As far as the U.S. plastics industry is concerned, the effect of the USMCA is net positive. It would be unproductive—let alone cumbersome—to go back to the drawing board to redraft and renegotiate a trade deal.
By Perc Pineda, PhD, PLASTICS Chief Economist
Despite the uncertainty that surrounded the North American Free Trade Agreement (NAFTA) renegotiation last year, preliminary trade data for 2018 shows that U.S. plastics trade with Canada and Mexico increased. U.S. plastics industry exports to Mexico topped $16.8 billion—a 7.3% increase, and imports registered a 4.1% uptick at $11.5 billion. All told, U.S. plastics’ trade surplus with Mexico stood at $5.3 billion. That’s an 8.9% increase from 2017.
U.S.-Canada plastics trade last year, however, resulted in a trade surplus that was 19.3% lower than the previous year. Exports expanded to $13.1 billion—a 4.5% increase. U.S. imports from Canada also increased by 4.8%—topping $13.0 billion.
While the manufacturing sector cheered when all three countries inked a new version of the trade pact called the U.S.-Mexico-Canada Agreement (USMCA), the tri-lateral treaty still needs to be ratified and domestic legislation to implement the treaty drafted and enacted in all three countries. At this stage, the risks of USMCA being rejected by the legislative bodies of each of the three legislatures are purely political.
Federal elections in Canada slated to take place in the fall may result in a new government that objects to the trade agreement—in part or in whole. In Mexico, foreign policy observers cite President Andres Manuel Lopez Obrador’s (AMLO) foreign policy as cautious, quiet and restrained. “AMLO remains mostly muted though positive on [President] Trump’s vaunted USMCA,” wrote Prof. Gregory Weeks of the University of North Carolina, Charlotte. The results of the U.S. midterm elections may have wrinkled what previously looked like a smooth transition from NAFTA to USMCA. With the Democrats now in control of the House, the ratification of the trade pact would most likely be scrutinized in several areas. For now, the U.S. Congress’ debate on the USMCA still has yet to take place.
As far as the U.S. plastics industry is concerned, the effect of the USMCA is net positive. It would be unproductive—let alone cumbersome—to go back to the drawing board to redraft and renegotiate a trade deal. Based on estimates by the U.S. Department of Commerce that $1.0 billion of exports supports 5,744 jobs, not passing USMCA puts some 181,997 jobs at risk. And that just from U.S. plastics exports (HTS 39 – Plastics and articles thereof) to USMCA partners. Plastics exports originating from California to Canada and Mexico in 2018 alone supported 15,188 jobs. PLASTICS’ estimates of jobs supported by plastics exports via the USMCA can be downloaded at https://www.plasticsindustry.org/data-analysis-reports/.
Markets are averse to uncertainty—including a decrease or loss of U.S. export market share in Canada and Mexico to China and other countries. Such a scenario puts U.S. jobs at risk. The U.S., Canada, and Mexico had embarked on a free trade renegotiation and it’s too late to turn back now. And there is no reason to do so considering the positive effect the USMCA will have on the economies of the three signatory countries.
