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Ethylene, diethylene and triethylene glycols (developing country preferences), 18 December 1981


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The Parliament of the Commonwealth of Australia

E T H Y L E N E , D IE T H Y L E N E A N D T R IE T H Y L E N E GLYCOLS (D E V E L O P IN G C O U N T R Y PR EFER EN CES)

Industries Assistance Commission Report

18 December 1981

Presented by C om m and 6 M ay 1982

O rdered to be p rin te d 27 M ay 1982

I

Parliamentary Paper No. 152/1982

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INDUSTRIES ASSISTANCE COMMISSION REPORT

ETHYLENE, DIETHYLENE AND TRIETHYLENE GLYCOLS (DEVELOPING COUNTRY PREFERENCES)

18 DECEMBER 1981

No. 294

INDUSTRIES ASSISTANCE COMMISSION REPORT

ETHYLENE, DIETHYLENE AND TRIETHYLENE GLYCOLS (DEVELOPING COUNTRY PREFERENCES)

18 DECEMBER 1981

AUSTRALIAN GOVERNMENT PUBLISHING SERVICE

CANBERRA 1981

© Commonwealth of Australia 1981

Printed b y C.J. THOMPSON Commonwealth Government Printer Canberra

INDUSTRIES ASSISTANCE COMMISSION REPORT ETHYLENE, DIETHYLENE AND TRIETHYLENE GLYCOLS (DEVELOPING COUNTRY PREFERENCES)

THE HONOURABLE THE MINISTER FOR BUSINESS AND CONSUMER AFFAIRS

I forward the Commission's report on "Ethylene, Diethylene and Triethylene Glycols (Developing Country Preferences)" made in accordance with the reference of 20 October 1981 under Section 23 of the Industries Assistance Commission Act 1973.

K.B. Mourant Secretary

21 December 1981

ξοτ the purpose of the inquiry and report on this matter, in accordance with Section 19 of the Industries Assistance Commission Act 1973, the powers of the Commission have been exercised by:

J.W. CAHILL ASSOCIATE COMMISSIONER

CONTENTS

Page

1 . SUMMARY 1

2. INTRODUCTION 2.1 Scope Of The Reference 2

2.2 Present Assistance 2

2.3 Public Hearing 2

2.4 Requests 2

3. THE AUSTRALIAN INDUSTRY 3

3.1 Structure And Production Process 3

3.2 Production 3

3.3 Employment 4

3.4 Profitability 4

4. THE AUSTRALIAN MARKET 5

4.1 Sales By Local Manufacturer 5

4.2 Imports 6

4.3 Market 7

4.4 Prices 8

5. CONCLUSIONS 10

6. REPORTING REQUIREMENTS 13

7. FINDINGS AND RECOMMENDATION 14

Appendices

A. The Reference B. Tariff Provisions C. List Of Witnesses, Abbreviations, And Requests And Suggestions D. Imports Cleared For Home Consumption E. Government Statement Regarding Developing Country Preferences F. Industries Assistance Commission Reports On Developing Country

Preferences

SUMMARY

The Commission was asked to report on whether imports of ethanediol (ethylene glycol or MEG), diethylene glycol (DEG) and triethylene glycol (TEG) dutiable at the Developing Country (DC) Preferential Tariff rate are causing or threatening injury to Australian industry. These imports are dutiable at 10 per cent which is a margin of preference of 20 per cent over imports dutiable at the General rate.

ICI Australia Operations Pty Ltd (ICI) , the sole manufacturer of the glycols under reference, based its case of injury on falls in the volume of its sales of locally produced glycol, suppression of its prices to meet

competition from developing countries and the consequent effects on the profitability of its glycol operations. During 1978-79 to 1980-81 ICI was a large importer of glycols but mainly from developed countries. These imports were for its own use and were necessary to meet shortfalls in the

company's production.

Taiwan has been the main source of DC imports of MEG and DEG, with the Peoples Republic of China and the Republic of Korea being alternative DC sources. The Commission found that there was no regular pattern of imports of DC origin.

Imports of TEG, other than by ICI, have been negligible.

ICI has retained a dominant market share but stated that this had been possible only by keeping its prices low to the point where profitability had fallen. In the latest year ended 30 September 1981 the company claimed that it had incurred a loss on production of the goods under reference.

Price data indicated that landed duty free into store prices of comparable imports were lower than ICI's production costs of MEG and DEG. This situation has existed for about the last two years and is expected to continue. Price disadvantages for DEG were about double those for MEG.

The Commission found that DC imports of MEG and DEG from Taiwan, the Peoples Republic of China and the Republic of Korea are causing and threatening injury to Australian industry, but that the degree of injury is

not as great for MEG as for DEG. The Commission found no evidence of injury or threat of injury in respect of DC imports of TEG.

The Commission has recommended that the DC margin of preference accorded Taiwan, the Peoples Republic of China and the Republic of Korea

(a) be reduced to 10 per cent on MEG; and (b) be withdrawn on DEG; and

there be no change in the DC margin of preference on TEG.

2. INTRODUCTION 2.1 Scope Of The Reference

On 20 October 1981 the Minister for Business and Consumer Affairs requested the Commission to report, within 60 days, on whether imports of ethanediol (ethylene glycol), diethylene glycol and triethylene glycol dutiable at the DC preferential tariff rate are causing or threatening injury to Australian industry and, if so, from which country or countries should the DC margins of preference be withdrawn or modified and if modified, to what extent.

The text of the Minister's reference is set out in Appendix A.

2.2 Present Assistance

In 1966 1 the Government implemented a Tariff Board recommendation that the General rate of duty on MEG, DEG and TEG be increased from 7.5 per cent to 25 per cent. In January 1967^ the Special Advisory Authority advised, and the Government accepted, that urgent action to protect the Australian industry was necessary and temporary additional duties based on support values (SVD) were introduced. The support values no longer have any

protective effect. In 1971^ the Government implemented a Tariff Board recommendation that the General rate of duty be increased from 25 per cent to 40 per cent and that support values remain applicable. The 25 per cent across the board tariff cuts of 1975 reduced the General rate of duty to that now current, viz. 50 per cent and 67.5 per cent of SVD.

On 1 July 1976, the rate of duty for the goods under reference from developing country sources was reduced from 20 per cent to 10 per cent as a result of the Government's review of the system of tariff preferences for developing countries.

Tariff provisions for the goods under reference are set out in Appendix B.

2.5 Public Hearing

The matters covered by the Minister's reference were the subject of a public hearing in Sydney on 25 November 1981. The witnesses, the companies or organisations they represented, and abbreviations used to identify them throughout this report are listed in Appendix C.

2.4 Requests

The local producer, ICI, requested complete withdrawal of DC Preference rates for MEG, DEG and TEG. This request was supported in respect of DEG by Comcork (a division of Repco Limited) which uses this product in the manufacture of cork products. Two importers - Commercial Chemicals and A.B. Tall-Bennett - were opposed to the removal or modification of DC preferences.

Full details of requests are set out in Appendix C.

1 Tariff Board Report No. 1769, Industrial Chemicals and Synthetic Resins, AGPS, Canberra, 15 April 1966. 2 Special Advisory Authority Reports 65/64, Ethylene Oxide Derivatives, AGPS, Canberra, 6 January 1967. 5 Tariff Board Report No. 1941, Industrial Chemicals and Synthetic

Resins, Etc., AGPS, Canberra, 10 December 1971.

2

3. THE AUSTRALIAN INDUSTRY 3.1 Structure And Production Process

ICI is the only manufacturer of the goods under reference in Australia. They are produced in an integrated petrochemical plant at Botany, New South Wales.

The base feedstock used by ICI for glycol production is naphtha, the bulk of which is sourced locally. Naphtha is cracked to produce ethylene together with a number of other products which include propylene, LPG, fuel oil, fuel gas, butadiene and petrol. Ethylene production capacity is being expanded from 100 000 to 250 000 tonnes per annum by 1983· The expanded plant will be able to use feedstocks other than naphtha, eg LPG and ethane. Ethylene is reacted with oxygen in the presence of a silver

catalyst to produce ethylene oxide and carbon dioxide. When ethylene oxide is reacted with water it produces a mixture of MEG, DEG and TEG which is distilled to produce the three glycols. MEG accounts for about 70 per cent of the total production by volume of goods under reference. By varying the

ratio of ethylene oxide and water it is possible to alter the ratio of glycols produced. The company claimed that glycol technology has changed little in the last 15 years and that its plant is up to date.

Glycols have a wide range of uses such as in the production of antifreeze and brake fluids, as a gas drying agent, solvents, fibre conditioner in the textile industry and in explosives.

3.2 Production

No glycol was produced by ICI in November 1979, October and November 1980, and March and April 1981. The company claimed that interruptions to production were due to shortages of ethylene oxide, but that production had never been interrupted by shortages of ethylene supplies. On these

occasions ICI imported glycols to supplement its production.

From 23 February to 6 May 1981 the ethylene oxide plant was shut down while capacity was expanded from 22 000 to 31 000 tonnes per annum, a proportion of which is available to the glycol plant. Because of this increased capacity the company does not expect any further interruptions to the glycol plant. The company believed that the new plant would have a minimal

effect on the economics of glycol production. With the expanded ethylene oxide capacity ICI considered that it would not need to revert to importing.

ICI submitted production details for the period April 1979 to September 1981. Quarterly production of glycols by ICI (including that for its own use) for this period fluctuated widely. Production of DEG for the year ended September 1981 increased on the previous year even though during the

first half of the September 1981 year the production of DEG was at its lowest level over the thirty month period owing to shortages in the supply of ethylene oxide. In the June 1981 quarter the production of DEG was at its highest level since the June 1979 quarter. In the case of MEG and TEG

production peaked in the September 1981 quarter. These increases followed the glycol plant returning to production as of May 1981. Around half of ICI' s production of glycols is used internally in further manufacturing. Production is well below the rated capacity of the glycol plant which is

capable of meeting the total Australian demand for MEG, DEG and TEG.

Forward ordering by customers is negligible as they expect delivery ex

stock. Consequently, the level of stock holdings in relation to sales and internal usage is very high.

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3.3 Employment

A total of 34 persons is employed in the production and sale of goods under reference. As part of an integrated petrochemical complex the production of glycols is a capital intensive operation. About 14 production employees are required for the annual output of ethylene and ethylene oxide consumed in the production of glycols, but only seven production employees are required directly for the annual output of glycols under reference. The remaining 13 persons are engaged in such activities as servicing, administration and selling.

3.4 Profitability

Confidential evidence indicated that ICI earned only a low rate of return on funds employed in goods under reference for the years ended September 1979 and 1980. Funds employed in 1981 increased with the construction of the new ethylene oxide plant. Profit margins on sales were also low and fell in 1980 and 1981 compared with 1979. Price cutting by ICI, which it claimed was to meet import competition, resulted in a trading loss for the year ended September 1 981 .

4

4. THE AUSTRALIAN MARKET 4.1 Sales By Local Manufacturer

. Domestic sales

Table 1 below sets out details of ICI's domestic sales (excluding internal transfers) of locally produced MEG, DEG and TEG.

TABLE 1: DOMESTIC SALES OF LOCALLY PRODUCED GOODS UNDER REFERENCE (tonnes)

Year ended 30 September MEG DEG TEG

Total sales

1977 974 596 293 1 863

1978 2 453 728 367 3 548

1979 1 924 749 378 3 051

1980 1 630 454 413 2 497

1981 1 293 496 404 2 193

SOURCE: Evidence

ICI's total domestic sales of glycols reached a peak in the year ended 30 September 1978 when MEG accounted for about 70 per cent. Subsequently, domestic sales gradually declined and in 1981, compared with 1978, sales of MEG and DEG were nearly 50 per cent and 30 per cent lower respectively.

The decline in ICI's sales of MEG and DEG reflected a drop in sales to most of its major customers. Not only were 1981 sales well below previous years but average selling prices also fell. On the other hand in 1981 sales of locally produced TEG were slightly higher than in 1978, but marginally

lower than their peak in 1980.

. Export sales

Only MEG and DEG are exported by the local manufacturer. Exports are negligible, being less than one per cent of ICI's total production of glycols.

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L

4.2 Imports

Imports of MEG and DEG that directly compete with local production are shown in Tables 2 and 3· Imports of TEG are not separately identifiable in the Tariff but evidence suggested that they have been insignificant. Further details are given in Appendix D of imports of MEG, DEG and goods under the item to which TEG is classified.

ICI imported MEG, DEG and TEG at various times in 1979-80 and 1980-81 to meet shortages in local production. All of its imports were used internally for further manufacture. The company stated that it accounted for most of the imports from other than DC sources.

TABLE 2: MEG - IMPORTS CLEARED FOR HOME CONSUMPTION (EXCLUDING BY-LAW) -BY SOURCE: 1975-76 TO 1981 (tonnes®)

Period

3 Months

Country of July-Sept

Origin 1975--76 1976-77 1977 -78 1978-79 1979-80 1980-81 1981

Developing Countries China 16

Korea Rep - - - - - 202 -

Taiwan - 14 156 34 48

Sub-total - - 14 156 - 236 64

Other Countries Japan 6 177 9 5

USA • . . . 32 271 503 1 003 • .

Other • . . . . . e . 1 4 1

Aust Re-impt 3 - - -

Sub-total 6 180 41 276 504 1 007 1

Total 6 180 55 432 504 1 243 65

a Converted from litres to kg on basis 1 litre = 1.115 kg .. less than 500 kg SOURCE: Compiled from information supplied by ABS.

Table 2 shows that, except for 1977-78, non by-law imports of MEG increased steadily. However, there has been no regular pattern to non by-law imports of MEG from developing countries. DC imports have been sporadic while imports from the USA increased significantly between 1977-78 and 1980-81 and accounted for the bulk of imports in that period.

ICI has been the main importer of MEG, principally from the USA. In addition, the company imported a large quantity from the UK in 1978-79 under by-law to meet a shortfall in local production. Other importers also shared in the "shortfall by-law" arrangement.

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TABLE 3: DEG - IMPORTS CLEARED FOR HOME CONSUMPTION (EXCLUDING BY-LAW) -BY SOURCE: 1975-76 TO 1981 (tonnesa)

Period

3 Months

Country of July-Sept

Origin 1975-76 1976-77 1977-78 1978 -79 1979 -80 1980-81 1981

Developing Countries China 163 47 14

Korea Rep - - - - - 107 -

Taiwan - 50 218 297 72 142 32

Sub-total - 50 218 297 235 296 46

Other Countries Japan 207 125

USA - 3 1 110 369 • · 8

Other • · • · • · • · • · 1 1

Sub-total 207 128 1 110 369 1 9

Total 207 178 219 407 604 297 56

a Converted from litres to kg on basis 1 litre = 1.115 kg .. less than 500 kg SOURCE: Compiled from information supplied by ABS.

Table 3 shows that there were regular imports of DEG from developing countries and sporadic imports from developed countries between 1976-77 and 1980-81. The percentage share of total competitive imports held by developing countries in those years varied, but in the last four years

those countries have been the main source, accounting for virtually all imports in 1977-78 and 1980-81. Taiwan has been the most consistent supplier of imports. ICI also imported DEG in the past two years.

. TEG

j Apart from ICl's own imports of TEG which supplemented the company's local production, the Commission could find no evidence of other imports in the I three years ended 30 September 1981. The two major importers of glycols - | Commercial Chemicals and A.B. Tall-Bennett - indicated that they did not [ import TEG between March 1979 and September 1981. Commercial Chemicals

stated, however, that about 15 tonnes of TEG had recently been landed rather than 50 tonnes as had been surmised by ICI.

4.3 Market

| Table 4 shows domestic market supplies for MEG and DEG. The Commission estimated that in 1981 the value of the domestic market for goods under reference, excluding internal transfers by ICI, exceeded $3 million. Imports shown in the following table exclude those by ICI and therefore the

figures do not agree with those for total non by-law imports shown in Tables 2 and 3.

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TABLE 4: ESTIMATED DOMESTIC MARKET SUPPLIES: 1977 TO 1981

MEG DEG

Year ended Competing Total Competing Total

30 Sept ICI Sales Imports* Market ICI Sales Imports* Market

tonnes % tonnes % tonnes tonnes of /o tonnes % tonnes

1977 974 96 36 4 1 010 596 74 207 26 803

1978 2 453 95 124 5 2 577 728 80 182 20 910

1979 1 924 86 315 14 2 239 749 68 358 32 1 107

1980 1 630 89 210 11 1 840 454 65 247 35 701

1981 1 293 94 78 6 1 371 496 71 199 29 695

*Excludes imports by ICI SOURCE: Evidence and information supplied by ABS

. MEG

The market (excluding ICI's own usage) for MEG reached a peak in 1978 and then fell by about 47 per cent. Although competing imports increased their share of the domestic market initially, the volume of imports in the latest year dropped markedly. ICI is still supplying the bulk of a domestic market that has greatly contracted.

Domestic demand for MEG varies depending on natural gas producers' requirements for this product for use as a gas drying agent, which among other factors is in turn, dependent on the vagaries of climate, and rate of MEG recovery for re-use. The Commission estimates that in 1981 well in

excess of 30 per cent of the domestic market supply of MEG was sold for gas drying purposes.

. DEG

The market for DEG reached a peak in 1979, after which it fell by 37 per cent and in the last two years was below that for 1977. In 1979 sales by ICI increased marginally on the previous year whereas competing imports nearly doubled. In 1980, although sales by ICI and imports both fell, ICI lost further market share, but recovered to some extent in the latest year. Imports have recently been supplying about 30 to 35 per cent of the domestic market.

. TEG

There appears to have been little importation of TEG in recent years other than by ICI to supplement its own production. The domestic market increased from 378 tonnes in 1979 to 566 tonnes in 1981 based on public evidence from ICI.

4.4 Prices

ICI, Commercial Chemicals, A.B. Tall-Bennett and Customs submitted confidential data which enabled the Commission to compare prices of locally produced glycols with prices of shipments of comparable imports in drums.

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The landed duty free (ldf) into store prices were compared with ICI's ex­ factory costs and with ICI's costs of production (ie excluding selling, distribution and administration expenses). The ldf into store price of imports includes bank charges, financing costs and transport costs into

store. Comparisons of ICI's prices were made with imports from the Peoples Republic of China, the Republic of Korea and Taiwan. Confidentiality prevents the Commmission from publicly quantifying the extent of these price differences. In all cases, however, the ldf prices into store of MEG and DEG were below ICI's costs of production. The price disadvantages for DEG were nearly double those for MEG. ICI stated that on several

occasions it had tried to establish a prima facie case of dumping but had not proceeded as it had not been able to satisfy itself that there was a case.

ICI's current average sales prices realised for MEG and DEG are well below prices realised over the previous two years. Its prices have fallen since around June 1980 although a small increase was apparent in the September 1981 quarter. Latest prices are still below 1979 prices. In addition,

although the average value for duty of MEG from Taiwan has shown a slight increase in the quarter ended September 1981 compared with the average for 1980-81, the average value for duty of DEG from Taiwan has fallen.

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5. CONCLUSIONS

The Commission has been asked to determine whether imports of MEG, DEG and TEG from developing countries are causing or threatening injury to Australian industry. Consistent with a Government statement regarding DC preferences (Appendix E), the Commission has not been asked to base its recommendations for withdrawal or modification of DC preferences by reference to the competitive need of developing countries in relation to other overseas suppliers.

In several of its reports on DC preferences (see Appendix F), the Commission has discussed a number of criteria for assessing injury or threat of injury to an industry. The Commission has stated that evidence of injury could be expected to be reflected by one or more factors. Prima facie indicators of injury could include falls in production, reduction in capacity utilisation, decrease in profitability, loss of sales and/or market share. Such factors in themselves, however, may not necessarily be

caused by competition from DC imports. To satisfy the injury criteria, it would need to be demonstrated that imports, or threat of imports, at DC preference rates are a significant contributing factor to such changes.

ICI is the sole local manufacturer of glycols under reference. These products are produced as part of an integrated petrochemical complex at its Botany plant. The company claimed that imports of MEG from the Republic of Korea and Taiwan and imports of DEG from the Peoples Republic of China, the Republic of Korea and Taiwan have already caused and are continuing to

cause injury to the local industry and that imports of MEG, DEG and TEG from those countries constitute a threat of further injury. In addition, ICI claimed that a threat of further injury is emerging from Brazil, Mexico, Singapore, Indonesia, Saudi Arabia and Thailand.

ICI1s case for injury was based on falls in the volume of sales of its production, suppression of prices of locally produced glycols and the consequent effects on profitability of its glycol operations. The company stated that the major cause of injury was related to price suppression and its effect on profitability and that, as a response to low priced imports of MEG and DEG, it reduced its prices from 1 September 1980. The company believed that the reduced selling prices would have had less impact on profitability than loss of volume. It further stated that withdrawal of DC preferences would enable it to operate profitably.

Arguments put forward by importers were concerned mainly with comparisons of prices of goods under reference from developing and developed countries, with particular reference to Taiwan and the USA, and details of recent overseas price quotations. They claimed that, on the basis of actual import levels and price quotations, imports from the USA are cheaper than those available under DC margins of preference. There have been few competing imports from the USA in recent years as ICI has been the major importer from that source. Furthermore, the Commission is concerned in this inquiry only with establishing whether or not there is injury or threat of injury from DC sources. In the case of price quotations, the Commission considers that these are not necessarily conclusive evidence of realised prices and the Commission has based its price analysis on actual data.

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Total production and capacity utilisation were increased in the year ended 30 September 1981 compared with the previous year. Employment directly engaged in the production of goods under reference is small and largely

unaffected because of the capital intensive nature of production. The only adverse indicators are decreased sales, reduced prices and falls in profitability. In this inquiry the Commission considers that a case for injury rests on establishing whether reduced profitability is due to price competition from DC imports.

The domestic market for MEG has declined steadily since 1978. For the year ended 30 September 1981 the market was about half that for the corresponding period in 1978. Over this period ICI sales of MEG also fell by about half. Its market share, normally about 95 per cent, fell to about 85 per cent in 1979, rose to 90 per cent in 1980 and recovered to 95 per

cent in 1 981 .

The market for DEG has decreased in the last two years compared with the peak year ended 30 September 1979· Sales by ICI and its market share have fluctuated over the past five years but ICI's sales in 1980 and 1981 were

below their peak in 1979 and its market share has also fallen. In 1979 imports increased their market share and in the last three years it has been about 30 to 35 per cent.

There has been no regular pattern to imports of MEG or DEG which over recent years have been in relatively small shipments. Taiwan has been the main source of DC imports but the Peoples Republic of China and the Republic of Korea have been alternative sources of DC imports. ICI has

also been a major importer, when local production has been interrupted, but most of its imports were from developed countries.

Despite falling sales and smaller markets ICI has still retained significant shares of the domestic market for MEG and DEG. The company stated, however, that this has only been possible by keeping prices low to the point where its profit has fallen and it is now trading at a loss.

The Commission considers that, in general, injury is not necessarily demonstrated merely because the prices of DC imports are lower than those of comparable locally produced goods. In this case, however, price data indicate that ldf into store prices of MEG and DEG from DC sources are

below ICI's costs of production. This situation has been apparent for at least one to two years and could be expected to continue.

The Commission considers that the existing preference for MEG and DEG imports from some DC sources are causing injury to the Australian industry and that this is not a short term phenomenon. However, the degree of injury varies between MEG and DEG.

In the case of MEG, the Commission believes that a modification of the DC preference accorded the Peoples Republic of China, the Republic of Korea and Taiwan, by reducing the margin of preference from 20 to 10 per cent, would be sufficient for ICI to trade profitably while allowing imports from

these sources to remain competitive in the Australian market. The Commission will recommend accordingly.

The incidence of injury as reflected by price disadvantages and relative market shares is greater for DEG and the Commission will recommend that the DC margin of preference of 20 per cent be withdrawn from the Peoples

Republic of China, the Republic of Korea and Taiwan. The Commission points out that even at the General rate of 30 per cent DC imports will still be competitive in the Australian market.

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Although most imports of MEG and DEG come from Taiwan, the Commission has included in its recommendation the Peoples Republic of China and Republic of Korea. These countries are established suppliers to the Australian market and as imports from these countries have proven to be equally

competitive, in the absence of similar tariff treatment they are likely to become more prominent as alternative sources of goods under reference.

The Commission considers that there is no case for modification or withdrawal of the DC margin of preference for TEG. Apart from about 15 tonnes which were stated to have been imported recently, ICI has been the

only known importer.

There is no history of imports from Brazil, Mexico, Singapore, Indonesia, Saudi Arabia or Thailand. Whilst there may be evidence of new development of, or expansion of, existing petrochemical complexes with the potential t produce glycols in these DC countries, it does not necessarily follow that they will export to Australia. In addition, given the timing of development of some of these programs as outlined in evidence by ICI, it is unlikely that, if any threat were to emerge, it would be in the near future. The Commission considers that there is insufficient evidence to support a case for threat of injury from these countries.

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6. REPORTING REQUIREMENTS

Under Section 23A of the Industries Assistance Commission Act 1973, the Commission is required to report on a numher of matters. These are dealt with below:

(a) the level of assistance required to ensure that the level of activity and employment in the industry is not less than that which existed at the time the reference was made (20 October 1981).

(b) if the Commission recommends assistance that would result in a level of assistance less than the level referred to in paragraph (a) it shall state its reasons for not recommending assistance that would avoid that result.

The Commission expects that the modification of the DC margin of preference for MEG and its removal in the case of DEG, currently accorded Taiwan, the Peoples Republic of China and the Republic of Korea will assist the local industry to maintain the level of activity and employment (34 persons in

October 1981) existing at the time of the reference.

(c) whether, in the view of the Commission, the structure of the industry can be improved, and if so, the manner in which, and the measures by which the improvement can be achieved and the consequences of such improvement.

The Commission did not receive in this inquiry evidence specifically relating to the appropriateness of the structure of the industry.

(d) the economic and social consequences of the recommendation and the employment consequences, both generally and in particular regions.

The Commission considers that implementation of its recommendation would be unlikely to affect the level of production of glycols significantly but may contribute to improved profitability. The Commission expects little change in the level of employment.

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7. FINDINGS AND RECOMMENDATION

The Industries Assistance Commission:

. finds that:

1. imports of ethanediol (ethylene glycol) of a kind falling within sub-item 29.04.4 and diethylene glycol falling within sub-item 29.08.1 of the Customs Tariff from Taiwan, the Peoples Republic of China and the Republic of Korea dutiable at the Developing Country Preferential Tariff rate are causing and threatening injury to Australian industry;

2. imports of ethanediol (ethylene glycol) and diethylene glycol from other countries dutiable at the Developing Country Preferential Tariff rate are not causing or threatening injury to Australian industry; and

3. imports of triethylene glycol of a kind falling within sub-item 29.08.1 of the Customs Tariff and dutiable at the Developing Country Preferential Tariff rate applying to those goods are not causing or threatening injury to Australian industry; and

. recommends that:

1 . the Developing Country margin of preference accorded Taiwan, the Peoples Republic of China and the Republic of Korea on ethanediol (ethylene glycol) falling within sub-item 29-04.4 be reduced to 10 per cent;

2. the Developing Country margin of preference accorded these countries on diethylene glycol falling within sub-item 29.08.1 be withdrawn; and

3. there be no change in the Developing Country margin of preference on triethylene glycol falling within sub-item 29.08.1.

J.W. CAHILL ASSOCIATE COMMISSIONER

CANBERRA, AUSTRALIAN CAPITAL TERRITORY ........... 18 DECEMBER 1981

lb

APPENDIX A

THE REFERENCE

I, JOHN COLINTON MOORE, Minister for Business and Consumer Affairs, hereby:

1) Refer the following questions to the Industries Assistance Commission for inquiry and report in accordance with Section 23 of the Industries Assistance Commission Act 1973:

Having regard to the fact that the policy objective of the system of tariff preferences for developing countries is to assist imports from developing countries to become competitive in the Australian market with other overseas suppliers by according preferential tariff

treatment to such imports provided that the imports entered under such preferential tariffs do not cause or threaten injury to Australian industry (a) whether imports of ethanediol (ethylene glycol) of a kind falling

within sub-item 29.04.4 and diethylene glycol and triethylene glycol of a kind falling within sub-item 29·08.1 in Schedule 1 to the Customs Tariff Act 1966, as proposed to be altered, and dutiable at the developing country preferential tariff rate applying to these goods are causing or threatening injury to Australian industry

(b) if so, from which country or countries should developing country margins of preference be withdrawn or modified and if modified, to what extent.

2) Specify the period of 60 days from the date of receipt of this reference as the period in which the Commission is to report on the questions specified in paragraph (1) above.

JOHN MOORE

MINISTER FOR BUSINESS AND CONSUMER AFFAIRS

20 October 1981

A. I

APPENDIX B

TARIFF PROVISIONS

Goods under reference the produce or manufacture of New Zealand are free of duty.

CUSTOMS TARIFF

Rates of Duty

Item Goods General Preferential

ALCOHOLS AND THEIR HALOGENATED, SULPHONATED, NITRATED OR NITROSATED DERIVATIVES

29.04 ACYCLIC ALCOHOLS AND THEIR HALOGENATED, SULPHONATED, NITRATED OR NITROSATED DERIVATIVES:

29.04.4 - Goods, as follows:

(a) ethanediol; (b) mannitol; (c) sorbitol

)Not under ) reference

Sorbitol in aqueous solution and ethanediol

30% and

67.5% of SVD

22.5% and 67.5% of SVD

DC: 10% and 67.5% of SVD

PNG: Free

Remainder 30%

DC: 10%

22.5%

PNG: Free

SUPPORT VALUE for calculation of SVD as follows:

sorbitol in aqueous solution - $344 per tonne ethanediol - $276 per tonne

ETHERS, ALCOHOL PEROXIDES, ETHER PEROXIDES, EPOXIDES WITH A THREE OR FOUR MEMBER RING, ACETALS AND HEMIACETALS, AND THEIR HALOGENATED, SULPHONATED, NITRATED OR NITROSATED DERIVATIVES

29.08 ETHERS, ETHER-ALCOHOLS, ETHER-PHENOLS, ETHER-ALCOHOL-PHENOLS, ALCOHOL PEROXIDES AND ETHER PEROXIDES, AND THEIR HALOGENATED, SULPHONATED, NITRATED OR NITROSATED DERIVATIVES:

B.l

TARIFF PROVISIONS (Cont'd)

Rates of Duty

Item Goods General Preferential

29.08.1 - Goods, as follows: (a) being ethylene oxide derivatives; (b) ethyl methyl ketone peroxide; (c) di-t-butyl peroxide; (d) t-butyl hydroperoxide; (e) tetrachloronitroanisole; (f) trichloronitroanisole; (g) trichloronitrodimethoxy-

benzene

) ) ) )Not under ) ) )

reference

Diethylene triethylene glycol and glycol

30% and 67.5% of SVD

22.5% and 67.5% of SVD

DC: 10% and 67.5% of SVD

PNG: Free

Remainder 30% 22.5%

DC: 10% PNG: Free

SUPPORT VALUE for calculation of SVD, as follows: Diethylene glycol - $315 per tonne Triethylene glycol - $423 per tonne

For the purposes of 29.08.1 "ethylene oxide derivative" means a substance that contains in its chemical structure an oxyethylene group, that is to say, a group having the configuration as follows ’-CHp-CHp-O- '< that results from or may be produced by the introduction of ethylene oxide into the synthesis or production of that substance.

APPENDIX C

LIST OF WITNESSES, REQUESTS AND SUGGESTIONS AND ABBREVIATIONS

Name of witness, company or organisation represented and address Requests and suggestions Abbreviation

Edward Cyril Brown, No request or suggestion. Customs

senior inspector appraisements, Bureau of Customs Department of Business and Consumer Affairs, Sydney, New South Wales

Dennis Foster, purchasing manager and director, A.B. Tall-Bennett & Co. Pty Ltd., 4th Floor, Maritime Museum Building, Birkenhead Point, Drummoyne, New South Wales

Requested that the Republic of China continue to obtain developing country preference for glycols under reference.

A.B. Tall-Bennett

Frank Arthur Roberts, general manager, Comcork Manufacturing Co., 7-15 Valley Street, Huntingdale, Victoria

Requested that for diethylene glycols falling Comcork within sub-item 29.08.1, the Australian industry be protected by the lifting of the appropriate developing country tariff rate to the General

rate to enable the Australian industry to compete and to give Australian industry some basis for future planning.

Ronald Claude Fisher, managing director, Ronald C. Fisher Trade Consultants Pty Limited, Ross H. Taylor,

managing director, Commercial Chemicals Company (Vic) Pty Ltd., 13 Simpson Street, East Melbourne, Victoria

Requested that the developing country preference margins for sub-items 29-04.4 and 29.08.1 of the Customs Tariff be not withdrawn nor modified.

Commercial Chemicals

LIST OF WITNESSES, BEQUESTS AND SUGGESTIONS AND ABBREVIATIONS

Name of witness, company or organisation represented and address Bequests and suggestions Abbreviation

Robert Bryce, tariff officer, David Meale, product manager, Craig Lukeman,

market development officer, ICI Australia Operations Pty Limited 1 Nicholson Street,

Melbourne, Victoria

Requested that the 10 per cent developing ICI

country preference rate for ethanediol (ethylene glycol) of a kind falling within sub-item 29·04·4 and diethylene glycol and triethylene glycol of a kind falling within sub-item 29.08.1 in Schedule

1 to the Customs Tariff Act 1966 be completely withdrawn.

ΑΡΡΗ Μ Χ D

1979-8)

Qty Value

1960-81

5 n in th s

July-SqDt 1981

Qty

146 000 80 OSE 42 SCO 19 843 14 400 8 464

95 604 65 554 - -

266 353 105 605 64 300 41 812 1 27 800 81 585 31 950 19 590

266 353 105 605 210 300 121 904 266 004 166 982 46 350 23 054

2 8 150 129

96 361 39 986 331 007 172 195

98 363 39 991 331 157 172 324

1

20 600 104

5

24

2 703 417

8 782 600

9 625 2 203

3 149 9 382 11 838

364 716 145 599 541 457 294 22B 266 729 170 131 55 732 39 882

104 900 71 933 3 910

39 100 21 359 -

2 681

144 000 93 387 3 910 2 681

364 716 145 599 685 457 387 515 270 639 172 812 55 732 39 3 $

IMPORTS CLEARED FOR HCME CONSUMPTION

1975-76 1976-77 1977-78 1978-79

Country Value Value Value Value

O rigin $ $ $ $

29. 08.1 Other (includes triethylene glycol)

Normal Taiwan - - 77 891 -

France 21 - - -

Germary 66 316 17 10

Japan - - - -

Netherlands 1 681 3 520 1 798 1 649

Switzerland - - 169 13

UK 261 9 - 168

USA 30 625 41 491 77 582 58 870

Total Normal 32 654 45 366 117 457 60 710

ffy-Law Germany - 995 - -

Japan 7 144 4 178 - -

UK - - - -

USA 258 12 44 651

Total by-Law 7 382 5 185 44 651

Govt ISA - - 7

Total Govt - - 7

TOTAL 40 036 50 551 117 5C8 61 361

a Preliminary . . Quantity not recorded

SOURCE: Com piled fro m in fo r m a tio n s u p p lie d by ABS.

1979-80 1980-81

Value Value

$ $

59 629 11 481

10 5 240

- 133 336

3 965 2 366

- 29

182 7 480

305 497 794 817

369 2® 954 749

- 5 377

- 3 927

851 2 177

851 11 411

370 134 966 160

3 months3 July-3 q?t 1981

Value

$

177

13 975 1 461

15 613

1 067

741

1 8C8

17 421

APPENDIX E

GOVERNMENT STATEMENT REGARDING DEVELOPING COUNTRY PREFERENCES

(Evidence on developing country preferences submitted by the Department of Trade and Resources and Industry and Commerce at the Commission's inquiries into products of the metal trades industries.)

"The Australian tariff preference system is a unilateral, non-reciprocal and non-contractual concession designed to assist developing countries overcome disadvantages they may experience in competing with other overseas suppliers in the Australian market.

The system permits specified products imported from developing countries to enter Australia at rates of duty below the relevant General Tariff rates providing that such imports do not, or would not, cause or threaten injury to Australian industry.

Two elements which are fundamental to the tariff preference system arise from this statement of broad policy.

The first is that preferences are not accorded, or if accorded will be modified or withdrawn, in circumstances where injury or threat of injury to Australian industry arises.

In conformity with the Government's policy, it is the Government's intention that any Australian industry, which is concerned about imports from developing countries entering at concessional rates, should base its case on the injury or threat of injury concept. This concept was deliberately incorporated into the policy in order to safeguard the interests of Australian industry.

Accordingly, references to the Commission in response to representations from domestic industry on DC preferences specifically ask the Commission to report on whether injury to Australian industry is being caused or threatened and, if so, to recommend withdrawal of the preference or an appropriate modification. Whilst not specifically sought in more general references on industry assistance, the Government would expect the Commission to adopt a similar approach in these cases.

The second arises from the fact that the system is intended to assist developing countries to compete with other overseas suppliers in the Australian market. In accordance with this competitive need element of the

policy, preferences are not given where the country or countries concerned are already considered to be competitive with third countries in the Australian market. In addition, preferences already included in the system may be modified or withdrawn when developing countries are considered to have become competitive with other overseas suppliers.

The Commission has not been asked to base its suggestions or recommendations for withdrawal or modification of a DC preference in relation to the competitive need criterion. The reason for this is that the application of competitive need in any particular case, in the absence of injury, may involve the consideration of factors other than purely

economic considerations, particularly Government policy objectives in the trade relations area. In such instances where the competitive need concept is raised, it would be helpful to Ministers in reaching their decision if

the Commission could put forward its comments and conclusions in relation to the competitive need of specific developing countries. The Government considers these should, however, be provided in general terms within the body of the report rather than as specific recommendations or suggestions. The competitive need provision may be used by the Government to ensure that a disproportionate share of the benefits of the preference system do not fall to one or two developing countries.

The principles outlined above have been in place for many years and apply equally to DC Preference questions arising in the course of normal IAC inquiries as well as in special DC Preference inquiries."

APPENDIX F

INDUSTRIES ASSISTANCE COMMISSION REPORTS ON DEVELOPING COUNTRY PREFERENCES

No. 118 Watt Hour Meters, 4 January 1977

No. 135 Malleable Cast Iron Fittings, 17 June 1977

No. 158 Sporting and Recreational Equipment: Tennis and Squash Racquests, 5 January 1978

No. 159 Bottle Washing Machines, 23 January 1978

No. 173 Certain Welded Steel Pipe and Tube, 26 June 1978

No. 202 C-Zero Cassettes, 23 February 1979

No. 205 Chokes and Ballasts, 15 March 1979

No. 252 Files and Rasps - Interim Report, 30 October 1980

No. 261 Lamps and Lighting Fittings, 16 April 1981

No. 263 Paper Novelties, 8 May 1981

No. 281 Vibratory Road Rollers, 2 November 1981 (not yet released)

F. 1