Analysis: International talks aim to cut wind import tariffs

WORLDWIDE: New talks aimed at eliminating import tariffs on environmental products could be a first step towards opening borders to free trade in wind turbines and components.

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"There is less and less of an appetite for governments, especially in the wake of the financial crisis, to subsidise renewables. In light of these developments it is extremely important to be able to draw on all the levers to be as competitive as we possibly can," said Pierre Tardieu, senior political affairs adviser at the European Wind Energy Association (EWEA).

"Part of that is being able to draw on a global supply chain in order to have competitively priced semi-processed raw materials and parts. This initiative is a good step in that direction," he added.

The negotiations include 14 members of the World Trade Organisation (WTO), including wind manufacturing heavy hitters such as the European Union, China and the US. The other participating members are Australia, Canada, China, Chinese Taipei, Costa Rica, Hong Kong China, Japan, New Zealand, Norway, Singapore, the Republic of Korea and Switzerland.

Within that group, the import tariffs applied to turbine parts can be as high as 8%. Outside the group, they can hit double digits, reaching 12% in Brazil and 14% in Argentina.

Eliminating that cost could not only lead to greater efficiencies for the sector as a whole, but also reduce barriers to entry for companies looking to break into new markets. "You can easily see how those tariffs can make the difference between being able to bid on a project or not, if you are competing with a domestic supplier that doesn't have to pay that cost," said Bernd Janzen, a partner in the international trade practice at law firm Akin Gump.

There are limits to what the current talks can accomplish, however. Any agreement will only apply to the parties at the negotiating table, meaning a country like Brazil can maintain its high tariffs and still benefit from the opening of borders elsewhere. The good news, said Janzen, is that the 14 countries involved represent "an overwhelming majority of existing global trade in renewable energy products."

The negotiations will also not tackle some of the larger trade irritants that have beset the sector, including the thorny issue of local content restrictions or disputes over unfair subsidies leading to the imposition of anti-dumping or countervailing duties, such as the charge of up to 71% the US tacked on to turbine tower imports from China and Vietnam in December 2012. Restrictions on the provision of services, such as difficulty and delays getting work visas, will also not be discussed.

"If you try to introduce those kinds of issues, it is all the harder to get to a satisfactory conclusion," Janzen said.

Such non-tariff barriers are a greater concerns for the wind industry than import tariffs, said Tardieu, but he hopes this round of negotiations will set the stage for future progress.

"I think it is going to depend on how successful this first step is. If it is successful, I don't see any reason not to go further," he said. "I hope this first stage is completed by the end of 2015 and then we can talk about the next steps."

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