EU launches first salvo in biodiesel trade war

Start digging the trenches, a trade war is coming.

The European Union has launched an expected anti-subsidy and anti-dumping investigation into imports of biodiesel from the U.S.

The move follows a complaint filed by the Brussels-based European Biodiesel Board (see The splash and dash smackdown).

"We have always said that the EU will not tolerate unfair trade practices, and will pursue vigorously any well founded complaint," said Peter Power, EU spokesman for trade, in a statement.

"The commission will leave no stone unturned in these investigations and will act in accordance with the findings."

The investigations could lead to tariffs on U.S. biodiesel coming into the EU.

The commission said it would make its provisional findings by March 13, 2009 at the latest, which it would then present to EU member states.

The European Biodiesel Board said "it will be essential that countervailing measures targeting B99 imports are imposed by the EU authorities in a reasonable timeframe."

"In the absence of such measures, the situation of the EU biodiesel industry would become even more critical than it is at present."

The B99 imports are sometimes referred to as "splash and dash" biodiesel.

In the U.S., biodiesel can be subsidized up to $300 per tonne, and some companies ship tankers full of foreign biodiesel to the States and add just a small amount, or a "splash," of U.S. diesel to qualify for the subsidy.

The tankers then often "dash" off to Europe, one of the largest markets for biodiesel.

The EU said, "The effect of the subsidization and dumping is, according to the complainant, a deterioration in the prices charged and market share held by the community industry, which has led to substantial adverse effects on the overall performance and the financial situation of the industry."

But a group representing U.S. biodiesel firms is readying its troops for a fight.

"The allegations of harm leveled by the European biodiesel industry in these trade complaints are baseless," said Manning Feraci, VP of federal affairs for the Jefferson City, Mo.-based National Biodiesel Board.

"It is disingenuous and hypocritical that several of the European biodiesel companies that joined in the complaints are the very entities actively involved in the trade of U.S. biodiesel."

Feraci said the National Biodiesel Board would "not only vigorously defend the interests of the U.S. biodiesel industry, but will employ every tool available to challenge existing EU trade barriers that provide preferential treatment to European biodiesel producers."

The EU said that imports of biodiesel into the EU market come mainly from the U.S., with the amount of biodiesel coming in from the U.S. rising to about 1 million tonnes in 2007, up from approximately 7,000 tonnes in 2005.

"It is alleged that the volumes and the prices of the imported product concerned have, among other consequences, had a negative impact on the market share held and the level of prices charged by the community industry," according to the Official Journal of the European Union.

"It is further alleged that the unfair competition from the United States of America is causing the material retardation of the establishment of a community industry which is at a very early stage of development," said the journal.

Earlier this week, the EU used a two-day World Trade Organization review of U.S. trade policy to raise concerns about what it considered to be rising levels of protectionism in America.

The EU noted mounting restrictive import requirements for security purposes that are imposing "considerable burdens" on EU exporters.

The union also pointed to the new 2008 U.S. Farm Bill, saying that the recently enacted bill "maintains the same trade-distorting character as its predecessor."

Today's trans-Atlantic biodiesel spat comes amid an already boiling debate over food vs. fuel, where some are calling for a reduction in the use of biofuels that are made with food-based feedstocks (see World Bank says food prices hit by biofuels).

Biodiesel is usually made with vegetable oils, such as soybean oil, or animal fats.