competition: challenge oferingopportunities not to be missed

The chem icals industry has a pivota l p lace in manu f acturin g and the p otentia l to co ntinue pr ov idin g soluti ons . The k ey ch allen ge is tom ak e sure that these opp ortunities are f ully exp loited in Europe in

a sustaina ble manner and that Europe s industry remains amo ng the f rontrunners . This has been the constant theme of the High Level Group .

In all its dis cussi ons , b e it on inn ovation , ener gy, climate ch an ge or ndin g the righ t sk ills, the Group identi ed best pra ctices and the ways

industry , pu blic aut ho rities and o ther sta k eholders cou ld address the current ch allen ges . The follow ing ch apters in th is rep ort pr ov ide the main conclusions and recomm endati ons f rom a vast amo unt of materia l

presented in som e 18 mo nt hs of intensi ve wo rk and rich de bate .

wh en the Group started its wo rkit is im p ortant to h ave a clear vide ve lopments and the measures The chemicals industry is capita l intare the dom inant f actor in invest m

Europe s ch em icals industry has com petiti veness , if the pu blic andthe righ t de cisions . The measures the follow ing ch apters .

G E O G R A P H I C B R E A K D O W N O F W O R L D C H E M I C A L S A L E S 2 0 0 7

0

100

200

300

400

500

600

700

800

C h

e m i c a l s a

l e s

( b i l l i o n

)

690

Asia

537

EU27

405

NAFTA

90

LatinAmerica

63

Rest of Europe

35

Other

Source : Cec Chemdata Internati ona l 2007


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Y u r

i A r c u r s

# 1 3 9 5 6 9 4 F o

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The European chem icals industry is well p laced to provide sustaina ble soluti ons . This is one area wh ere European industry has som e initia lcom petiti ve ad vanta ges . There appears to b e co nsidera ble m ark et potentia l and a positive consu mer attitude . Graspin g th is opp ortunity requires a positive , proactive and comm itted stan ce f rom the industry and f rom policy and pu blic aut ho rities at all leve ls. Equa lly important for the f ull exp loitati on of the vast potentia l for inn ovati on is closer coo perati on bet ween acade m ia, the chem icals industry and its many cust om er industries as we ll as ear ly comm uni cation with c ivil soc iety ,leadin g to rapid intr odu ction of inn ovations ont o the mark et .

RE C O M ME N D AT I O N S

Stren g thenin g Innovation Net wo rk s is of ut mo st importan ce

Industry, in cooperation with governments, should setup topical innovation networks to promote key strategicinnovations and foster best practices and exchange of knowledge and experience between them. One such network

should deal with energy and climate change.

Supp ort for agsh ip pr ojects, which co u ld ta k e the form of pi lot /de mo nstrati on p lants , as guidan ce for industry and soc iety to signa l

the p otentia l of certain k ey inn ovati ons , is essentia l. Publ ic supp ort for this type of project not primarily as a source of nan ce but , as a m inimum, to signa l pu blic comm itment is essentia l.

Industry and public authorities at all levels should strengthenclusters 4 (and open innovation processes) which facilitatecooperation across sectors and across borders, with the aimof further stimulating, accelerating and facilitating cross-cutting innovation throughout the value chain.

Initiati ves sho uld build on existin g stru ctures and prog ramm es where possible . The resu lts ach ieved by EU,nati ona l and regiona l inn ovation net wo rk s sho uld be examined , and possible areas of im pr ovement

identi ed , for examp le, by greater promo tion of best pra ctices .

As part of further strengthening existing networks, thetechnology platform SusChem should explore opportunitiesbeyond the dened key areas to include innovationleadership issues (bringing good ideas to the market) in anew SusChem+ structure

2.Research: pillar o chem

Europe cann ot base its grow th o nIts ma jor asset is k nowled ge , and essentia l for buildin g a k nowled gis the main co nsiderati on beh indpromo ted by the European Comm To ach ieve sustaina ble glob al comsingled out k nowled ge and inn ovaareas for action . The 2002 Barcelonraising overa ll resear ch invest ment

2010, increasin g the share of privatecurrent situati on show s considera blwith the overa ll tar get , ea ch Membincreased R&Dintensity . The Europcornerst one of the Lisbo n partners

While inn ovati on is mo re than Rchem istry (and related scien ces ) ain the chem icals industry . It is, the

(i.e. the rati o b et ween R&Dexpenchem icals industry has show n a slide cade , while som e emerging co uefforts with nota ble su ccess . Eurobeen considera bly lower than in Ja2% of sa les . Due to the multinati ochemicals industry and the tenden ccloser to cust om ers along the valueR&D has gradua lly mov ed nearer t

One reas on for the relatively low ov etoday base chemicals which requ represent almo st 60% of Europeanhigh er R&Dinvest m ents in spe cia

materia ls and other h igh er te ch su

Corporate R&Din Europe is increasinwhere revenues f rom b ase chemical

in resear ch and inn ovation for ne wcom panies have genera lly maintainR&Dexpenditure in sm aller com pf undin g varies great ly f rom region tinvest ment , in parti cular, is needed


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used to help achieve thisgoal. Concerns of allstak eholders , includin g those of civil society should be tak en into account in this process.

Condentia l business information /data prote ction

The genera l protection of k now how, includin g the related studies and data wh ich are to b e considered as condentia l b usiness information

(CBI), is important for the chemicals industry . This is parti cularly true for SMEs, which f requent ly do not have the resources to create and maintain a portfolio of registered IPR on the one hand , and have little experien ce of mana ging trade secrets on the other. Moreover, there are instan ces in which

unre gistered IPRis the only solution available. The erosion of condentia lbusiness information and data protection is a pressin g issue . This is part ly a resu lt of increasin g glob alisation and ever growing conne ctivity.

For certain information espe cially detai ls relatin g to hea lth, saf ety and the environment the concerns of enterprises to protect their data may conict

with the public interest and the righ t to k now. In such situati ons, a balance must be stru ck as has been done , for example, in the Aarhus Conventi on.

Counter f eitin g

Counter f eitin g is a ma jor problem fo r the European chemicals industry . This is not simply a problem of luxury brands . It is a glob al issue aff ecting

all manu f acturin g sectors. Hea lth and saf ety concerns mak e the problemeven mo re serious and dan gerous for chemicals than for certain other

products, even if hard data on the scale of counter f eitin g in this industry are hard to nd . However, recent high prole cases (e.g. heparin ,diet hylene

glycol in too thpastes and melamine in milk) give a goo d indication of the importan ce of the issue . Counter f eitin g not only causes econom ic damage,it also under mines conden ce in the chemicals industry . The problem grows

as counter f eiters becom e increasin gly sophisticated .

The legislative f ramewo rk to comb at counter f eitin g in the EU is well

de veloped . However, more can still be done on en forcement . Most f ak es see m to com e f rom o utside Europe , in parti cular China. There fore,

the Comm issions efforts to tackle the issue multilatera lly (e.g. the Anti Counter f eitin g Trade Agreement ) and , where appr opriate , bilatera lly (Free Trade Agreement ne go tiati ons) are to be supp orted .

Technolog y Trans f er

R E C O M ME

The Commission and Member Statetheir efforts to reach agreement on tpatent and a common jurisdictionalEuropean and Community patents c

The Commission and Member Statepatent law harmonisation through thProperty Organisation (WIPO) and Transatlantic Economic Council (T

The Commission and Member Statthe protection of condential busineimportant IPR and ensure that the psystematically applied when strikinlegitimate protection of condentialother policy objectives, such as the and access to documents, as has beeAarhus Convention. Awareness of tby relevant industry associations in

to members and by the Commissiondeveloping innovation policies relev

The Commission and all players invcounterfeiting and product piracy inEuropean industry, should cooperatand conduct strong enforcement actin Europe and elsewhere in the woreducational initiatives.


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G r z e g o r z

K w o

l e k # 1 4 0 0 3 0 7 F o

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The Commission should ensure that all relevantconsiderations are addressed in impact assessmentsaccompanying new legislative proposals. These shouldinclude the impact on sustainable development, health,international competitiveness, SMEs and innovation. Whereappropriate, further research needs should be specied.

The Commission and Member State authorities shouldimprove communication with industry and otherstakeholders to facilitate proper understanding of, andcompliance with, regulatory requirements.

The need to comm uni cate f ull and accurate information is espe cially important follow ing ad opti on of ne w legislation . Ways to ach ieve th is include information meetin gs and other initiati ves for enterprises along

the value chain to provide guidan ceRegiona l aut ho rities can p lay a cruneeds of SMEs sho uld also b e bo rBetter Regulation strate gy is bring

in this eld , includin g co nsu ltati osubstantia l impa ct sho u ld also be swith sta k ehol ders .

The Commission and Memberunnecessary divergence of rulerequirements while ensuring cin order to reduce the administshould form a consistent framestable long term perspective.


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1.Energy and eedstock as decisiveelements o competitiveness

The ch em icals industry uses ener gy produ cts , na mely oil, gas and to

a m inor de gree coal and b iom ass , no t on ly as a source of ener gy but as prin cipa l raw materia ls for its na l produ cts . The policies to comb at climate ch an ge aim to redu ce green ho use gas (GHG) emissions , the ma jor part of wh ich ste ms f rom ener gy generati on and use . Energy and

climate chan ge policies are , there fore, close ly link ed . They have a strongdire ct and indire ct impa ct on the prices of ener gy produ cts and ener gy use and also o n other aspe cts of sustaina ble de ve lopment , includin gen vironmenta l prote ction . The chem icals industry accounts for 12% of tota l EU ener gy de mand and for one -th ird of all EU industria l ener gy use (ener gy and f eedst ock). At the sa me time , ener gy and f eedst ock availab ility and pri ces are k ey f actors for the com petiti veness of large parts of the chem icals industry . In parti cu lar, in the area of b ase ch em ica ls, ener gy and f eedst ock tog et her f requent ly exceed 50% of

tota l produ ction cost .

Petr och em icals (olens ): industry based on oil

The petr och em icals se ctor is at the start of mo st chem ical value chains .It creates signicant added value (50b n) and is highl y capita l intensi ve.

European produ cers have genera lly been able to remain com petiti ve due to a nu mb er of f actors, such as plant size, upstrea m and downstrea m

inte gration, operati ona l per formanand a concentrated mark et . The sec

to avoid transp ort co sts and to iener gy effi cien cy, and there by av

emissions. Inte grati on in Europe rem

be extre mely expensi ve, ener gy covery ne gative for downstrea m indu

Forecasts predi ct that the wo rld dwill continue to g row su bstantia llymuch low er in the EU. Produ ctionover the past de cade and therecapa city. In contrast , the Midd le Eand China (due to strong grow th in

increasin g their produ ction capa citincludin g, fo r exam p le, polypr opInvest ments in Europe are focusedand effi cient p lants of a size adapmark et . Produ ction essentia lly grow

existin g p lants (de bo tt lene ck ing) lincreases in output .

EnergyVI and eedstoc

T H E E T H Y L E N E VA L U E C H A I N


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V i t a

l i y

P a

k h n y u s h c h y y

# 1 1 6 7 3 2 3 5 F o

t o l i a


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1.Action on climate change as a businessopportunity or the European chemicalsindustryIncreased efforts to save ener gy and m itigate climate chan ge are not on ly a challen ge for the chem icals industry , but also off er substantia land rapid ly grow ing mark et opp ortunities in Europe and other regions

as well. The ch em icals industry off ers a wide ran ge of inn ovati ve pr odu cts (inorgani c and organi c ch em icals) wh ich eit her a llow s

en vironmenta lly mo re sustaina ble ener gy generati on (solar pane ls),

ener gy storage (batteries depend on ch em ical pr odu cts ) or ener gy savings (insu lation materia l and ligh t weigh t materia ls or tyres wh ichredu ce vehicle ener gy consu mpti on). Numerous initiati ves have been laun ched by gov ern ments and the private sector to promo te the wider use of ener gy saving produ cts . These expand mark ets and create ne wbusiness opp ortunities . Examp les include the com pre hensi ve Action

Prog ramm e on Sustaina ble Consu m pti on and Produ ction and on Sustaina ble Industria l Policy the Comm ission ad opted in June 2008. In parti cular, improved ener gy mana gement in buildin gs off ers potentia lly vast savings for the econom y as a whol e in the near ter m.

The ener gy saved by these items easi ly exceeds the ener gy required for their manu f acture . Hen ce, the ch emicals industry s produ cts f requent ly create the potentia l for ener gy savings and emissions redu ction in other

se ctors of the econom y. This must be k ept in m ind since these savings are attri buted to user se ctors, and not to the ch em icals industry . In additi on , the f eedst ock used for the manu f acture of na l produ cts can be , and is increasin gly, sourced f rom recycling o r recovery . However,waste pre venti on is sti ll the mo st eff ective way to save ener gy and

redu ce CO2 em issions . This also needs to be considered in produ ct and process de ve lopment

2.In a globalised chemicalsglobal action including anengagement o emergingessential to combat climaDespite the overa ll positive contri b

and soluti ons to the m itigati on o

use and GHG em issions in produ cdependen ce on fossil f eedst ock rener gy and resource use effi cien cy

The chem icals industry operates gprodu ction base in Asias emerginwo rldwide probl em and , conse queeff ects of policy measures is cruciaagree ment on climate chan ge and

of comm itments and amb itions onimportan ce for the com petiti venessReloc ati on of parts of the ch emicdue to diff erent climate chan ge mparts of the wo rld wou ld cause unEurope . It wou ld also increase globand pollution if ma jor parts of the inand India , with a probl ematic energenerati on and use . It is for this reas

the green ho use gas emissions allowcontains spe cial provisions to redumaintainin g the leve l of comm itmto the provisions in Article 10 a) ofsubsectors of the chem icals industrdee m ed to b e exposed to a signi

Climate chVII policy


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eco nom ies in se curin g ade q uate ener gy supp lies and the pressin gneed to redu ce massive air pollution, there sho uld be a commo n interest in su ch agree ments , altho ugh it is too ear ly to jud ge the perspe ctives for glob al parti cipati on. In order to be eff ective against climate ch an ge,

and in parti cu lar carbo n lea k age , se ctoral agree ments sho uld lead toem ission redu ctions of com para ble magnitude to tho se for European insta llati ons . They need to b e co ntr ollable, veriable and su bject tomandat ory en forcement arran gements .


As the chemicals industry is truly globalised, adequatemeasurable action by emerging economies is needed tomitigate climate change. This would contribute to creatinga more level playing eld, allowing the European chemicalsindustry to compete. Europe should do its utmost to createthe conditions for such action.

In view of the complexity of sectoral agreements inthe chemicals industry, support by all actors (industry,governments, including those of emerging countries, andthe Commission) to bring these initiatives to a successfulconclusion in as many subsectors of the chemicals industry aspossible is to be welcomed.

3.

Europes chemicals industry has mademuch progress in reducing energyintensity and emissions, but urthereforts are necessary The European ch em icals industry can b e regarded as a rst mov er

to impr ove ener gy effi cien cy and much h as been ach ieved . Overa ll,chem icals produ ction in Europe increased by mo re than 50% b et ween 1990 and 2005, yet the industry s emissions of GHG f ell by 25% ov er

the sa m e peri od . This is m ain ly due to the m any highl y inte grated produ ction sites . Other important elements were the large scale mov e f rom co al to gas as a prin cipa l ener gy source and chan ges in the produ ct m ix. Res ource and ener gy de mand were m inim ised and their ow s opti mised at site level, by usin g excess heat f rom o ne proc ess as an

input to an other for example Indi cati ons now are that the residua l

the data available f rom these studthe Internati ona l Energy Agen cy aconclusions on the nature , size anfor impr oved ener gy effi cien cy in

ne cessary to f ully exp loit this potenresear ch and de velopment in Eurowill b e important for the im plemrevised E TS Directive that the allocmeasures wh ich g ive incenti ves forand ener gy intensi ve te chniques .

Car bo n capture and st o rage (Cco ntri buti on to GHG emissions resta k ehol ders consider CCS as a pr

ener gy and f eedst ock. O ther sta k eof CCS must no t com prom ise efforunder ground in jection of CO2 has b

in various app lications with in the ote ch nolog ies for comm ercial app licposes a substantia l challen ge. CCSpetr och em ical p lants , but addin g

andco

sts. L

arg

e sca

le

dep

loy

mechem icals sector before 2020. How

pilot or comm ercial de mo nstrati on

the Directive on the geolog ical stodue to its potentia l as a possible optsuccess f ully de velop this technologof CO2 transp ort and storage proje

R E C O M ME

Robust and veriable informatemission reduction potential ocrucial for decisions on measuand for setting benchmarks forof the European Emissions Tracurrent information gap is of th

Member States and the Commefforts for the full implementawithin the ambitious timelinesstakeholders.


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R E C O M ME N D AT I O N

In many cases the development of local cluster platforms

with active cooperation between industry and (local) publicauthorities would improve their logistical effi ciency andoverall management. A multi-stakeholder approach tocluster leadership may enable the development of long termperspectives and guarantee consistency.

3.Addressing numerous bottlenecksin transport must be a priority

Long distan ce transp ort is the ru le in the ch em icals se ctor. Chemical

com panies are of ten quite spe cialised and one com pany can supp ly the whol e European mark et . Even if large parts of the industry are located in clusters , distan ces bet ween these produ ction sites can be very great . There is a risk that insuffi cient logistics inf rastru cture and other transp ort bo tt lene ck s co u ld pre vent the ach ievem ent of str onger clusters . In genera l,the High Level Group f ee ls that the share of road transp ort is tooh igh. It considers that the de clinin g use of rail sho u ld be reversed and that mo re pipe lines are needed . The de velopment of effi cient transp ort syste ms of all types requires mo re attenti on , with due care paid to the en vironment and saf ety .

Inter mo da l transp ort is genera lly supp orted and is of increasin gimportan ce, but the ne cessary inf rastru cture is not yet f ully in place and

regulat ory hurd les can de lay projects . Industry cites , for examp le , the lack of transit storage per m ission for containers containin g h azard ous goo ds at inter mo da l ter mina ls and the com plexity of pr oc edures toob tain per m its for ne w inter mo da l ter m ina ls and for on-site storage.

The issue of spur tra ck s to co nne ct railway lines with ch em ical sites sho uld also be addressed . Decisions on such m easures sho uld ta k e into

account the wider impa ct and bene ts and sho u ld no t be based solely on local interests . At the internati ona l level, diff eren ces in ru les for the transp ort of dan gerous goo ds by mo de of transp ort can be an ob sta cle

to inter mo da l transp ort and sho uld be addressed .

A de cline in the use of rail transp ort can be seen in se vera l Memb er States . Non-aligned railway syste ms bet ween countries , and a lack of effi ciency and exibility see m to explain this de velopment . This is raisin gconcern espe cially amo ng nati ona l govern ments and the Comm ission

inter mo da l transp ort . A high er, haredu ce co ngesti on , em issions , lovehicles and help tackle the sho rta gthe suita bility of the existing road in

be care f u lly considered and the exbe care f ully evaluated . Work by theassess the ad vanta ges and disad va

Produ ct pipe lines are crucial for tha su bstantia l co ntri buti on to reduFrom an en vironm enta l perspe ctimo re ad vanta geous than traditi onapro te ction issues are ade quate ly aconstru ction sta ges . Pipe line constaut ho rities and re g u lati o ns wh

pr ojects . This can becom e extreCloser transnati ona l coo perati on ,

needed to address these challen gethe idea of a pan -European Olenand extendin g the existin g ol ende velopin g it towards Sout hern andall ma jor clusters and reg ions .

R E C O M ME

Furt her inte gration of European ch

needs better inf rastru cture along t

Stakeholders should work togea Member State and Communiand address key bottlenecks wintermodal transport.

National and European authorpossibilities for revitalising rai

Massive congestion of the roafor chemical logistics and the investigating solutions to the p

The question of closing gaps iand public support for such anin order to establish an approp


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1.

European chemicals industry: strongglobal player acing mounting pressure

The EU has always been an important p layer in the glob al chem icals m ar k et . So f ar, it has b een in a p ositi on to b ene t f rom trade opp ortunities . Europe has a very substantia l trade surp lus in chem icals (35.3 b illion in 2007). However, ana lysis of glob al mark et shares show s that bet ween 1995 and 2007 bo th the European and US chem icals industries lost 4%, wh ile their Japanese co unterparts f e ll by almo st

7%. Comb ined , the ch em icals industries in Brazil, Russia , India and China (BRIC) gained almo st 13% b et ween 1995 and 2007. Th us , the BRIC countries espe cially India and China have becom e ma jor glob alchem ical produ cers follow ing the strong increase in interna l de mand .

The evoluti on of the Trade Com petiti veness Indi cat o r (TCI), wh ichcom pares the trade balan ce to tota l trade (exports p lus imports ) of a region , conrms th is picture . It revea ls the de clinin g com petiti veness since 2003 of the overa ll EU chemicals industry . In four years , the TCIf ell

f rom 21.6% to 16.5%. Th is show s that imports are grow ing f aster than exports . The situati on diff ers acco rdin g to indi vidua l su bse ctors. A TCI trend ana lysis (19992007) show s that the EU h as recent ly increased

its trade surp lus in spe ciality chem icals with mo st of its main tradin gpartners . The sa m e app lies to co nsu m er ch em icals and p olym ers .Innovation and produ ct de velopment are drivers behind this grow th In

C O N C L

International trade is vital for gEuropean chemicals industry. at the centre of global trade anmarkets. As growth is concentimproved access to these mark

The general performance of th on the global market has been decade, especially compared tproducing countries such as thchemicals industry is generallydriven subsectors. The trade psubsectors, particularly the rawparts of the chemicals industryerosion. Their global competit

Goo d econom ic f ramewoimportant for internati onemerg ing co untries have

Globalisation,IXinternationalcompetitiveneand trade


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at this sta ge litt le chan ce of arriving at su ch an out com e through the ho rizonta l Non Agricu ltura l Mark et Access (NAMA)ne go tiati ons . The tariff-cuttin g fo rm ulas b ein g co nsidered will mo st lik e ly not resu lt

in a meanin gf ul redu ction for ch em icals, parti cular ly with regard to

the k ey emerg ing co untries , wh ich are of g reatest interest for the EUindustry and wh ich sti ll have relati vely high app lied rates and even h igh er bo und rates . This m eans that the way to ach ieve a f urt her signicant tariff redu ction for chem icals in the DDAis through an other sectoral agree ment . In June 2008, the EU, USand severa l other countries

su bm itted a proposa l in the DDA for such an agree ment . This was f ully supp orted by the EU chem icals industry .

From a European perspe ctive , this se ctoral agree ment sho u ld involve

all countries with a signicant ch em icals industry and include allchemicals (Harmo nized Syste m - Chapters 28 to 39). Chemical produ cers based in emerging co untries now adays com pete dire ctly with their

EU counterparts . These industries are h ighl y prote cted in their hom e mark ets and bene t f rom low EU tariff s. An agree ment amo ng OECDcountries alone would be insuffi cient .

Mark et access depends not only on tariff s. Non-tariff barriers also

need to b e syste m ati cally addressed . In additi on , a com pre hensi ve agree ment on trade f acilitati on is important for the trade dependent EUchemicals industry . Finally, since inn ovation is de cisive for the success of

the chem icals industry , trade policy has a k ey role to p lay in prote ctin ginte llectua l property righ ts in th ird country mark ets .

The European ch em icals industry genera lly supp orts the accessi on of mo re co untries , su ch as Russia and Iran , to the ru les -based WTOsyste m. It considers that the basis for the accessi on ne go tiati ons must

be acceptan ce of the Chemical Tariff Harmo nisati on Agree ment and the eliminati on of allnon-tariff barriers and other trade dist ortin g measures

su ch as double pricing and export ta xes .


Notwithstanding the diffi culties in reaching an agreementin the framework of the WTO trade negotiations, themultilateral approach towards trade liberalisation, currentlybeing pursued through the DDA negotiations, remains thepreferred option. In order to foster increased competitivenessfor the European chemicals industry, the EU should thereforecontinue to actively pursue an ambitious overall NAMA

Free Trade Agree ments (F

Bilatera l and re g iona l FTAs canmultilatera l trade agree m ents . Eco

priority in se lectin g potentia l FTApsho uld be eco nom ic potentia l (siagainst EU exports (tariff and non-ndin g itse lf excluded f rom FTAs b

In ter ms of m ark et access , FTAs shabol ish all tariff s with a maximum owh ich sho uld be as sho rt as possibl

secure an out com e at least com para

partner to o ther k ey com petit or cobe to redu ce or elim inate allun warsecure a standsti ll for all ne w o nesbe so-c alled WTO p lus agree menf urt her and f aster in promo tin g o pissues wh ich are not ready for a mu

ne go tiati ons need to address un f asu bsidies , exp ort duties , double access to raw materia ls. It is importapossible bet ween all FTAs in order t

procedures , such as rules of origin, foperat ors.

Enforcement of FTAs can som eti mattenti on sho uld b e g iven to thethese agree ments . Where an FTApf ramewo rk to implem ent the agre

m ind . Capa city buildin ginitiati ves

R E C O M ME

The EU should pursue Free Trtrading partners, in particular iplus agreements that go furthe

and integration than is currentlnegotiations. The selection of give priority to economic critegiven to the EUs Policy for Dstrive for consistency betweenconditions comparable to thos


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Because of the str ong commo n traditi on of sim ilar policy prin cip les ,bo th nati ona lly and internati ona lly, the US is the mo st log ical partner wh en see k ing mo re regu lat ory convergen ce in the ch em ica ls se ctor.However, it sho uld also be recog nised that substantia l legal and soc ieta l

diff eren ces have materia lised over the years wh ich m ak e regulat ory co nvergen ce diffi cult . Regulat ory coo perati on sho uld , there fore , b e based on a rea listic expe ctati on of wh at is f easi ble .

Trade Def en ce Instru ments (TDIs)

The WTOanti -du mpin g agree ment allows gov ern ments to act if there is genuine (materia l) in jury to the com petin g dom esti c industry .

The ch emicals industry acco unts for mo st anti -du mpin g pr ocedures glob ally and bo th de ve loped and de ve lopin g countries mak e f requent use of this instru m ent . However, not all WTO memb ers app ly the sa me met ho dolog y or pr ocedura l dead lines . It is genera lly accepted that the EU app lies mo re rigo rous criteria than mo st countries in the wo rld. The reas on for this restrained use of anti -du mpin g m easures

is that European industry usua lly has bo th signicant pr odu cer and

user interests with a strong comm itment to o pen internati ona l trade .Developin g co untries , in parti cular, appear to use less strin gent ru les ,leadin g to un justi ed action against imports when they de cide to ta k e anti -du mpin g measures . Imp lementati on of current WTOru les is wea k,or som etimes simply ignored . The Comm issions active role in counterin gsu ch pra ctices is important and sho u ld be rein forced .

When it com es to anti -du mpin g o r TDI pra ctices in genera l, it is crucialto c reate a tru ly glob al level p layin g eld within the WTO f ramewo rk. The current proposa ls ta bled in the conte xt of the DDA ne go tiati ons

appear insuffi cient to ach ieve this.

In the discussions, industry raised concerns abo ut increasin g diffi culties

in ad option by the EU of anti -du mpin g measures . In rep ly, it was pointed out that the econom ic and industria l lands cape has chan ged en ormo usly

in the past de cade . Due to glob alisation , com petiti on has intensi ed and supp ly chains are mo re sophisticated , mak ing econom ic ana lysis much mo re com plex than before . Interests amo ng industry are alsomo re diverse . It is, thus, not surprisin g that de cisions have becom e mo re

com p lex. In additi on , there is a grow ing tenden cy by th ird countries tothreaten industries wh ich parti cipate in TDI proceedin gs with reta liation. The EU sho uld consider providing a strong and eff ective ans wer to these

threats , includin g recourse to ex-offi cio case initiati ons if appr opriate .

In the WTO, the EU should serules leading to a global level of anti-dumping practices. TDto offset the impact of unfair t

measures to tackle double pricHowever, a realistic and balanfollowed and it must be recognwider package being negotiate

Cust om s procedures and

Because of glob a lisati on , cust om s

an exponentia l and unpre cedentetransa ctions . In additi on , 149 ne whave been notied to the WTO siinternati ona l trade ru les . The chalne w saf ety and security risk s, includof cust om s procedures has slowed

Effi cient cust om s pr oc edures canby redu cing b usiness co sts and c

there fore, needs to mo dernise thework on greater operati ona l inte graof its Memb er States . This sho u ld iof ne w electronic co ntr ol syste men vironment . European cust om s lawa clear distin ction in the Comm unitycom panies and smuggl ers . Nationaof th is, creatin g diff eren ces of treat

increases the risk of cust om s dispchem icals industry wh ich is hea vimateria ls and sem i-nished produ

In resp onse to terr orist atta ck s, theimpa ct on internati ona l trade contitigh tenin g its security arran gementoperat ors will be obl iged to send sucust om s aut ho rities before any de

that the pre -departure de clarati oncom petiti ve dist ortions with th ird cexports , but simply com ply with theimporting their produ cts .

The High Level Group proposes to d


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are currently a major problem for chemicals exporters andtraders to some countries, such as Russia. The EU shouldfurther pursue multilateral and bilateral cooperation betweencustoms authorities and governmental dialogue as ways to

counter illegal activities.

3.Securing access to raw materials in nondiscriminatory conditions

The EU chem icals industry needs to be able to source its raw materia ls,

includin g rene wables , at wo rld m ark et pri ces in order to rem ain com petiti ve. It is, there fore , long esta blished EU policy to h ave no, o r low, import tariff s on raw m ateria ls or inter mediate produ cts so as toallow industry to create added value , and thus job s, with in the EU.

However, access to raw materia ls appears to have becom e mo re diffi cult

in recent years , for severa l reas ons. Increasin g scarcity on glob al mark ets has go ne hand in hand with greater gov ern ment inter f eren ce in a wide ran ge of m ark ets . In mo st cases , the orig in of the mark et dist ortion is externa l to the EU and com es , for instan ce, f rom export restri ctions ,

tariff s, su b sidies or other pri cing m easures by th ird co untries . But som etimes interna l EUpolicies , such as agriculture or ener gy, inuen ce cost and availab ility of raw materia ls for industria l purp oses .

Eviden ce show s that countries restri ct their exports or subsidise imports of raw m ateria ls and there by inuen ce access to o ther co untries ,includin g the EU, in various ways : exp ort ta xes (Chinese ye llow

p ho sp ho rus ), export licen ces or quotas (Chinese uorspar , Chinese cok e), dua l pricing schemes (gas and oil in Saudi Arab ia or Russia ) and su bsidised imports or local pur chases of raw materia ls.

One pr obl em fo r the EU wh en addressin g these various pra ctices is that they are diffi cult to ta ckle under existin g internati ona l trade law. There fore , it is important that the EU continues its efforts to stren g then the ru les regardin g these pra ctices in WTO and b ilatera l ne go tiati ons and mak es optimum use of other available means to tackle the situati on.

Trade de f en ce instru m ents can only be regarded as a se co nd b est solution .

Som e rene wable raw materia ls for chem icals are also used to produ ce food, f eed and ener gy. In a situati on of sho rt supp ly, probl ems to source

raw materia ls may arise wh en policies for the parti cular use of rene wable

For these cases , soluti ons co uld bor suspendin g EU tariff s and q uthat ser ve as industria l inputs inmark et pri ces for the mo st aff ecte

A nu mb er of cust om s procedures ,Contr ol (PCC), current ly exist in theor redu ction of im port duties on certain spe cic, and industria l, usescreate the predi cta bility the chemic

de cisions wh ich are usua lly ta k enand re liable supp ly of rene wablestimulate inn ovation in their use . Ffor bio-et han ol for industria l use sho

Union. Eliminatin g or redu cing impother rene wable raw m ateria ls,

intr odu ction and en forcement of sto agree on internati ona l standardswhere possible , in order to avoid arob ust b ilatera l or regiona l schemEU, can act as steppin g stones towcriteria used sho uld ta k e account oappr opriate .

R E C O M ME

The EU should continue to propermanent new WTO rules adto the discriminatory supply of

trade negotiations, the EU shounwarranted trade and subsidyproblems in accessing raw ma

The EU should assess the comby the elimination or reductionopening import quotas for the renewables, of the various subchemicals industry. For enviro

renewable raw materials, furthgo hand in hand with sustainabconsideration of WTO rules. Wstrive for internationally agree


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C h r i s t

i a n

4 2 # 6 2 1 1 2 8 2 F o

t o l i a

Annex I


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COMMISSION DECISION of 14 June 2007

setting up the High Level Group on the Competitiveness of the Chemicals InEuropean Union

(2007/418/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the EuropeanCommunity,

(5) The group should be compCommission, the Member and relevant stakeholderindustry and downstream ube drawn, inter alia , frtrade unions, non-govresearch/academia.

Whereas:(1) Article 157(1) of the Treaty assigned the Community and the

Member States the task of ensuring that the conditionsnecessary for the competitiveness of the Community sindustry exist. Article 157(2) in particular calls upon theMember States to consult each other in liaison with theCommission and, where necessary, to coordinate theiractions. The Commission may take any useful initiative topromote such coordination.

(2) In its Communication Implementing the Community LisbonProgramme: a policy framework to strengthen EUmanufacturing Towards a more integrated approach forindustrial policy* ( 1), the Commission announced theintention to set up a High Level Group concerned with thecompetitiveness of the European chemicals industry.

(6) Rules on disclosure of informshould be provided foCommission s rules on seCommission Decision 2001

(7) Personal data relating to meprocessed in accordance wof the European ParliamDecember 2000 on the protto the processing of perinstitutions and bodies anddata ( 4).

(8) It is appropriate to fix a peDecision. The Commissioadvisability of an extension

(3) It is therefore necessary to set up a group of experts in the fieldof competitiveness of the EU chemicals industry and todefine its tasks and structure.

HAS DECIDED ASFOLLOWS:

(4) The primary task of the group should be to conduct economicand statistical analysis of the factors determining the rapidstructural changes in the chemicals sector, as well as otherfactors that influence the competitive position of theEuropean chemicals industry. Based on this analysis thegroup should formulate a set of sector-specific policyrecommendations with a view to enhancing thecompetitiveness of the chemicals industry in accordancewith the objective of sustainable development. Given thatRegulation (EC) No 1907/2006 of the European Parliament

Arti

High Level Group on the CompetitiIndustry in the Eur

A High Level Group on the ComIndustry in the European Union,group, is hereby set up with effectthis Decision.

Arti

T

Annex I


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(a) to conduct economic and statistical analysis of the factorsdetermining the structural changes in the chemicals industry aswell as other factors that influence the competitive position of the European chemicals industry;

(a) where the member resigns;

(b) where the member is no loeffectively to the group

(b) to assist the Commission in questions related to the compe-titiveness of the chemicals industry;

(c) where the member does noTreaty.

(c) to formulate a set of sector-specific policy recommendationsaddressed to policy makers at the Community and nationallevel, industry and civil society organisations.

2. The group will not discuss matters directly linked to Regulation(EC) No 1907/2006 concerning REACH or assess its functioning.

Article 3

Consultation

1. The Commission may consult the group on any matterrelating to the competitiveness of the EU chemical industry.

2. The Chairperson of the group may advise the Commissionthat it is desirable to consult the group on a specific question.

6. The names of members shaDG Enterprise and Industrycollected, processed and pprovision of Regulation (EC) N

1. The group shall be chair

2. The sherpa sub-group spapers and advice for actirecommended by the group; i

Commission services in ordemeetings.

Article 4

Membership appointment

1. The members of the group shall be appointed by theCommission from high level specialists with competence andresponsibility in areas which are related to the competitiveness of the European chemicals industry.

2. The group shall be composed of up to 31 members composed of representatives of the Commission, the European Parliament, the

3. The group may, with the asub-groups to examine specifiestablished by the group. Susoon as their mandates are fulf

4. The Commission s represwith specific competence on ain the work of the group, or groups and ad hoc groups, if iis necessary or useful.


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8. The Commission may publish, or place on the Internet, in theoriginal language of the document concerned, any summary,conclusion, partial conclusion or working document of the group.Proceedings and interim reports will be available on a dedicatedwebsite. The final report will be published early after the finalmeeting of the group.

Article 6

Reimbursement of expenses

The Commission shall reimburse travel expenses and, whereappropriate, subsistence expenses for members, sherpa groupmembers, experts and observers in connection with the group sactivities in accordance with the Commission s rules on thecompensation of external experts.

The members of the group, sherpa sub-group members, expertsand observers shall not be remunerated for the services theyrender.

Meeting expenses shall beannual budget allocated Commission department.

The Decision shall apply unadoption.

Done at Brussels, 14 June 20

For th

GV

Annex II


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Annex IIMembers o the High Level Group on the Competitivenesso the European Chemicals Industry

Comm ission

Gnter Verheugen Vice -President of the Comm ission - Comm iss

Stavros Dimas Comm issioner for Environment

Janez Potonik Comm issioner for Scien ce and Resear ch

Peter Mandelson 12 Comm issioner for Externa l Trade

Catherine Ashton 13 Comm issioner for Externa l Trade

Andris Piebalgs Comm issioner for Energy

Jacques Barrot 14 Comm issioner for Transp ort

Memb er States

Maria van der Hoeven Minister of Econom ic Aff airs, The Net her lands

Fientje Moerman 15 Minister of Econom ic Aff airs, Energy, Foreign TrReg ion , Belgium

Patricia Ceyssens 16 Minister for Eco nom y, Enterprises , Scien ceBe lgium

Piotr Grzegorz Woniak Minister of Econom y, Poland

Martin man Minister of Industry and Trade , Czech Repu bl

Michael Glos Federa l Minister of Econom ics and Technolog

Herv Novelli Minister of State , the Ministry for the EconomFran ce

Stephen Timms 17 Minister for Competiti veness and Consu mer

Ian Pearson 18 Minister for Econom ics and Business , United

Industry


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y

Franois Cornelis Vice -Chairman of the Executi ve Comm ittee and President of Ch

Tony Bastock Group Mana g ing Director, Contra ct Chem icals Ltd

Thierry Le Hnaff Chairman and CEO, Ark ema

David Duncan Seni or Vice President of Hom e & Pers ona l Care Resear ch & Deve

Jrgen Hambrecht Chairman of the Board of Executi ve Directors, BASF

Ben van Beurden Executi ve Vice President of Shell Chem icals

Johan von Knorring President , Ban g & Bonsom er Group

Giorgio Squinzi Chief Executi ve Offi cer, Mapei

Regions , Trade Unions , Acade m ia, Environmenta l NGOs, Consu mer organsiati on

Reiner Haseloff President of the European Chem ical Reg ions Net wo rk (ECRN)

Reinhard Reibsch Secretary Genera l, EMCEF

Karin Markides President of Chalmers University of Technolog y, Sweden

Mikael Karlsson President of the European Environmenta l Bureau

Mette Boye Head of Pol icy, Danis h Consu mer Coun cil


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Public sector should provide effective support to private sector efforts (Addressee: EU, Me5.


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local authorities)

Within the limitati ons of nati ona l R&D bud gets , m any Memb er States have comm

increased effort . Cost effi cient use of scarce resources is essentia l. This can be ach ievon the qua lity of R&Dexpenditure , based on exce llen ce and priorities . Focusin g on ksho u ld be accom panied by road mappin g exercises and active coo rdinati on of Europin ch emistry and ch em ical en gineerin g resear ch w ith clo se link s to regiona l induinstru ments , includin g ta x ad vanta ges , providin g supp ort and risk cover over a suffifor start -ups and o ther SMEs.

3. Innovation needs trust : improv ing comm uni cation with sta k ehol

Improve information and comm uni cation

The chemicals industry needs to develop a more effective dialogue with society based on 6.understanding and trust.

Listenin g and understandin g are essentia l for eff ective two way comm uni cation . Therisk mana gement k ey to de ve lopin g the trust needed to supp ort an inn ovation f rmak e it wo rk. Innovation requires the conden ce of invest ors, cust om ers , emp loyesustaina b ility and saf ety of produ cts and processes .

4. K nowled ge is k ey : prote ction of Inte llectua l Property Righ ts (IPR

The Commission and Member States are encouraged to continue their efforts to r7.the creation of a Community patent and a common jurisdictional framework withand Community patents can be enforced.

The Commission and Member States should pursue international patent law harm8.the World Intellectual Property Organisation (WIPO) and initiatives such as the TransatlantiCouncil (TEC).

The Commission and Member States should recognise the protection of condential b9.information as an important IPR and ensure that the proportionality principle is systematicalwhen striking the balance between the legitimate protection of condential business informother policy objectives, such as the right to know, transparency and access to documents, as

done, for example, in the Aarhus Convention. Awareness of this IPR should be emphasisedindustry associations in their information activities to members and by the CommStates when developing innovation policies relevant to SMEs.

The Commission and all players involved in the ght against counterfeiting and product p10.Member States including European industry should cooperate to facilitate investigations and

IV. Regulation


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g

Proper co nsu ltati on of sta k ehol ders , im proved comm uni cati on by aut ho rities and mo re happ lication of ru les are k ey e lements of a goo d regulat ory f ramewo rk

The Commission should ensure that all relevant considerations are addressed in im11.accompanying new legislative proposals. These should include the impact on sustainable devehealth, international competitiveness, SMEs and innovation. Where appropriate, further reneeds should be specied.

The Commission and Member State authorities should improve communication with industry12.

stakeholders to facilitate proper understanding of, and compliance with, regulator

The need to comm uni cate f u ll and accurate information is espe cially important follegislati on. Ways to ach ieve this include information meetin gs and other initiati v

the value chain to provide guidan ce on the imp lementati on of ne w ru les . Reg ioncrucial role in th is process . The spe cial needs of SMEs sho uld also b e bo rne in m indBetter Regulation strate gy is bring ing abo ut signicant improvements in this eldimp lementin g m easures with a substantia l impa ct sho uld also b e subject to appr opsta k eholders .

The Commission and Member States should aim to avoid unnecessary divergence of r13.implementation requirements while ensuring correct application of EU rules, in administrative burden. Regulation should form a consistent framework and provide a reasstable long term perspective.

V. Human resources

Deve lopin g h uman res ources needs mo re attenti on

Member States should step up promotion of chemical and science education, sta14.schools.

Chemistry or/and chemical engineering faculties should dene the proles of new profes15.cooperation with industry.

Industry, in cooperation with education and employment agencies, should intensify efforts to16.human resource requirements in the short and long term in various locations and regions an

VI. Energy and eedstock


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gy

1. Energy and f eedst ock as de cisive elements of com petiti veness

Measures are needed to secure a suffi cient level of invest ment in the base chem ical sectors

In order to support the competitiveness of the petrochemicals sector in Europe, measure17.as strengthening clusters and improving infrastructure, should be taken to consolidate excompetitive advantages and secure the integration of Europes chemicals industry as a (Addressees: Member States, regional/local authorities, EU)

Improved performance of an effectively liberalised gas market, at least in the Community, an18.reliable imports of gas at competitive non-distorted prices are of very high importance for sparts of the chemicals industry. (Addressees: EU, Member States)

Due to the long term nature of the high investments required and the need to achi19.utilisation, stable long term electricity supply is a key element of competitiveness of the chemicals industry. Long term contracts with power generators or increasin e.g. combined heat and power facilities to cover inherent heat demand are the main o

(Addressees: Private Sector, Member States, EU)

2. Raw m ateria l chan ge: tow ards high er contri buti on of rene wable

Secure esta blished uses of rene wable raw m ateria ls and pa ve the way for large scale inn ovmediu m and longer ter m

At present, it seems too early to make a robust assessment of the economic viability of ren20.feedstock in the chemicals industry as a replacement for fossil feedstock, but the epotential available in the longer term provides suffi cient justication to continue research and development activities as a priority.

Incentives (e.g. subsidies or regulation) in agriculture or energy policy can seriously jeo21.attractive established uses of bio-based raw materials in the chemicals industry applications (e.g. threat to tallow availability as feedstock for the detergent indusubsidies for bio-fuel use). Policy makers at European, national and local level, s

such unwanted side effects.

VII. Climate change policy


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g p y

1. Action on climate chan ge as a business opp ortunity for the Euroindustry

Action on climate change provides signicant business opportunities for the European che22.industry. At the same time, it will remain an important research and development This potential should be fully exploited. (Addressees: Industry, Member States, E

2. In a glob alised chem icals industry , glob al action includin g an adeen gagement of emerging econom ies is essentia l to comb at climate

As the chemicals industry is truly globalised, adequate measurable action by eme23.needed to mitigate climate change. This would contribute to creating a more level playing eld, allEuropean chemicals industry to compete. Europe should do its utmost to create the conditions for su(Addressee: EU)

In view of the complexity of sectoral agreements in the chemicals industry, support by a24.(industry, governments, including those of emerging countries, and the Commissinitiatives to a successful conclusion in as many subsectors of the chemicals indube welcomed.

3. Europe s chem icals industry has made much prog ress in redu cinintensity and em issions , but f urt her efforts are ne cessary

Robust and veriable information on the emissions and the emission reduction potential of the 25.industry is crucial for decisions on measures to mitigate climate change and for sfor the future implementation of the European Emissions Trading Scheme. Closure of theinformation gap is of the utmost priority. (Addressees: Industry, Member States, C

Member States and the Commission should make strong efforts for the full implementation26.revised ETS Directive within the ambitious timelines set and in cooperation with

VIII. Logistics


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2. Strong clusters : European asset that merits f urt her supp ort

In many cases the development of local cluster platforms with active cooperation between ind27.(local) public authorities would improve their logistical effi ciency and overall mstakeholder approach to cluster leadership may enable the development of long tand guarantee consistency.

3. Addressin g nu merous bo tt lene ck s in transp ort must be a priority

Furt her inte gration of European c

Documents

High Level Group on the Competitiveness of the European Chemicals Industry — Final Report