Comments on Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement with Canada and Mexico

Transcription

1 Comments on Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement with Canada and Mexico The Plastics Industry Association (PLASTICS) hereby submits the following comments on negotiating objectives regarding modernization of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. PLASTICS comments cover U.S. trade in plastic products (HTS ); resins (HTS ); molds for plastics (HTS ); and machinery for the production of plastics (HTS ). The U.S. plastics industry directly employed 954,000 workers in When suppliers to the plastics industry are included, the total number of workers is estimated at 1.75 million. Last year, U.S. plastics exports to Canada and Mexico totaled $29.7 billion (Figure 1). If $1.0 billion dollar of exports supports 5,279 jobs trade under NAFTA, the plastics industry supported over 156 thousand jobs in In an industry where the hourly median wages in plastic materials and resin manufacturing (NAICS ) and plastic materials (NAICS 3261) rose 30.2 percent and 22.6 percent, respectively over a ten-year period, it is in the best interest of the U.S. economy that trade in plastics is uninterrupted. The U.S. had a $23.3 billion trade surplus in plastics in 2016, and it is fitting that we ensure that the surplus is sustained. The importance of plastics in the U.S. economy cannot be overstated. Plastics have numerous applications in packaging, a broad range of consumer products, medical devices, automotive, aviation, housing, and infrastructure. An increase in U.S. exports in the Canadian and the Mexican markets in these sectors would benefit the U.S. plastics industry and the U.S. macro economy. We support the modernization of NAFTA for the sole purpose of enhancing U.S. access into Canada and Mexico markets. In a survey of our members this year, we found that 82 percent of PLASTICS members export to both Canada and Mexico, and a majority of the survey respondents expressed confidence in continued growth for their businesses in both markets. U.S. plastics exports to Canada and Mexico continue to increase. Since the creation of NAFTA, U.S. plastics exports rose from $7.5 in 1994 billion to $29.7 billion in 2016 a 296 percent increase (see Table 1). Exports to Canada increased percent (from $4.45 billion in 1995 to $12.70 billion in 2016), and exports to Mexico grew percent (from $3.10 billion in 1995 to $16.97 billion last year). In 1994, 43.0 percent of U.S. plastics total exports went to Canada and Mexico. In 2016, almost half (48.9 percent) of the U.S. plastics total exports went to Canada (20.9 percent) and Mexico (27.9 percent), as shown in Figure 2. Our plastics trade surplus with Canada and Mexico altogether rose percent since the inception of NAFTA in January The trade surplus was $2.7 billion in 1994 and continued to increase to $13.41 billion last year (see Figure 3). U.S. trade surplus in plastics with Mexico was $23.27 billion last year much improved from the $17.14 billion surplus in While U.S. trade relations with Mexico in plastics have been positive since the creation of NAFTA, U.S. trade relations with Canada have been less than favorable, particularly prior to January 2008 when all tariffs and quotas were eliminated on U.S. exports to Mexico and Canada under NAFTA. As shown in Figure 3, prior to 2008, the U.S. had a trade deficit with Canada in 1995 and 2000 through Although the U.S. enjoyed a trade surplus in plastics with Canada, the surplus has been significantly less than the surplus with Mexico. In 2016, U.S. trade surplus in plastics with Mexico and Canada was $23.3 billion and $1.15 billion, respectively. 1

2 Figure 1. U.S. Plastics Total Exports ($ in billions) NAFTA Canada Mexico Figure 2. U.S. Plastics Total Exports by Destination (1994 vs 2016) U.S. Plastics Total Exports in 1994 by Destination: Canada, Mexico, and Rest of World R.o.W % Canada 25.36% Mexico 17.65% U.S. Plastics Total Exports in 2016 by Destination: Canada, Mexico, and Rest of World R.o.W % Mexico 27.91% Canada 20.94% Figure 3. U.S. Plastics Trade Balance ($ in billions) NAFTA Canada Mexico

3 In a survey of our members, members indicated their support for the continuation of NAFTA, however many shared their concerns about non-tariff barriers (NTBs) and technical barriers to trade (TBT). Survey responses from PLASTICS members below suggest that challenges remain. Having to operate within different and inconsistent regulatory regimes was a consistent theme with our membership. PLASTICS members expressed concerns about a lack of standards in documentation paperwork and no transparency in the frequent rulemakings made by the Mexican and Canadian governments on importing requirements. Members reported that different paperwork can be required from different customs houses creating extra costs and burdens on our members. A large number of PLASTICS members export machinery manufactured in the U. S. to Mexico and Canada. Each of the three countries has different machinery safety codes and requirements causing confusion in compliance. Machinery manufacturers also expressed difficulties in getting their American service technicians and other workers into Canada to provide maintenance work for Canadian customers because travel is expensive and there can be challenges at the borders in entering the country. U.S. businesses continue to face challenges doing business with Canada and Mexico. In particular, the NAFTA modernization negotiations must address the seemingly inaccessible parts of the Canadian market for some plastic products (see Table 1), which places the U.S. plastics industry and the U.S. economy at a disadvantage. It is puzzling why the U.S. is able to export more to Mexico than to Canada considering that Canada is a bigger market than Mexico; the Canadian dollar is more valuable than the Mexican peso; and the per capita GDP in Canada (US$50,108.07) is higher than that of Mexico (US$9,510.60). 1 In fact, over time the per capita GDP difference between Canada and Mexico rose from $29, in 1994 to $40, in Although the U.S. trade surplus with Mexico increased significantly since the creation of NAFTA, the growth of our trade surplus in plastics machinery (HTS ) and molds for plastics (HTS ) has stayed low (see Figure 4). In regard to our trade balance with Canada, the U.S. trade deficit with Canada in plastics machinery (HTS ) and molds for plastics (HTS ) has persisted since NAFTA (see Figure 5). There may very well be non-price determinants that explain the inability of U.S. plastics industry to improve their export share in the Canadian market. If TBTs exist, they should be thoroughly investigated and resolved in the renegotiation of NAFTA. Moreover, it is disconcerting that the U.S. has not exported some plastic products to Canada while it had routinely exported them to Mexico since the creation of NAFTA. Since 1994, the U.S. exported a total of $8.1 billion to Mexico of plastic products identified by HTS numbers shown in Table 1 while export to Canada was nil. If the U.S. had also exported some $8.1 billion to Canada a conservative estimate considering the difference in the size of the Canadian and Mexican markets it could have supported over 42 thousand jobs in the U.S. 1 Per capita GDP in constant 2010 U.S. dollars. Source: from the World Bank s World Development Indicators. 3

4 Figure 4. U.S. Trade Balance in Plastics with Mexico ($ in billions) Resin Plastics Machinery Plastics Products Molds for Plastics (0.5) (1.0) (1.5) Figure 5. U.S. Trade Balance in Plastics with Canada ($ in billions) Resin Plastics Machinery Plastics Products Molds for Plastics While a free trade agreement does not guarantee export sales or a balanced trade, there seems to be a discrimination against certain U.S. plastics products, which we feel should be looked into. If a technical barrier of trade exists, it is should be part of the U.S. negotiating position in the modernization of NAFTA. Specifically, if the issue is products standards, it should be articulated to Canada and Mexico that the U.S. plastics product standards are based on sound science and most likely exceed the product standards of our trading partners. The discrimination of entry of plastic products listed in Table 1 into the Canadian market is an unfair trade practice and has no place under a free trade agreement. 4

5 Table 1. U.S. Plastics Exports to NAFTA (Total from , $ in millions) HTS Commodity Canada Mexico Ethylene-vinyl Ace Copoly:vinyl Ace-vinyl Chlr-eth (kg) Polyisobutylene,elastomeric (kg) Other Fluoro-polymers,except Elastomeric (kg) Othr Vinyl Polymers,prim Fm,cont>=50% Der Vnyl Ace (kg) Vinyl Copolymrs: Cont By Wt 50%+ Deriv Of Vnyl Ace (kg) Polyvinyl Carbazole (including Adjuvants) (kg) Othr Acrylic Polymers In Primary Form,elastomeric (kg) Bis(4-amino-3-methylcyclohexyl)methane-isophthalic (kg) Polyurethanes,elastomeric (kg) Other Elastomeric Resins Nesoi (kg) (cholestyramine Resin Usp) (kg) Of Polyethylene Terephthalate (pet) Plastics (kg) Tubes,pipes&hoses,rigid,of Plastic, Nesoi, <200mm (ths) Self-adhs Plates,etc,rols Le 20cm,ligt Ref,glas Gr (x) 0 1, Filament Reinforced Tape, In Rolls, Width</=20cm (m2) Electrical Tape, In Rolls Not Exceeding 20 Cm Wide (m2) Transparent Tape, Length </= 55 M, Width </= 5 Cm (m2) Transparent Tape Not Exceeding 55m In Length,w>5cm (m2) Self-adhes Plates,sheet,etc,light Refl,glass Grain (kg) 0 1, Self-adhesive Reflectorized Sheeting Of Plastics (m2) Filament Reinforced Tape, In Rolls Exceeding 20 Cm (m2) Electrical Tape, In Rolls Exceeding 20 Cm Wide (m2) Transparent Tape, In Rolls Exceeding 20 Cm Wide (m2) Nursing Nipples And Finger Cots (grs) Handles & Knobs Of Plastics For Furn,coachwork,etc (kg) Nursing Nipples & Pacifiers (grs) Pacifiers (grs) Ladders Of Plastics/other Materials (no) Ladders Of Plastics/other Materials (no) Inj/compr Molds Rub/plas Manuf Semicondctr Devices (no) Total 0 8,

6 In sum, while the U.S. plastics industry has benefitted from NAFTA, there is room for further improvements. Thus, PLASTICS supports further improvements of NAFTA with the goal of increasing U.S. exports in Canada and Mexico. Our members continue to face challenges when doing business with Canada and Mexico. Lastly, PLASTICS would like to underscore the need to address the inaccessibility of the Canadian market for selected plastic products discussed above. If you have any questions or need additional information, I can be reached at or by at ppineda@plasticsindustry.org. Respectfully, Perc Pineda Chief Economist 6