Mexico City — The U.S. plastics industry's trade surplus with Mexico grew 4 percent in 2018, to $11.5 billion, and a new NAFTA deal could open more plastics trade between the two countries, a senior U.S. industry trade association executive said in a speech at Plastimagen.
Perc Pineda, chief economist for the Washington-based Plastics Industry Association, told a forum at Plastimagen in Mexico City April 2-5, that the global plastics industry faces a more uncertain economy this year.
But he suggested that for 2018 at least, the links between the U.S. and Mexican industries were weathering the heightened political tensions.
"Mexico is the U.S.'s largest market for plastics and vice versa," Pineda said. "We have a very strong relationship with Mexico in plastics trade."
He said the United States has a similar trade surplus in plastics — mostly in resins — with all of Latin America, and also saw it rise in 2018. It increased 9 percent to $17.3 billion.
He said more than half of the U.S. industry's exports to Latin America are in resins.
Pineda said there are opportunities to deepen the plastics industry's economic integration with the proposed new version of the NAFTA trade pact, called the United States-Mexico-Canada Agreement, in the U.S.
The USMCA deal includes new country of origin rules for the auto industry that requires 75 percent of the components in a car to come from Mexico, Canada or the U.S. to qualify for tariff-free movement of the car in the region.
That's up from 62.5 percent in the old North American Free Trade Agreement, he said.
"We are excited, for lack of a better term, that there is an improved NAFTA," he said. "One of the points in USMCA that I think is positive as an industry is the country of origin regulations.
"When that happens, we will have increased trade in plastics between the three countries," Pineda said.
He said the industry trade groups of the three countries, including the Canadian Plastics Industry Association and Anipac — the Asociación Nacional de Industrias del Plástico AC in Mexico — presented a common front in negotiations.
The groups "came together and stood as one voice to make sure ultimately there was a free trade pact between the three countries because there's so much trade in plastics between Mexico, the U.S. and Canada."
Mexico is the 10th-largest plastics industry in the world, Pineda said, and it has become a "global player" in plastics.
He said that ranking is based on combined import and exports in plastics, which is a reasonable proxy of production. By that ranking, he said, China is the largest, followed by the United States and Germany.
The deal still requires approval from the governments of the three countries. Canada and Mexico have called for the U.S. to drop its steel and aluminum tariffs on their countries before they will ratify the new trade pact.
While Pineda argued the new USMCA deal will bring benefits to the industry, he said that current global economic headwinds and uncertainty surrounding the U.S.-China trade fight are the biggest risks.
"One of the biggest concerns for the plastics industry this year is we have economic growth globally that's beginning to slow," he said.
He said growth in developed economies is projected to slow from 2 percent this year to 1.7 percent in 2020, while growth in emerging markets is expected to grow from 4.5 percent this year to 4.9 percent next year.
He presented figures in his talk that showed the U.S. plastics industry's surplus with Mexico continues to be offset by its sizable deficit with China — more than $11 billion in 2017. Globally the industry had a surplus of $3.4 billion in 2018, Pineda said.