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Modernized NAFTA Should Create Efficiencies, Deepen Economic Integration, and Fortify Risk-Based Approach to Chemical Regulation in North America and Globally

WASHINGTON (June 28, 2017) – U.S. chemical manufacturers are in a unique position to capitalize on the shale gas revolution by securing expanded access to foreign markets, including Canada and Mexico, according to American Chemistry Council (ACC) Senior Director of Regulatory and Technical Affairs, Greg Skelton, who testified today before U.S. government officials on the chemical industry’s priorities for a modernized North American Free Trade Agreement (NAFTA). The U.S. has a large and growing trade surplus in industrial chemicals, which currently stands at $28.2 billion, according to data from 2016. Canada is the single largest national market for U.S. chemical exports ($24 billion in 2016, a $1.9 billion trade surplus). Mexico is the second largest ($21 billion, a surplus of $14.6 billion).

“That surplus is likely to grow significantly as increased production from more than $185 billion in announced new investment in domestic chemical manufacturing comes on stream,” Skelton told government officials at the U.S. International Trade Commission. “This investment is a direct result of the shale gas revolution, which has made the U.S. one of the most competitive producers of chemicals in the world.” In 2016, expenditures on chemical plants accounted for half of all capital investment in U.S. manufacturing, according to the Census Bureau. A recent ACC report estimated that exports of specific key chemistries directly linked to shale gas, such as polymers, plastics resins, and specialty chemicals, will more than double – from $60 billion in 2014, to $123 billion by 2030. The increased production cannot all be consumed domestically, Skelton explained. To maximize this competitive advantage, the U.S. must strengthen and expand access to key foreign markets.

“Over the past two decades, NAFTA has provided enormous benefit for the chemical sectors in Canada, Mexico and the United States,” Skelton said. “NAFTA has facilitated expanded economic growth, job creation, and enhanced North American competitiveness in the global marketplace.” Since NAFTA entered into force, trade in chemicals between NAFTA countries has more than tripled, from $20 billion in 1994 to $63 billion in 2014.

“After more than 20 years, modernization of NAFTA is an opportunity to upgrade the agreement to address inefficiencies and reflect procedures adopted or proposed in subsequent negotiations,” Skelton told government officials. “ACC’s overriding objective is for a modernized NAFTA to result in efficiencies that deepen economic integration and make North America’s co-produced products and services more globally competitive.”

Skelton unveiled several of the chemical industry’s priorities for a modernized NAFTA, including:

  • Maintaining duty-free trade for all qualifying chemical products, including the large proportion of chemicals trade within NAFTA that is intra-company;
  • Modernizing the NAFTA rules of origin to bring them into line with rules adopted in subsequent U.S. trade agreements, such as the Korea-U.S. Free Trade Agreement;
  • Pursuing a World Trade Organization Trade Facilitation Agreement “plus” approach to customs and trade facilitation efforts, including promoting digital trade, targeting infrastructure projects to remove bottlenecks on the movement of exports, modernizing transport security requirements, and harmonizing clearance procedures;
  • Strengthening regulatory coherence and implementation of Good Regulatory Practices to help address current and future areas of regulatory divergence among the countries; and
  • Establishing a Regulatory Cooperation Council that would help set overall priorities and coordinate regulatory cooperation and coherence efforts on a sectoral basis.

ACC’s top priority for enhancing regulatory cooperation under NAFTA, Skelton explained, is to strengthen and align the risk- and science-based approach to chemical regulation, adopted in the U.S. and Canada, throughout the region. “The Canadian Chemical Management Plan and the recently updated U.S. Toxic Substances Control Act rely upon a common set of concepts and principles to ensure appropriate health and environmental protections, while preventing the imposition of regulatory barriers to trade, reducing costs and creating other efficiencies for regulators and industry,” Skelton said. “In promoting such a ‘North American model’ for chemical regulation – and extending it to Mexico – NAFTA could help provide a model for other countries and regions around the world considering developing or updating their own chemical regulations, and push back against the spread of more hazard-based approaches.” 

More than 95% of manufactured goods – from textiles, to electronics, to automobiles – are touched by chemistry, Skelton explained. As a result, the chemical industry has a multiplier effect on job creation and economic growth in the region. “A strengthened NAFTA has the potential to provide a significant boost to growth and job creation, which in turn would promote innovation and strengthen the international competiveness of U.S. exporters,” Skelton concluded. 

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