Senator Cruz stresses need to encourage trade under NAFTA

05 March 2018 22:47 Source:ICIS News
Space and Satellite views, Earth - 2015

HOUSTON (ICIS)--US Senator Ted Cruz (Republican-Texas) stressed on Monday the need and benefits of using the NAFTA renegotiations to open up Mexico and Canada to more trade with the US.

Cruz made his comments on Monday during a forum held by the American Chemistry Council (ACC) and the Texas Chemical Council.

The US, Canada and Mexico are in the midst of renegotiating the North American Free Trade Agreement (NAFTA), from which US President Donald Trump has threatened to withdraw.

For the US petrochemical industry, both countries are major export markets, and their importance will increase as companies start up new plants.

The renegotiations are also a good opportunity to update and modernise the trade deal, which went into effect in 1994, Cruz said.

But Cruz spent much of his time stressing the importance of international trade to the economy in Texas.

"There are about 2.2m jobs in the state of Texas that depend on international trade," Cruz said. "Texas does very well under NAFTA."

The renegotiations could help both Texas and the US if their objective is to expand international trade and to open up Mexico and Canada to more goods and services from the US, Cruz said.

"If on the other hand the objective is to erect barriers to the US market and decrease trade, that's going to hurt Texas," he said.

Such a development could represent a lost opportunity for the state.

He pointed to Mexico's recent energy reforms, which opened the country to investment from companies other than the state producer, Pemex. The NAFTA talks should further expand on this opening in the Mexican energy market.

Such a move could create more well-paying jobs in Mexico, he said. And Mexico will likely turn to companies in Texas to help develop the nation's energy resources.

Conflicting voices within the Trump administration is pulling it in different directions in regards to trade, Cruz said.

"I can tell you that I have weighed in heavily, emphatically, with the president, with the commerce secretary, with the US trade representative, with the treasury secretary, with the secretary of state, I have weighed in aggressively in support of expanding trade," he said.

More recently, Cruz said he talked to the president about NAFTA presenting an opportunity to pass further regulatory reform in the US.

This would come in the form of the Regulations from the Executive in Need of Scrutiny act, or REINS.

This act would require a vote from Congress before the government could adopt a regulation that would impose a cost of more than $100m on the economy, Cruz said.

Pushing through such an act would require 60 votes in the Senate to overcome a filibuster from the Democratic party, Cruz said. Right now, the act does not have that support.

One way to get around this barrier is to attach a competitiveness chapter to NAFTA that codifies regulatory reform, Cruz said. "What we could do is codify something like the REINS act."

The US could do this without seeking approval from Mexico or Canada, he said.

Plus, if the REINS act is attached to NAFTA, "under trade promotion authority, that goes to Congress on an expedited vote, up or down, at a 50-vote threshold, and it can't be filibustered", Cruz said. "And so it's a tool to get around a Democratic filibuster and enact regulatory reform that would have a profound impact in terms of continuing the economic growth that we're seeing in Texas."

In addition to NAFTA, Cruz also talked about Trump's proposal to impose tariffs on steel and aluminium. He said that the US has a lot more jobs in industries that use those metals as raw materials versus those that produce them.

"So you're looking at costs going up for industries that use those inputs and that doesn't even count what happens if other countries retaliate and start putting tariffs on our exports," Cruz said. "It's a real concern, and I don't have a magic solution for it."

Given that the US will start exporting growing amounts of polyethylene (PE) and other petrochemicals, it could be the target of retaliatory tariffs, given both the volume of those exports and the nation's cost advantage in producing those materials.

Space and Satellite views, Earth - 2015

Photo by Sipa USA/REX/Shutterstock
By Al Greenwood