FocusAsia wary US may shift trade policy post-poll

04 November 2008 04:52 [Source: ICIS news]

By Hong Chou Hui

SINGAPORE (ICIS news)--Asia’s polyester makers are keeping a wary eye on the outcome of the US presidential elections today amid concerns of a protectionist shift in government policy, said Asian producers and traders on Tuesday.

Both the US presidential candidates – Democrat Barack Obama and Republican John McCain – have vowed to revive the country’s economy with a slew of measures that include reviewing current commercial agreements with foreign trade partners and reviving domestic industries.

Already, India and Indonesia’s GSP (Generalised System of Preferences) status were put under review by the US International Trade Commission (ITC) five weeks ago, as the value of polyethylene terephthalate (PET) exports from both countries had exceeded their respective quotas of $150 million (€118.5 million) and $135 million set by the US government, said industry sources.

Exports of PET bottle chips from India and Indonesia have enjoyed tax-free status under the Office of the US Trade Representative’s GSP program.

This has provided makers from both countries with lucrative margins when selling to the US, while PET sellers from Korea, Taiwan and China pay an import tax of between 5-6% on the value of their cargoes, said an executive from Taiwanese PET bottle chip producer, Far Eastern Textile, in Mandarin.

“The US PET industry is one of the key supporters of this GSP review as it has been facing stiff competition from cheaper imports. We are doing all we can in the appeal to keep Indonesia’s GSP status,” said a source from the southeast Asian nation’s largest PET bottle chip maker.

Obama was more likely to be pre-disposed to protecting the US economy via the removal of the GSP as it would help to revive the country’s polyester sector while providing jobs for US citizens, he added.

The possible removal of India and Indonesia’s GSP status sparked fears of a price war come 2009 as PET markets shrink due to the global economic downturn.

“We could all be jostling for a slice of the same pie if the GSP is revoked. India and Indonesia enjoy lower labour costs as well as proximity to key markets such as Europe and the Middle East so the PET market next year is going to be overcrowded,” said a northeast Asian trader.

He added that be it Obama or McCain occupying the White House next year, both candidates could resort to protectionist trade policies in order to jolt the sluggish US economy back to life.

Prices for PET bottle chips from India softened by $125-130/tonne to a four-year low of $875-910/tonne FOB India for the week to 31 October from the previous week’s level of $1,000-1,040/tonne FOB India on the back of offers and thin trades, based on global chemical markets intelligence service ICIS pricing.

In northeast Asia’s polyester fibre and yarn (POY) market, talk of anti-dumping duties (ADD) being slapped on Chinese material next year made its rounds but market players remained optimistic.

“I don’t think the US election will impact the textile exports as the clothes (are) necessary to people’s lives. The Americans can’t live without wearing clothes,” said Li Zhihao, an executive from Wuxi WorldUnion Trading, in Mandarin.

PET bottle chips are used to manufacture bottles for consumer goods such as drinking water and cooking oil.

Major PET producers in Asia include Reliance, SK Chemicals and Indorama.

Judith Wang contributed to this article.

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By: Hong Chou Hui
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