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The market is not doing well, the customs duty penalizes companies, but let's not touch it!
A briefing note issued on 3 December 2010 by the European Commission - Taxation and Customs Union, explains why "… the decision of maintaining the autonomous custom duty suspension of 3% currently applicable on unwrought not alloyed aluminium, under Regulation 501/2007, is the most appropriate response to the current and very specific situation in the aluminium market ..."
The explanations the document provides for this choice (which was probably very difficult to make) are at the least bizarre and in any case ambiguous. The first interpretation we suggest for incurable optimists is that our Commission has finally figured out that the duty on crude metal is damaging to the system. In fact the document is careful to inform us that "… reintroducing the previous import tariff of 6% to compensate the deteriorating conditions of the aluminium market, does not seem appropriate as it would affect negatively the downstream users who are mostly small and medium sized companies that are in the middle of the value added industrial chain ..."
But then the Commission's decision inexplicably stops here and does not elaborate further: it notes that the crisis has hit the aluminium industry critically, both producers and downstream users, and with special emphasis notes that "... the competitive situation of the EU primary aluminium producers was affected by the high EU electricity costs that form a major part of the production costs of the not alloyed aluminium”; in addition, “... currently prices are at the level of those at the beginning of 2006, a level still lower than the prevailing prices at the time of the application of Council Regulation 501/2007. Two smelters in the EU closed down and there were numerous production cuts. Smelter operation rate (capacity utilisation) fell from a stable 90% in 2007 level and is now expected to be around 80% in 2010."
In essence, a true Greek tragedy for the very sad situation of the producers of raw materials, a fact which obviously prevents taking into due consideration the complaints of those in the aforementioned downstream part of the chain, which for decades have been asking for the total abolition of the customs duty in question. And here is a detail to keep in mind that in fact the Commission's document ignores: the imbalance between those in the aluminium industry who are damaged by the duty and those who for decades have been taking advantage of it.
In fact, official statistics relating to the EU aluminium industry indicate that the industry's value chain has a workforce of more than 255,000, and that 15% of it is used in upstream production while the remaining approximately 220,000 workers operate in the downstream processing. So the choice of the Commission, which moreover acknowledges the heavy burden the duty means for the downstream industry, confirms the correctness of the choice made in 2007 to decrease the duty from 6 to 3% on non-alloyed aluminium. It expressly confirms that the EU metal producers can still maintain the benefits of a protection that is worth €45 million per year for every percentage point of the duty (a substantial gift, but orders of magnitude lower than the figure that would be needed to overcome the handicap of energy costs, and in fact the relocation of European smelters continues to move forward, regardless the duty), and that the downstream must continue to carry a burden of €117 million Euro per year for each percentage point of the duty. But has anyone counted how many small and medium-sized companies in the EU aluminium industry are shutting their doors because they cannot be competitive with countries outside the EU borders which have duty free policies? And yet, is it not clear to all that the permanence of aluminium transformers is essential for the health of the manufacturing industry in the EU? While waiting for some answers, we anxiously think about the next oddities that will be proposed in the near future to explain why the duty on aluminium should not be touched.
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