Dooley Says Administration Should Engage In Constructive Negotiations With China, Prevent Retaliation On America’s Most Competitive Industries
WASHINGTON – By proposing tariffs that are intended to prop up challenged and less profitable U.S. industries, President Trump has inadvertently made two of America’s most competitive and successful sectors – chemicals and agriculture – the targets of retaliatory tariffs from China, according to American Chemistry Council (ACC) President and CEO, Cal Dooley, who testified today before the U.S. House Committee on Ways and Means at a hearing entitled “Effects of Tariff Increases on the U.S. Economy and Jobs.” 40 percent of the products on China’s initial Section 301 list relate to chemicals and cover polyethylene, PVC, polycarbonates, acrylates, and many other chemicals. ACC estimates that $5 billion in U.S. chemicals and plastics trade to China would be exposed under the tariffs that China has proposed.
“China knows how competitive the U.S. chemicals industry is and has very likely targeted U.S. chemicals exports because it is an area where the U.S. is poised to grow the most,” Dooley explained in his written statement. “That China has included these products on its tariff list is a recognition of the competitiveness of the U.S. chemicals industry and the challenge it poses to China’s own fast growing chemicals industry.” China is one of the U.S. chemical industry’s most important trading partners, importing 11 percent, or $3.2 billion, of all U.S. plastic resins in 2017.
For the first time in decades, the U.S. enjoys a competitive advantage in chemicals and plastic production, made possible by affordable domestic natural gas, the industry’s primary feedstock. Today, American chemical manufacturers account for 14 percent of all U.S. exports, or $174 billion in 2016. The U.S. chemicals industry had a trade surplus of $33 billion in 2017, and that number could more than double to $73 billion by 2020 if the U.S. were to enact smart policies and trade agreements that fully capitalized on industry’s global competitive advantage.
“Thanks to America’s shale gas revolution, in a little over a decade the U.S. has gone from being one of the most expensive places to produce chemicals, to one of the world’s lowest cost producers,” Dooley told lawmakers. “Approximately $194 billion in new chemicals and plastics production capacity has been announced in the United States in the past eight years. Much of the new capacity is intended for export, reflecting investors’ belief that the U.S. is the most competitive platform from which to serve global markets.” The expansion is projected to bring with it 846,000 total new jobs, according to the latest ACC analysis.
The effect on the American economy of the Chinese government’s proposed tariffs on chemicals and plastics goes well beyond chemical manufacturers. Dozens of other sectors that rely on chemical and plastic products including the automotive, health care, building and construction and consumer goods industries could shoulder higher related costs. “There is ample evidence that tariffs lead to higher costs for downstream producers, higher prices for consumers, fewer jobs in downstream industries, and less economic growth, investment, and innovation in the United States,” Dooley said in his written statement. “It is ultimately the consumer who pays the price.”
Mr. Dooley told lawmakers that he shared President Trump’s concerns about China’s inadequate protections of intellectual property and forced technology transfer practices, and that he understood concerns about China’s refusal to address their policies that result in over capacity of steel manufacturing. “But the U.S. consumer, U.S. worker, or U.S. economy does not win if the tariffs we have proposed result in the implementation of China’s proposed retaliatory tariffs that target those sectors of our economy that are global leaders,” Dooley said. “U.S. chemical manufacturers, U.S. energy producers, and U.S. farmers are competing and winning in the global marketplace – they are generating increasing trade surpluses, and we cannot allow them to become causalities of trade disputes. We urge the U.S. and Chinese governments to put aside talk of a trade war and stop the volley of potential tariffs.”
In his written testimony, Dooley outlined several practical recommendations for managing both the Section 232 and Section 301 actions. “The most positive step would be to revoke the proposed tariffs immediately,” Dooley said about the steel and aluminum tariffs. In the absence of a full withdrawal, he urged the Trump Administration to modify the tariffs to make country exemptions permanent; allow associations to request exclusions on behalf of their members; allow product exclusions to all companies rather than on a company by company basis; and exempt key U.S. allies without conditions. For Section 301, Dooley suggested that the Administration outline a clear, detailed plan for how it will address longstanding problems in China, including by making greater use of the World Trade Organization’s dispute settlement and negotiation pillars.
“We support efforts by the Administration to resolve concerns with China, but strongly believe that these long-standing problems should be addressed through constructive negotiation, rather than through tariffs that could make the world’s most important economic relationship even more difficult,” Dooley wrote in his statement. “We are hopeful that, with support from Congress, the Administration and the Chinese government will recognize that it is in the best interest of both countries to commit to a process that will produce a mutually beneficial agreement before the proposed tariffs go into effect,” he concluded.