Chemicals are vital to our well-being. They help us grow more abundant crops and preserve our food. In the form of plastics, rubber and foam, they help make our homes, factories and vehicles clean and comfortable. They enable us to make safer, lighter, cheaper, more durable goods and structures. And they help us to extract energy and use it efficiently. Trading chemicals around the world stimulates competition, provides an incentive to develop new markets through innovation and boosts production efficiency. But above all, it helps to improve the quality of human life.

Most chemical products are intermediates, used in the production of other goods. The chemical industry underpins virtually all sectors of the economy and its strategies directly affect downstream chemicals users. The big industrial users of chemicals are rubber and plastics, construction, pulp and paper, and the automotive industry. Nearly two-thirds of EU chemicals are supplied to the EU industrial sector, and more than one-third of chemicals go to other branches of the EU economy such as agriculture, services, and other business activities. The rise of global value chains gives all countries an interest in keeping chemical import duties low. Nowadays trade is no longer about "produced here, sold there" but "produced everywhere, sold there."

Future Economic Growth Beyond Europe's Borders

Since 90% of gross domestic product growth will take place outside Europe in the next decade, international trade should be a potential growth driver of the European chemical industry, bolstering sales and jobs. But barriers need to be stripped away. Despite some multilateral trade deals within the General Agreement on Tariffs and Trade (GATT) framework and some bilateral agreements between the European Union and its partners, much remains to be done in opening markets. And our industry also needs better access to affordable energy and raw materials and greater harmonization of standards and regulations around the world. A more coherent policy framework would help the European chemical industry fulfill its vocation of ensuring that by the year 2050 more than 9 billion global citizens live well, within the resources of the planet.

Surging Population

Between 2014 and 2050 the world's population will surge from 7.2 billion to 9.5 billion, according to the United Nations. But over the same period, Europe's total population will decline to 709 million, just 7.5% of the total. Meantime Asia's population will grow to 5.1 billion, 54% of global citizens; and Africa will be home to 2.3 billion, twice as many as today, and a quarter of those on our planet. World chemicals production is set to almost double from €3.4 trillion in 2013 to €6.3 trillion in 2030. But most of this growth will be outside the EU: If Europe's industry is to grow and share in the rewards, Europe must reinforce its role as a chemical exporting region.

Why Liberalized Trade Needs to Happen

Growth in post-recession Europe remains low, hampered by mature markets and an aging population. Domestic and international economic uncertainty aside, EU chemical industry exports did reach €139 billion in 2013, delivering an EU chemicals trade surplus of nearly €49 billion.

Given an appropriate domestic and international policy framework, the European chemical industry has strong potential to benefit from further forecasted growth in global chemicals demand. The industry firmly supports the European Commission's endeavors to underpin the internationalization of European companies and further liberalize trade - preferably at a multilateral level through the World Trade Organization (WTO) or via bilateral or regional trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP) or proposed EU-Japan Free Trade Agreement.

Multilateralism Is the Best Option

By its nature, the chemical industry benefits from liberalized trade. Its products are hugely diverse, innovative and widely used, and its plants and employees are located worldwide. Improving trading opportunities for chemicals can make the industry more competitive.

The successful Uruguay round of multilateral trade talks in 1994 achieved the Chemical Tariff Harmonization Agreement (CTHA) and Pharmaceutical Agreement, which harmonized chemical import duties at just 6.5%, 5.5% or 0%. The European Chemical Industry Council (CEFIC) then started advocating for a new, ambitious and proactive agenda. The successive extensions of the CTHA to new members of the WTO and updates to the Pharmaceutical Agreement have delivered tangible benefits for the industry as well as for consumers worldwide. Consumption and production of chemicals is growing most strongly in emerging and developing economies and in global value chains. If the WTO lives up to the proclaimed importance of global value chains, the goal of the Doha round should be to substantially reduce or eliminate tariffs for intermediate products including chemicals to help the development of these economies.

The European chemical industry is being increasingly harmed by measures in other regions including double pricing, export restrictions and export taxes. The chemicals sector is especially concerned about discriminatory practices regarding ethylene feedstock, gas, palm oil and important minerals such as yellow phosphorous, fluorspar or rare earths. It therefore welcomed rulings by the WTO Dispute Settlement Body that export duties and export quotas applied by China to rare earths, tungsten and molybdenum breached its WTO obligations. CEFIC supports the strong stand the European Commission takes against breaches of WTO obligations and the commission's pursuit of bilateral free-trade negotiations. But ultimately we need improved rules governing access to raw materials at a multilateral level.

Doing Bilateral Deals

Because the Doha round has made such slow progress, the EU and other regions and countries have sought to liberalize world trade via bilateral free-trade agreements (FTAs). CEFIC considers that FTAs complement the search for a multilateral deal and offer opportunities to achieve agreements in areas that are not yet or not sufficiently addressed by the WTO.

Negotiations on TTIP - a radical, far-reaching trade agreement - began in July 2013 and are ongoing. TTIP can help reduce the cost of trading with the US in various ways. A deal would help companies compete more effectively in increasingly globalized and competitive chemicals markets.

As regards Japan, negotiations for an EU-Japan Free Trade Agreement were launched in March 2013 and are proceeding. An FTA with Japan not only has the potential to enhance market access and regulatory coherence between the EU and Japan, but it will also pave the way for other bilateral and multilateral negotiations with and between Asian economies. It can also contribute to broader acceptance of world standards by Japan, where many barriers stem from stricter Japanese standards. And thirdly, an agreement with Japan could reduce any handicaps suffered by European companies arising from the proposed Trans-Pacific Partnership (TPP) agreement to which the EU will not be a party.

The EU chemical industry also has a lot to gain by increasing our chemical connections with regions including India, China, the Gulf Cooperation Council (GCC) and Mercosur. Spurring EU chemical industry growth in all these regions requires eliminating all chemical tariffs and removing all trade barriers, including export restrictions and export duties on raw materials. Ensuring effective protection and enforcement of intellectual property rights is essential to give investors confidence and foster innovation. Nontariff barriers such as double-testing of products and burdensome licensing and labeling requirements, and failure to comply with international standards prevent the EU and these regions from achieving the full commercial potential of their chemical trade.

Broad-Based Tariff Liberalization Needed

Despite talks about the importance of global value chains, many countries have yet to draw logical conclusions that growth of all their economic sectors requires liberalization of not only end-products but especially of intermediates like chemicals. A narrowly focused environmental goods agreement being pursued by a group of countries therefore misses the point. The world economy needs broad-based tariff liberalization, including ambitious tariff reductions for chemicals. The plethora of regional and bilateral trade deals being struck may reinvigorate participants to agree to international trade rules under the aegis of the WTO. If the WTO is to keep relevance for 21^st century trade, it must include in its agenda more ambitious deals at a regional level.