Capitol Comments

White House Announces “Trade Deals That Work For All Americans.” What’s the Impact on Nonwovens?

By Peter G. Mayberry, Contributing Editor | March 9, 2017

Potential dissolution of NAFTA could cost U.S. nonwovens manufacturers millions

Following up on numerous campaign pledges, the White House released this statement in the very first days of the new Administration: 

“For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country. As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.

With a lifetime of negotiating experience, the President understands how critical it is to put American workers and businesses first when it comes to trade. With tough and fair agreements, international trade can be used to grow our economy, return millions of jobs to America’s shores and revitalize our nation’s suffering communities.

This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers. President Trump is committed to renegotiating NAFTA. If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the U.S. intent to withdraw from NAFTA.

In addition to rejecting and reworking failed trade deals, the U.S. will crack down on those nations that violate trade agreements and harm American workers in the process. The President will direct the Commerce Secretary to identify all trade violations and to use every tool at the federal government’s disposal to end these abuses.

To carry out his strategy, the President is appointing the toughest and smartest to his trade team, ensuring that Americans have the best negotiators possible. For too long, trade deals have been negotiated by, and for, members of the Washington establishment. President Trump will ensure that on his watch, trade policies will be implemented by and for the people, and will put America first.

By fighting for fair but tough trade deals, we can bring jobs back to America’s shores, increase wages, and support U.S. manufacturing”.

Perhaps the most troubling part of this statement is the line about “the interests of insiders and the Washington elite ” because this allows the White House to distance itself from other Republicans and Democrats, the U.S. Chamber of Commerce, the Business Roundtable and numerous other establishment institutions that have historically supported both NAFTA and TPP.

So now it’s time to consider what “re-negotiation” or withdrawal from the North American Free Trade Agreement (NAFTA) could do to the U.S. nonwovens industry.

The first, obvious, issue is that NAFTA involves three countries: the U.S., Canada and Mexico. Looking at numbers alone, when the agreement took force in 1994 the total value of U.S. exports of nonwoven roll goods (Harmonized Tariff Schedule, HTS, number 5603) to Mexico was about $160 million and exports to Canada were about $120 million. Last year, by contrast, U.S. exports to Mexico equaled $480 million while exports to Canada reached $319 million. 

That’s an impressive amount of trade. 

“Perhaps some American workers might benefit from NAFTA renegotiation/withdrawal, but there doesn’t appear to be much benefit for the U.S. nonwovens industry.”

Indeed, total U.S. exports of nonwoven roll goods last year, globally, is reported to be just under $1.6 billion. So nearly half of all U.S. exports remain within North America and trade duty free. 

This has been a tremendous advantage that U.S. manufacturers have held over global competitors for decades but now the White House says “re-negotiation” or outright withdrawal of NAFTA is necessary. 

For better or worse, negotiated treaties cannot be altered by Executive fiat. The Republican Congress would have to be party to any NAFTA alteration on behalf of the U.S. 
And what if they were? 

Pre-NAFTA, Mexican duties on textile exports from the U.S. hovered around 19% while those for Canada were similar. Nonwovens, as a U.S. industry, was forced to pay tariffs similar to all other textiles even though nonwovens, by nature, can be more similar to paper than, say, a blouse or a pair of jeans. 

Imagine if U.S. nonwoven roll goods were subject to double-digit quotas when exported to both Canada and Mexico. At 18%, that would cost U.S. business nearly $90 million for products shipped to Mexico and nearly $58 million in product to Canada, annually at present trade rates.  

Another obvious consideration to the U.S. nonwovens industry would be the increased cost of converted consumer goods coming back to the U.S. from Mexico and Canada. Lacking NAFTA, everything from wipes to diapers, feminine hygiene products, surgical drapes and gowns, etc.—it’s a long list—would likely be subject to U.S. tariffs that pose inflationary risks and additional pain for consumers at the cash register.

This early in the new administration it’s impossible to tell if the White House rhetoric regarding international trade issues is just politics or if the President is serious when he says: “If our partners refuse a renegotiation that gives American workers a fair deal, then the president will give notice of U.S. intent to withdraw from NAFTA.”

Perhaps some American workers might benefit from NAFTA renegotiation/withdrawal, but there doesn’t appear to be much benefit for the U.S. nonwovens industry. 

There are plenty of ways to get involved in these issues—NAFTA and TPP—from an industry perspective, the U.S. Chamber of Commerce is a good starting point.  For individuals, the best advice from D.C. these days is to phone call for arranged meetings with your Federally-elected officials—one in the House and two in the Senate—in his/her district office that’s closest to you (Google helps here).

Short of that, Capitol Hill staffers are saying constituent post cards are most welcome because they’re the easiest documents to tally.

White House Issues Withdrawal Order for U.S. Participation in the Trans-Pacific Partnership Negotiations
Three days after inauguration, the White House issued a memorandum for the U.S. Trade Representative (USTR) which reads “…by the authority vested in me as President by the Constitution and the laws of the United States of America, I hereby direct you to withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP), to permanently withdraw the United States from TPP negotiations, and to begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages.”

Additionally, the memorandum states that USTR is “…directed to provide written notification to the Parties and to the Depository of the TPP, as appropriate, that the United States withdraws as a signatory of the TPP and withdraws from the TPP negotiating process.”

TPP is a trade agreement negotiated between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States (until January 23, 2017).
A final agreement was signed in October 2015, and it is formally up the U.S. Congress to determine whether the U.S. pulls out of the agreement. The treaty was made public November 5, 2015.