American-Made Chemicals Reach TPP MarketsApril 7, 2016
John Meakem is an International Trade Specialist with the Office of Materials Industries
When we hear the word ‘chemicals’, we often imagine a science lab, flasks, and Bill Nye the Science Guy. But did you know that chemicals are used to produce everyday household items such as cosmetics, paints, plastic products, and fertilizers?
It’s no surprise, then, to know that the United States has a bustling chemicals industry that in 2014 had $160 billion in exports and employed 1.2 million workers. Many countries rely on U.S. exports of these chemicals to help meet their everyday needs.
In fact, from 2009 to 2014, U.S. chemical exports to the world grew by 44 percent – and this supports the growth of jobs here in the United States as well. It’s estimated that STEM (Science, Technology Engineering and Mathematics) jobs are poised to grow by 8.65 million by 2018; many of them will be in the chemicals sector and will be critical in supporting the development of U.S.-made chemical products.
But there is a cost to doing business abroad. Without the Trans-Pacific Partnership (TPP) in place, these products have been subject to tariffs of up to 35 percent in some TPP countries. Worldwide, an estimated $236 million in duties are levied on U.S. exports of chemicals every year.
However, once enacted, the TPP will create duty-free access to new TPP markets, thus leveling the playing field for domestic-made chemicals and the chemical industry’s workers. Japan, for example, will eliminate import taxes on all U.S. chemical products immediately. And within four years, growing markets such as Malaysia and Vietnam will end upwards of 93% percent of their duties on U.S. chemicals exports as well.
With respect to plastics, the TPP countries represent a significant market for highly-competitive U.S. products. Under the TPP, tariffs of as high as 25 percent will be eliminated, and U.S. plastics producers will enjoy reciprocal market access to all the other economies. To give two examples: Japan will immediately eliminate all tariffs on U.S. plastics, and Vietnam will eliminate nearly all of its tariffs on plastics within four years.
The TPP addresses high foreign tariffs for many every-day use items (e.g., cosmetics, soap, shampoo, deodorant), as well. For example, Vietnam’s duties on U.S.-made cosmetics, which have been as high as 27 percent, will be eliminated within four years after implementation.
ITA’s Industry & Analysis team understands the importance of this historic agreement and is ready to assist businesses that are looking to take advantage of the new possibilities. We have created a detailed fact sheet on what U.S. chemical exporters can look forward to once the agreement is passed.