Groups welcome House Democrat, White House deal on USMCA

Author: Al Greenwood

2019/12/10

HOUSTON (ICIS)--The American Chemistry Council (ACC) welcomed on Tuesday a deal regarding the revised North American trade agreement that US President Donald Trump had reached with Democrats in the country's lower legislative chamber.

The US-Mexico-Canada Agreement (USMCA) is intended to replace the North American Free Trade Agreement (NAFTA), which governs trade relations among the US, Mexico and Canada.

The deal was announced by Nancy Pelosi (Democrat-California), speaker of the House of Representatives, the lower legislative chamber of the US.

“ACC and our members are strongly encouraged by the speaker’s announcement of a potential agreement that would codify important improvements to USMCA and possibly fast-track its passage in Congress," according to a statement by Chris Jahn, president of the trade group.

"ACC looks forward to reviewing the proposed changes closely to ensure chemicals manufacturers will continue to thrive under the new agreement," he said.

The next step is for the House and the Senate to vote on implementing legislation for the USMCA. The ACC would like both chambers to vote on this legislation before Congress goes into recess before the holidays at the end of the year.

"US chemicals manufacturers can strengthen our competitiveness and win with countries like China when we are free to innovate across borders and take advantage of integrated supply chains with our two largest trading partners in Canada and Mexico," Jahn said. "Under USMCA, the benefits of increased regulatory cooperation can also be deployed to prevent and reduce unnecessary regulatory barriers to trade while continuing to protect human health and the environment."

The ACC has been a vocal proponent of the USMCA.

Canada and Mexico are the two largest export destinations for the US chemical industry, with each country receiving $23bn worth of shipments, according to the ACC.

Canada and Mexico will receive a large portion of the chemicals linked to shale gas, the ACC said. Such exports should reach $30bn by 2025, and 40% of these will be destined for those two countries.

The economies of the three nations are tightly integrated. The ACC estimates that 44% of all US chemical exports to Canada and Mexico are intracompany exports. Among the chemical imports from Canada and Mexico, the ACC said 64% are between related companies.

Ratification of the USMCA would prevent any new tariffs on North American trade, and the deal will enhance regulatory cooperation among the three countries, the ACC said. The USMCA will make it easier for companies to exchange data across the borders of the countries and to prove from where their products originate.

The Association of American Railroads (AAR) also welcomed the agreement between the House Democrats and the White House.

In the US, chemical railcar loadings represent about 20% of chemical transportation by tonnage, with trucks, barges and pipelines carrying the rest, while in Canada producers rely on rail to ship more than 70% of their products, with some relying exclusively on rail.

“As the backbone of the North American supply chain, freight railroads applaud today’s announcement, which provides much-needed certainty with our two largest trading partners,” said Ian Jefferies, president of the AAR. “Congress should move with haste to ratify USMCA before the end of the year and provide an economic shot in the arm to US businesses.”

The three countries agreed upon the USMCA in 2018.

Mexico ratified the USMCA in June, but in the US House the Democrats raised objections over the deal’s provisions on the environment, labour standards and workers' rights as well as pharmaceuticals and prescription drugs.

The revised USMCA - with stronger provisions on enforceable labour standards and the environment - was taking into account those concerns, Pelosi said.

The revised deal has to be signed and ratified by the three countries.

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Additional reporting by Stefan Baumgarten
Image shows a map of North America. By Sipa USA/REX/Shutterstock