Although we didn’t see a vote on the United States-Mexico-Canada Agreement before the Thanksgiving recess, lawmakers must return in December with a renewed commitment to put this trade agreement to work for all Americans.
For the U.S. chemicals industry and a broader manufacturing sector that continues to grapple with tariffs and an unpredictable trading environment, the United States’ securing its relationship with North American partners could quickly relieve some of the uncertainty that is miring trade on the continent.
In the 2 1/2 years since U.S. Trade Representative Robert Lighthizer announced that he intended to renegotiate the North American Free Trade Agreement, the global trading environment has experienced an upheaval like we haven’t seen in a generation.
Few could have anticipated the swirling undertow of economic, trade, and political tensions in which NAFTA’s intended replacement would eventually find itself. The world’s most reliable barometers of U.S. and global economic health have even begun to waver — some to their lowest points in years. For example, the ISM’s Purchasing Managers’ Index for manufacturing in the U.S. has dipped below 50 since August. The September PMI reading was the lowest in more than 10 years. Economists say that this indicates an industrial sector in contraction.
The International Monetary Fund last month also trimmed its forecast for global growth to only 3%, the slowest pace we’ve seen since 2008 to 2009. IMF points to rising trade barriers and uncertainty as a driving factor in the disappointing economic performance in the U.S. and all over the world.
Leading economists seem to agree. In September, the National Association for Business Economics surveyed an expert panel of economists about the outlook for the U.S. economy. The consensus was clear: The U.S. economy will likely slow to a pace below 2% next year for the first time since 2016. Again, rising protectionism and pervasive trade policy uncertainty are cited as key downside risks.
Finally, the American Chemistry Council’s Chemical Activity Barometer dropped 0.7% in October to a level signaling a coming slowdown in the U.S. commercial and industrial sectors. The CAB consistently leads the U.S. economy’s business cycle, since chemicals have an early position in supply chains and are essential inputs into every stage of manufacturing.
It’s important to keep in mind that these are only warning signs. Although they don’t seal our fate, they can help guide the administration in its decision-making on trade to ensure the best possible outcome for our country.
Take the U.S. chemicals sector, for example, an industry that I represent. Free trade across the U.S., Mexican, and Canadian borders is essential to producing and selling chemicals and materials at lower cost. There’s an entire chapter on the chemicals sector in the USMCA that would deliver a wealth of benefits to U.S. manufacturing and our economy over the long term.
Passing USMCA could also help jump-start a faltering U.S. economy in the short-term by boosting the U.S. chemicals sector and the tens of thousands of customers throughout North America that depend on low-cost products of chemistry to stay in business.
USMCA isn’t meant to be a cure-all for the economy. Viewing it that way would belie the agreement’s many new and important other elements — such as modernizing sorely outdated rules of origin, and creating new provisions on regulatory cooperation so that the U.S., Mexican, and Canadian governments can work together more efficiently and prevent barriers to trade.
Hundreds of pages of hard-negotiated text aside, at this critical economic inflection point for our country, passing USMCA may very well help stem the rising tide of doubt and uncertainty in the minds of investors, and begin to chip away at some of the issues that economists say are weighing down the economy.
Hopefully, Congress and the White House will move swiftly to harvest this historic trade agreement on behalf of businesses, consumers, and Americans of all stripes.
Chris Jahn is the president and CEO of the American Chemistry Council, representing the leading companies engaged in the $553 billion U.S. business of chemistry.
