NACD looks to the new administration

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POLITICS • STABLE TRADE PREFERENCE PROGRAMMES ARE CRITICAL TO US ECONOMIC RECOVERY UNDER THE NEW ADMINISTRATION, SAYS ERIC R BYER, NACD’S PRESIDENT/CEO

“IT’S A NEW year, and we have a new administration. But unfortunately, many of the same international trade issues from recent years remain unresolved,” says Eric R Byer, president and CEO of the National Association of Chemical Distributors (NACD). Speaking in the immediate aftermath of the change of president and in an uncertain economic environment, he has some advice and a lengthy wishlist.

“Understandably, much of this stalemate can be attributed to Congress’ primary focus on providing Americans with Covid-19 relief as the pandemic continues to ravage communities and stifle economic recovery. However, it cannot be overstated how much the entire American supply chain, including the chemical distribution industry, rely on effective trade programmes to provide essential products and support local businesses.

“Designated by the US Department of Homeland Security (DHS) as an essential infrastructure and workforce, chemical distribution plays a vital role in providing critical chemical inputs for the energy sector, water treatment, food supply, pharmaceuticals and much more. But chemical distributors’ ability to ensure that these products are moving within the supply chain efficiently, and at a competitive cost, depends on sound and stable trade policies.

“Chemical distribution may not be the first thing that comes to mind when thinking about America’s essential infrastructure or the economy, but the industry is a significant economic engine for our country. Chemical distributors account for nearly $20bn in total economic output and provide more than 80,000 jobs. But that engine – and many other industries that depend on competitive trade policies – could be at risk of stalling.

“With the expiration of two critical trade programmes and the expected shifts in policies with the new administration, NACD is sounding the alarm on behalf of our members and advocating for programmes that support the industry, not stymie it,” Byer insists.

PROGRAMMES IN REVIEW The Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB) programmes were designed to provide duty-free tariff treatment to certain products for an established amount of time. “These preference programmes may not be exclusively focused on the chemical distribution industry but both reduce costs for importers which, by extension, support good-paying jobs for our members. Unfortunately, federal authorization for both MTB and GSP expired December 31, 2020, which means importers must now pay tariffs on goods that previously carried no tariffs or tariffs that were greatly reduced.

“While we are hopeful that the Biden administration will take a strong stance on the need to expedite renewal, the

Congressional debate over both programs continues to delay progress,” Byer adds.

When GSP last expired in 2017, it took Congress several months to renew the programme. During that lapse, imports from GSP-eligible countries were subject to duties and many companies were forced to cut wages and lay off workers to offset the increased costs. When the programme was finally renewed, Congress extended it retroactively from the original expiration date so that importers were refunded for duties incurred.

NACD continues to stress the importance of Congress swiftly acting to reauthorise GSP and MTB, whether that entails short-term clean extensions to ensure their continuity or more comprehensive reauthorisations. Ultimately, the impact that GSP and MTB expirations have on chemical importers is a real-world, time-sensitive issue that Congress must prioritise.

REAL-WORLD IMPACT To illustrate how critical trade preference programmes are to the US economy, Byer offers an anecdote, based on real-world challenges NACD members are facing every day while Congress fails to renew GSP and MTB.

Fisher-Allan Chemical Company, a small chemical distributor with 26 employees located in Kansas, imports several chemicals from different countries across the world. Using the GSP program, Fisher-Allan imports citric acid from Thailand, which it then sells into the food manufacturing and cleaning industries. The company and its US customers benefit because of the lower cost and the developing Thai chemical industry can take advantage of the lower tariffs, which make their product more competitive.

Similarly, Fisher-Allan also uses the MTB programme to import germanium dioxide at a lower tariff rate, which is then sold into the US semiconductor market. Since the expiration of MTB, the additional tariffs now make their current supplier cost prohibitive.

This year, Fisher-Allan was also considering hiring two new positions but without GSP and MTB, the company was forced to put into place a hiring freeze

Although Fisher-Allan Chemical Company is not a real company, the expiration of GSP and MTB have these same impacts on real-world chemical importers and distributors across the country.

PROSPECT FOR RENEWAL Historically, it is not uncommon for the GSP programme to expire prior to Congress reauthorising it. Of the 14 times Congress has reauthorised GSP since it was first scheduled to expire in 1985, Congress has only managed to keep the programme from lapsing four times.

“And while there is precedent for Congress granting retroactive relief in these situations before, we are currently in a global health crisis and local businesses count on this program to support good-paying jobs with health care benefits in their communities. These jobs are critical to ensuring that American families remain healthy and are able to make ends meet,” Byer stresses.

“On Capitol Hill, GSP and MTB are considered to be relatively non-controversial trade programs with overwhelming bipartisan support. However, as we saw last year, that does not necessarily mean there will be a smooth path to reauthorization.

“With Democrats now in control of the House, the Senate, and the White House, it is unlikely either program will be reauthorized until more debate is had regarding GSP’s eligibility criteria. While the continuation of the GSP program has tremendous support from both parties, there is a debate in Congress about whether to reauthorize the program “as is” or revise the GSP eligibility criteria to include environmental and labor conditions as congressional Democrats are encouraging,” Byer adds. “Additionally, MTB, whose jurisdiction falls under the Senate Finance and House Ways and Means committees, will meet a similar fate as Congress has effectively tied MTB reauthorization to GSP.”

This is unfortunate because renewing both programmes provides a great opportunity to support President Biden’s promise to shore up US manufacturing and innovation.

“NACD will continue to work tirelessly to ensure that the importance of these programs remains in the forefront for Congress and the new administration,” Byer promises. “As we grapple with life during and after the pandemic, our leaders must prioritize hard-working Americans and pathways to a strong economic recovery. An important pillar to American commerce, trade preference programs like GSP and MTB strengthen our ability to stimulate economies and will help push recovery forward.”

NACD’s membership comprises more than 400 chemical distribution companies and their supply chain partners, representing more than 85 per cent of US chemical distribution capacity and generating more than 90 per cent of the sector’s gross revenue. NACD members, operating in nearly every US state through approximately 3,400 facilities, are responsible for more than 26,000 direct jobs in the US. Collectively, the industry as a whole is responsible for almost 137,000 direct and indirect jobs.

Chemical distributors in the US are predominantly small regional businesses, many of which are family-owned and multi-generational – on average having 30 employees and operating under extremely low margins. www.nacd.com

THOSE INVOLVED IN INTERNATIONAL CHEMICAL TRADE

NEED CERTAINTY AND STABILITY IN TRADE AND TARIFF

MEASURES IF THEY ARE TO ABLE TO PLAN EFFECTIVELY