Protectionist tariffs are threatening the Gulf petrochemical industry, where recent multi-billion dollar investments in chemical plants have been based on target markets in Asia, comments Dr Abdulwahab Al-Sadoun, the secretary general of the Gulf Petrochemicals and Chemicals Association. He explains that Gulf exporters are battling a 21% anti-dumping tariff on Chinese imports from the Gulf on methanol, a basic building block of the chemical industry, in place since last summer, and face new plastics tariffs proposed in India. "The drive behind it is of course the recession and politicians who are trying to safeguard lost job opportunities," said Al-Sadoun.
China buys more than 55% of Gulf petrochemical exports, and the market was expected to continue to be the global center of demand growth. The tariffs imposed by India and China are based on the fact that GCC producers have some of the lowest production costs in the world, because they buy oil or natural gas from their governments at prices set far below international market rates. This was the basis on which the Gulf has built its chemicals industry. "This could lead to trade wars between countries, I don’t see a winner in this war, everyone will be losing," continued Al-Sadoun.
Wind Turbine Protectionism
The problem is not just about basic chemicals: Look at the so-called emerging high tech products, such as wind turbines. China, Germany, Spain, the U.K. and the U.S. vie with others to reap economic and environmental benefits of domestic green-energy sources while positioning themselves as market leaders in providing those technologies to export to the world. Like the U.K., China intends to meet 20% of its energy needs from renewable energy sources by 2020.
Last year U.S. public criticism succeeded in preventing taxpayer stimulus funds being used to buy 240 Chinese-made turbines for a new wind farm in west Texas. The world's pursuit of low-carbon sources of energy collided with the national need to create jobs: in the end, the public demanded that turbines be produced in the U.S., not China.
Local Production Centers
Probably to spread its green investments geographically, ABB has just announced its fourth global wind power generator factory, in Vadodara, India. The factory is intended to supply wind power generators, a crucial component in wind turbines, for the growing Indian and global markets. The new factory, employing 150 people, will produce up to 100 units per month with a rating of up to 2.5 megawatts.
Europe also has high renewable energy ambitions. Germany already gets 16% of its electricity from renewable sources such as solar and wind. A new McKinsey & Co. study concludes that "By 2050, Europe could achieve an economy-wide reduction of [greenhouse gas] emissions of at least 80% compared to 1990 levels." McKinsey expects the cost of energy per unit of GDP in 2050 could actually be reduced by 30% in Europe, boosting competitiveness. Production of renewable technology could create tens of thousands of new jobs.