WASHINGTON: US chemical companies, already riding a wave of lower production costs because of the United States’ natural gas boom, see additional gains from proposed US trade deals with the European Union and Asia-Pacific countries.
Cal Dooley, President of the American Chemical Council, said a free trade pact that eliminates EU tariffs on US chemical exports would save US producers $1.5bn per year.
“The potential savings from regulatory cooperation would be significantly greater than that,” although the industry group does have an estimate yet, Dooley said.
US and EU leaders this week announced plans to negotiate an agreement that would cut remaining tariffs across the Atlantic and address regulatory barriers that hamper trade.
American chemical companies have complained for years about an EU regulation, known as REACH, which imposes extensive registration, testing and data requirements on tens of thousands of chemicals.
The US chemical industry does not expect those rules to be overturned as a result of the US-EU talks, but sees opportunities for reform that could significantly reduce the cost of compliance, Dooley said.
However, to get those and other concessions from the EU, the White House needs to push Congress to renew legislation known as “trade promotion authority,” Dooley said. That law, which expired in 2007, allows the White House to submit trade pacts to Congress for a straight up-or-down vote without any amendments.
It long has been considered essential to persuading countries to put their best offers on the table in trade talks with the United States.
Dooley said he hoped the White House would announce plans in coming weeks to pursue the legislation. The US-EU trade talks are expected to begin by June and could take at least 18 to 24 months to complete.
The Asia-Pacific region was a close second at $51.8bn, while Canada and Mexico imported a combined $49.6bn of US chemical products. The United States, Canada, Mexico, Vietnam, Australia and six other countries in the Asia-Pacific region hope to finish talks on a proposed “Trans-Pacific Partnership” (TPP) pact by the end of the year. That agreement could boost US chemical exports by $1.2bn annually, Dooley said.
Both the EU pact and the TPP would help US chemical producers capitalize on a dramatic fall in production costs over the past five years because of lower prices for natural gas.
“Natural gas is to the US chemical industry as flour is to a bakery” because about 85 percent of chemicals manufactured in the United States use natural gas as a feedstock, Dooley said. Globally, chemical producers are indifferent to using natural gas or naptha, a hydrocarbon derived from oil, as a feedstock when prices for natural gas and oil are at a ratio of around one to four, Dooley said. The price ratio in the US currently is closer to 1 to 20 or 1 to 25 in favor of natural gas, which has made the US chemical industry probably the lowest cost producer in the world, with the possible exception of the chemical industry in the Middle East, he said.Reuters
