Leaving NAFTA would leave plastics users in the lurch

Leaving NAFTA would leave plastics users in the lurch
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As the administration and its Chinese counterparts work toward a solution that benefits consumers and the economic interests of both countries, another important trade discussion is taking place closer to home — the future of the North American Free Trade Agreement (NAFTA).  

Despite the heated rhetoric around specific parts of the agreement, at the end of the day, NAFTA has been an undisputed success for the U.S. chemicals and plastics industry.

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Strong increases in exports to NAFTA countries and other expanding global markets, along with the robust development of U.S. shale gas, have created an unprecedented wave of investment in our industry.

 

Companies like mine have been able to create tens of thousands of well-paying jobs while lowering the cost of countless products used by American consumers every day. 

In short, a complete withdrawal from NAFTA would be a costly mistake for consumers, the economy and our communities.

In just the past six years, our company, LyondellBasell, has announced U.S. investments of more than $5 billion to expand and build new manufacturing facilities. More broadly, the North American chemical industry has announced approximately 300 new projects valued at roughly $185 billion to meet growing global demand for our products.

NAFTA has strengthened more than chemical and plastics manufacturing in the U.S.; the products made by our companies are advancing several other industries that are also vital to our broader economy.

Chemicals and plastics are used in the manufacturing of automobiles, consumer goods, electronics and packaging film by our customers farther down the value chain. What is good for our industry is also beneficial for countless other U.S. companies that we serve every day.

According to a recent report from the American Chemistry Council (ACC), since NAFTA came into effect, chemical exports from the U.S. to Canada and Mexico have tripled and today are forecast to more than quadruple by 2025 to $30 billion.

The reality is, without a well-functioning North American trade compact, many of our global competitors stand ready to displace U.S. producers in these important markets. 

Combined with the recently passed tax reform package, ongoing regulatory reform and a favorable environment for energy production, NAFTA remains a key part of the equation for continued growth and success. 

While a strengthened trade agreement would benefit our industry and U.S. consumers, withdrawing from NAFTA would be distressing for our industry and those who benefit from our products.

The ACC reports that in a worst-case scenario, exports to our North American partners could fall up to 45 percent from current levels, with chemical industry losses totaling approximately $29 billion.

The tariff burden on U.S. chemical exports to Canada and Mexico would reach $700 million a year and could escalate to as high as $9 billion. Moreover, NAFTA withdrawal would jeopardize more than half of the $185 billion in new chemical industry investments that have been announced.

Perhaps worst of all, if the U.S. were to withdraw from the agreement, the ACC estimates that thousands of jobs would be lost and American consumers would face higher prices for end-use products including automobiles, electronics and appliances.

All told, the cost of withdrawing from NAFTA is extremely high.

Our industry is committed to a constructive dialogue that furthers regulatory certainty and maintains policies that strengthen our leading position. We must ensure that our products remain cost-advantaged for our NAFTA partners, ultimately leading to lower prices for our consumers and more high-paying jobs for our employees. 

For more than 30 years, thoughtful energy and trade policies have been critical to the chemical industry’s success as one of the country’s growing manufacturers and exporters. A productive NAFTA agreement that provides certainty, access and enforceability is the right and responsible path for the U.S.

Bob Patel is CEO of LyondellBasell Industries, a leading plastics, chemicals and refining company, and chairman of the board of directors of the American Chemistry Council.