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EU Proposes Protection For Plastic Bottle Industry

European Buy 1 in 5 of the Half Trillion Plastic Bottles Sold Globally

03.08.2010 -

The European Union wants to impose new trade barriers on imported plastic from Iran, Pakistan and the United Arab Emirates, saying the countries illegally give aid to exporters who supply plastic for Europe's rapidly growing soft-drinks market.

The European Commission - the EU's executive - wants to impose duties worth about €140, €44 and €42 per tons on imports of plastic for bottles and food packaging from Iran, Pakistan and the UAE respectively, according to documents seen by Reuters on Monday.

The proposal follows an investigation into allegations of illegal subsidies in the three countries that was brought last year by European plastics makers who say illegal trade practices are squeezing them out of Europe's market.

"In view of the definitive conclusions reached ... it is considered that a definitive countervailing duty should be imposed on imports of the product concerned originating in Iran, Pakistan and the United Arab Emirates," the Commission said in conclusions seen by Reuters.

European governments are widely expected to back the plan next week. The bloc has traditionally been united in is opposition to illegal foreign state aid, diplomats say.

Europe is a major market for plastics exporters. European citizens buy one in five of the half trillion plastic bottles sold globally each year, as well as a significant portion of the world's food wrapping, according to industry estimates.

European demand for polyethylene terephthalate or PET - the specific plastic facing duties - totaled about 3 million tons at a value of around €3 billion last year, industry figures show. About 1 million tons of PET was imported.

In the conclusions seen by Reuters, the Commission abandoned plans to impose additional duties on illegal market dumping by the three countries' involved and EU member states are also expected to back that decision.

Europe already has trade barriers in place against plastic imports from China, India, Indonesia, South Korea, Malaysia, Taiwan and Thailand, while European producers such as Spain's La Seda Group have closed plants and struggle to compete.

The duties are strongly opposed by Coca-Cola Group, Danone and PepsiCo, among others, according to Commission documents. Soft drinks makers fear duties will translate into plastic shortages.

Importers and bottle makers say the tariffs will squeeze their profits and open their own operations to competition from abroad, while failing to salvage local plastics production long term.

"The industry is in a coma, and these duties will only extend the coma," said Francesco Zanchi, chief executive of Global Services International, which uses 40% of PET imported into Europe.

"There will be duties in this case, but the EU's governments should really start to think about opposing senseless policy that will do more harm than good."