ACA Testifies at USTR Hearing on NAFTA Renegotiation
June 30, 2017 •
On June 27, ACA Vice President of Government Affairs, Heidi McAuliffe, testified at a hearing on Negotiating Objectives for Modernization of the North American Free Trade Agreement (NAFTA), held by the Office of the U.S. Trade Representative (USTR). ACA attested that the enhanced trade facilitated by NAFTA has been quite beneficial to the U.S. coatings industry: the U.S.-based coatings manufacturing base exports a significant portion of its production to Mexico and Canada, and the United States benefits from a consistently strong trade surplus with both countries. U.S. coatings exports range from consumer paints to those used in industrial settings and in manufacturing operations.
Considering the strong American trade position, ACA urged that future NAFTA negotiations be accomplished in a “do no harm” approach that preserves the very real benefits that the coatings industry has seen from this trade agreement over the past two decades. At the same time, ACA offered a few areas for improvement of the trade deal with respect to re-importation of coatings products, as well as other inefficiencies, that could be improved as part of this process.
McAuliffe testified as part of a panel representing U.S. manufacturers panel that included testimony from the National Association of Manufacturers, Tile Council of North America, American Institute of Steel Construction, American Iron and Steel Institute, and Kansas City Southern.
NAFTA – Paint by Numbers
In her testimony, McAuliffe cited some compelling numbers that illustrate the positive results of NAFTA for the coatings industry.
- The U.S. coatings industry enjoys a strong trade position, both within NAFTA and globally. In 2016, the United States exported coatings products valued at $1,531,842,275 to Canada and Mexico, with $1,040,857,987 of that total going to Canada and $490,984,288 to Mexico (these figures are comprised of a mix of waterborne, solventborne, and miscellaneous coatings products that are sold to both Canadian and Mexican consumers as well as industrial and commercial users and manufacturers);
- While the U.S. market did import coatings products from NAFTA as well, trade in coatings products resulted in a positive trade balance of $1,146,662,347 in our transactions within the NAFTA framework (these include a positive trade balance of $734,324,057 with Canada and $412,338,290 with Mexico); and
- Trade with NAFTA partners is twice as large as our trade with China…or equals trade with UK, Australia, and Netherlands combined.
Exports by State
Beyond the national benefit, McAuliffe also underscored the boon of paint and coatings exports to U.S. states, as well, providing the top 10 exporters.
- Illinois $298,357,209
- Texas $262,391,903
- Ohio $225,091,633
- Michigan $168,375,616
- Pennsylvania $160,256,580
- California $160,235,559
- Wisconsin $$107,156,104
- New Jersey $105,374,764
- Florida $77,808,279
- New York $69,577,590
Room for Improvement
While ACA underscored the overall positive impact of NAFTA for the paint and coatings industry, McAuliffe identified a few areas where the trade agreement could be modernized and improved.
The coatings products traded in the NAFTA region include both consumer paints, as well as coatings that are used as intermediate goods within in the manufacturing setting. Of importance to the U.S. coatings industry is the North American market for the manufacturing of motor vehicles. U.S. manufacturers, along with their global competitors, assemble cars, light trucks, and heavy vehicles at several locations in the United States, Canada, and Mexico. The extremely complex supply chains that support this manufacturing activity involve Tier 1 and Tier 2 suppliers within NAFTA and elsewhere. This trade in intermediate goods works in both direction, with U.S. suppliers selling to Canadian and Mexican manufacturers, and vice versa. ACA asked that USTR not do anything that would lead Canada or Mexico to erect new trade barriers that would hinder these currently beneficial trade stream.
Additionally, while they are themselves not specifically coatings, key raw material inputs classified, for example, under HS 39078 are used in coatings and in some cases, are also manufactured by coatings producers as inputs into coatings formulations. In practice, importing these products requires producers to apply (1) tariff shift rules and (2) regional value content calculations. This requirement places a considerable administrative burden on manufacturers, who must solicit supporting NAFTA certificates from suppliers of raw materials. ACA maintains that simplifying this procedure and allowing importers to apply either tariff shift rules or regional value content calculations rather than both could considerably simplify the overall process of importation.
ACA also raised the transport of dangerous goods and cross border issues with Mexico where regulatory standards are not consistent with the international codes, resulting in confusion and interrupted shipments.
ACA hopes to work with USTR, the Administration, and Congress to achieve a successful negotiation of NAFTA.