Without a doubt, the main theme of the summer of 2018 was the decision of the Eurasian Economic Commission on the introduction of anti-dumping duties for a number of manufacturers of herbicides from Europe.
It is assumed that European manufacturers of herbicides will pay a special fee in the amount of 28% to 52% of the customs value of each product. This decision will significantly change the situation on the Russian market of plant protection products.
The story of duties began in December 2016. Then four companies from Russia, Belarus and Kazakhstan (CJSC August Firm, JSC Shchelkovo Agrokhim, CJSC August-Bel and Astana-Nan LLP) applied to the Eurasian Economic Union with a request to conduct an anti-dumping investigation. The companies claimed that their European counterparts imported herbicides to the EAEU countries (Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia) at unreasonably low prices. And this is causing significant damage to local producers.
The investigation lasted almost a year and a half. As a result, the Eurasian Economic Commission supported the applicants' position and decided on June 30 to introduce anti-dumping duties for a period of five years. The amount of the duty was assigned as a percentage of the customs value of the herbicides.
In its decision, the Eurasian Economic Commission also identified a list of varieties of herbicides for which anti-dumping duty will not be introduced:
- herbicides containing one active substance penoxulam in a molecular concentration of 25 g / l;
- herbicides containing one active ingredient azimsulfuron in a molecular concentration of 500 g / kg;
- herbicides containing the active substance cygalofop-butyl in a molecular concentration of 100 g / l and the active substance penoxulam in a molecular concentration of 13,33 g / l.
Settlements and claims
Herbicide producers from Russia, Belarus and Kazakhstan explained their initiative by economic losses. Cheaper foreign herbicides led to the fact that in 2015 domestic products reduced their market share, decreased production, companies lost profits and were forced to cut jobs at their enterprises. And in 2016, domestic enterprises were forced to reduce drug prices by 12% in order to compete with cheaper European herbicides.
The applicants drew attention to one important circumstance: at a cheaper price, European colleagues-competitors sold their drugs only on the market of the EAEU countries. In their own markets, these same herbicides cost three times more on average. What is the reason for such an unprecedented generosity towards Russian agricultural producers?
Vladimir Alginin, Executive Director of the Russian Union of Manufacturers of Chemical Plant Protection Products:
- An independent investigation conducted by the relevant competent authority (EEC) proved that, due to the serious disparity in prices, the EAEU industry suffered serious material damage. The difference in prices on the internal European market and the EAEU market reached 300%. In connection with such strong price pressure from European producers, there was a systematic decrease in the share of EAEU producers in visible consumption (and an increase in the share of European producers), which had an extremely negative impact on the economic performance of the industry and its further development.
European manufacturers do not fully agree with the results of the investigation, arguing their position with a lack of accuracy in price data, a factor in the devaluation of the Russian ruble, import of herbicides from China and other reasons. Anton Pushkarev, Communications Manager, Syngenta LLC In his commentary for the newspaper "Plant Protection" noted:
- We see no reason to introduce an anti-dumping duty on herbicides from the EU. The report on the results of the investigation clearly shows that during the investigation period (2013 - 2016) there was no material damage to Russian producers - JSC Shchelkovo Agrokhim and ZAO Firm August. At the same time, the introduction of an anti-dumping duty may negatively affect the competitiveness of the Russian agricultural industry.
However, a decision has been made. The main question is what will happen next.
Everything will happen in August. Or not?
According to one of the versions, which experts of the plant protection products industry are discussing, the implementation of the adopted decision can be postponed for a certain period. This is indirectly evidenced by the position of the Russian Ministry of Agriculture, which comments on the situation sparingly and cautiously. At the June meeting on the introduction of anti-dumping measures for herbicides imported from the European Union into the customs territory of the Eurasian Economic Union, Minister of Agriculture of Russia Dmitry Patrushev stated:
- Recently, there have been numerous appeals from industry unions and associations in the field of plant growing to postpone the introduction of this measure. To exclude the adoption of an erroneous decision and negative consequences, there is a need for additional consultations.
It is obvious that consultations and negotiations are ongoing, and most of them have not yet been advertised. Russian manufacturers believe that there are no serious grounds for postponing the implementation of the decision of the Eurasian Council.
Vladimir Alginin, Executive Director of the Russian Union of Manufacturers of Chemical Plant Protection Products:
- Proceeding from the fact that the fact of dumping damage to the EAEU industry has been proven by the supranational body - the EEC, the adoption of an anti-dumping measure in the form of a duty will be justified and legal. All concerns of agricultural producers of the EAEU countries regarding the increase in prices for herbicides and their replacement with similar preparations of domestic production were completely leveled. In this regard, there are no other serious arguments in favor of not taking this legal measure. The time for the introduction of anti-dumping duties will be adopted following a meeting of the Supreme Eurasian Economic Council.
It’s not a matter of time, but of consequences
Meanwhile, both supporters and opponents of the introduction of anti-dumping duties are sure that the main issue is not the timing of the implementation of the decision, but its consequences. Two major herbicide manufacturers have already taken steps to protect themselves from the imposition of duties. Syngenta and BASF voluntarily accepted “price commitments”: they promised to import no more than a certain volume of the drug and sell it at a price not lower than the minimum.
Anton Pushkarev, communications manager of Syngenta LLC:
- In the course of the anti-dumping investigation, a transparent and working relationship has developed between Syngenta and the Eurasian Economic Commission. As a result of the negotiations, Syngenta signed a price commitment based on the need to ensure an uninterrupted supply of high-quality EU herbicides to EAEU consumers, as well as to guarantee a smooth transition period during which our commitments in the field of local production will be implemented.
The price commitment will allow Syngent to continue selling EU-made herbicides in the EAEU market at prices that do not harm the national manufacturing industry and without anti-dumping duties.
The increase in the price of herbicides after the introduction of anti-dumping duties worries the market the most. Obviously, prices for imported drugs from European suppliers (except for Syngenta and BASF) will increase at least by the size of anti-dumping duties.
The leading Russian manufacturers, for their part, invited the EAEU member states to conclude agreements to prevent unreasonable growth in prices for herbicides. Such a document has already been signed with the Republic of Belarus; an agreement is being finalized with other countries. They also discuss the idea of signing agreements with Russian agrarian unions on fixing price lists for these five years and other measures.
However, market experts believe that a rise in prices for herbicides will nevertheless occur for reasons that Russian producers cannot influence. For example, due to the fact that the active ingredients for the production of herbicides are supplied from China. In the first three months of 2018 alone, the supply of active substances from China fell by 19%, and prices increased by 20%. In addition, the adoption of the law on increasing VAT, the growth of other fees and tariffs will affect the cost of Russian-made herbicides.
Protect and defend
Meanwhile, anti-dumping duties on herbicides even in the paper version have already affected the market. And this influence is certainly positive. European manufacturers have stepped up efforts to localize production in Russia. Recall that Bayer is planning to produce 2020% of plant protection products sold in Russia by 60 (now only 30% is produced), Syngenta will localize 2019% of the production of herbicides by 80, DuPont also thought about new plants in Russia and discusses this issue with Ministry of Agriculture.
It seems that anti-dumping duties already work for the interests of the plant protection products industry, stimulating the development of production within Russia. Otherwise, the Russian SZR industry simply will not have a future. European producers will not always be so “kind” to Russian farmers. Their low prices today are a classic trick of conquering foreign markets, described in any marketing textbook. If domestic production does not survive the price war and goes bankrupt, it will be possible to raise prices. At least to the European level, that is, three times. Or more. When you control the market, you can dictate any prices.
That is why many countries protect their markets in a variety of ways, including through the introduction of duties. The fact that Russian producers of plant protection products have come together and defend their interests in a civilized manner is a good example of leveling the conditions for fair competition.
Vladimir Alginin, Executive Director of the Russian Union of Manufacturers of Chemical Plant Protection Products:
- On the part of agricultural producers, the situation on the herbicide market will not change fundamentally. They will also be fully provided with both domestic and European drugs. Due to the fact that the share of herbicides in the cost of the final product is insignificant, a significant increase in product prices is not expected.
On the part of European manufacturers, the assortment line for herbicides is forecast to remain the same, which will not limit the free choice of consumers.
The anti-dumping measure for European companies is an incentive to increase the production of herbicides in domestic enterprises through tolling and further localization of production in the Russian Federation.
On the domestic side, the anti-dumping measure will even out the competitive conditions in the market, which in turn will contribute to the expansion of production of the EAEU enterprises, the creation of new jobs, and the increase in tax revenues to the budget at various levels.
Equalization of competitive working conditions for European and Eurasian manufacturers opens up new opportunities for cooperation. For example, increasing the production of herbicides at domestic enterprises through tolling, further and operational localization of the production of plant protection products in the Russian Federation, technology transfer and the creation of new products for agricultural producers, joint research and development projects. Russian producers of plant protection products are ready to discuss the ways and form of such cooperation with all interested companies. Larisa Yuzhaninova.
Source: https://www.agroxxi.ru