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Long-Standing Issues With China Can Be Resolved Through Constructive Negotiation, Enforcement of WTO Rules, ACC Says

WASHINGTON (July 25, 2018) – The Administration should do everything in its power to keep chemical products off the front lines of a trade war with China or risk losing thousands of jobs and billions of dollars in new chemical industry investment in the crossfire, according to American Chemistry Council (ACC) Director of International Trade, Ed Brzytwa, who testified today before officials from the Office of the United States Trade Representative (USTR) regarding the U.S. Administration’s proposed Section 301 trade action against China. The global trade shakeup comes at a time when the low-cost production of chemicals in the U.S. has attracted more than $194 billion in new chemical industry investment and sparked a U.S. manufacturing renaissance that could be undermined by the imposition of U.S. tariffs and retaliation by U.S. trading partners.

In his testimony, Brzytwa requested that the Administration remove all chemicals and plastics products, valued at $2.2 billion, from the U.S. List 2 (see Annex C on pg. 28747), and pursue more constructive measures to resolve China’s unfair practices. “The inclusion of chemicals and plastics on List 2 has the potential to harm America’s manufacturing renaissance and is counterproductive to U.S. economic interests,” Brzytwa told policymakers. “Costs in the U.S. will go up, not just for our member companies, but also downstream industries that buy U.S.-made chemicals, including farmers and manufacturers. These tariffs will weaken the competitiveness of the U.S. chemicals industry and the U.S. as a whole. We respectfully request that the Administration remove all the chemicals and plastics products from the U.S. List 2.”

Uninterrupted access to global supply chains and foreign customer markets is vital to the American chemical industry’s ability to maintain its competitive position, ACC noted in public comments prior to the hearing. Tariffs increase the costs of doing business in the United States and invite damaging retaliatory actions by U.S. trading partners. This creates opportunities for countries like China to bolster their own competitive positions in global chemicals trade.

“The chemicals and plastics appearing on List 2 invite retaliatory tariffs from China, and by virtue of that retaliation, inadvertently give China the upper-hand over our growing industry,” Brzytwa explained in his testimony. “Due to shale gas and lower costs to produce and export chemicals, U.S. chemical manufacturers are competitively advantaged compared to Chinese producers if there are no U.S. tariffs and China does not otherwise retaliate.”

54 of the 114 products on China’s List 2 are chemicals, plastics, and plastics products, and would impact $5.4 billion in U.S. exports to China. “China’s tariffs will hit the U.S. chemicals industry, not once, but twice, since demand for chemicals by manufacturers that make products containing chemistry will drop,” Brzytwa said. “China’s retaliation against U.S.-made chemicals will also make it prohibitive to supply China’s large and growing demand for chemicals. That is why chemicals, arguably more than any other products, do not belong on the front lines of a trade war.”

ACC’s public comments also included a growing list of firsthand accounts from companies exposed to the potentially damaging impacts from the Administration’s China Section 301 tariffs and Section 232 tariffs and quotas on steel and aluminum imports. The anecdotes forebode significant disruptions to supply chain operations – incentivizing companies to move U.S. production overseas due to the sudden, uneven playing field that tariffs would create in the global marketplace.

“ACC supports efforts by the Administration to resolve concerns with China, but we strongly believe that these long-standing problems should be addressed through constructive negotiation and enforcement at the World Trade Organization where possible, rather than through the blunt instrument of tariffs that could make the world’s most important economic relationship even more difficult. We therefore strongly urge the U.S. government to rescind existing tariffs and avoid imposing new ones, thereby preempting additional retaliation by China,” Brzytwa concluded.

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