The potato processing industry is looking with great concern at the impending import stop and increased tariffs for European chips. After New Zealand and Australia, the United States has also recently come forward in the matter. "It's all hands on deck," says de Vavi.
Recent developments raise the question whether the so-called chip war has entered a new phase. In recent years, several countries have imposed import duties on frozen fries from the Netherlands, Belgium and Germany. South Africa and Brazil tried to prevent European fries from being sold below market price.
At the end of 2018, Colombia also introduced protectionist measures to protect its own market. The country imposed an 8% import tax on frozen potato products. Much to the frustration of the major chip exporting countries, which argue that there is no question of dumping. Efficient potato processing would make our fries cheap in countries like Columbia.
WTO is looking into the matter
The World Trade Organization (WTO) calls the issue unfair and announced in October 2019 steps to take against Colombia. This procedure is still ongoing, Hylke Brunt, secretary of the Association for the Potato Processing Industry (Vavi), said when asked. "The WTO has now appointed a temporary panel of judges to consider this."
What the outcome will be remains to be seen. Chip manufacturers hope that the Colombian measure can be reversed. Colombia itself is not a major buyer of European fries, but there are fears of a domino effect that will crumble the market throughout South America. Something that would cause great damage to the chip industry and that they do not have. Certainly not now that sales are under heavy pressure as a result of the corona crisis.
'Subsidized' fries
Nevertheless, chip exports are only further threatened. The corona crisis is the basis for this. For example, both Australia and New Zealand have been urging the government since May to impose import restrictions on frozen fries from Belgium and the Netherlands. Due to the collapse of sales and the compensation scheme from the government, our 'subsidized' fries would be offered en masse at dumping prices.
What bothers Brunt in particular is that the substantiation is shaky on all sides. "For example, the compensation scheme that the government has created is intended for growers and not for the processing industry. Moreover, the chip factories in the Netherlands have processed fixed volumes at pre-agreed contract prices. Not at sports prices."
'No dumping'
However, there is a lot of stock of end product in the cold stores. However, according to Brunt, the threatened measures are projected on something that could happen. To his knowledge, there is no question of dumping in the export countries mentioned. "My members have no interest in that. They have to earn back the losses suffered."
Hylke Brunt, Vavi
New Zealand claims the opposite. Whether Brunt is correct in his position will have to be determined by the investigation that the government in New Zealand (and perhaps also in Australia) may conduct. Potatoes New Zealand has submitted an application for this. "We have no choice but to wait and see what such a report says. From experience with Colombia, we know that apples and oranges are often compared, so we are following the matter closely."
Impact of the situation
New Zealand and Australia are not the largest buyers of European fries. For example, Belgium, the largest French fries exporter, Australia and New Zealand rank 27 and 71 respectively as export destinations. In New Zealand, normally 85% of French fries consumption comes from own production. However, according to Brunt, it is not only about the size, but also about the signaling function of the impending measures. "We don't want conclusions based on inaccurate reports."
Perhaps even more worrying is the situation surrounding the United States, whose size is of greater significance for the European chip industry. It's messy there too. For example, the American organization National Potato Council (NPC) has the federal government summoned to tax frozen fries from the Netherlands and Belgium with an import tax of 100%.
Political issue in USA
In the US it would also be about combating dumping scenes. However, according to Brunt, there is a more complex political agenda behind it. For example, the import of French fries would be used as a 'compensation' in an issue in the aviation industry. "I understand from the signals we receive that this is not possible. Frozen products could not simply be used to correct another issue."
Yet the signal is worrying, Brunt notes. "If countries suddenly decide to raise their borders, this is not good for the free trade principle. Something the Northern European chip industry depends on."