BUSINESS
Chemical Industry Medalist W. H. Clark Speaks Out on Global Trade Issues ater this week, W. H. Clark, chair man and chief executive officer of Nalco Chemical, will receive the prestigious Chemical Industry Medal at the Plaza Hotel in New York City. Giv en by the American Section of the Soci ety of Chemical Industry, the gold medal award recognizes Clark's 'leadership, foresight, and many contributions to ap plied chemistry which have enhanced the progress of the entire industry." Clark—called simply "H" by his friends—joined Nalco as a sales repre sentative in 1960. He rose through the ranks to become president and chief exec utive officer in Ί982 and chairman of the board in Ί984. Since then, Nalco has more than doubled its sales to SI A bil lion last year. Almost 437c of that total is from international business. Nalco, based in Naperville, III, is the world's largest producer of specialty chemicals and services for water and industrial process treatment. A past chairman of the Chemical Man ufacturers Association (CMA), Clark is also chairman of the Office of the Chemical Industn/ Trade Adviser (0C1TA), a coalition of trade associations that represents the industn/'s international trade interests. He also serves on the Industn/ Policy Advison/ Committee (IPAC), a group of top-level executives that advises the Administra tion on trade matters. In these positions, he is active in promoting the North American Free Trade Agreement (NAFTA). With his extensive background in the international arena, it's no surprise that in a recent interview with C&EN senior corre spondent Earl Anderson, Clark focused on international trade and policy.
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Almost 43% ofNalco's sales last year represented in ternational business, including exports. For a com pany of this size, isn 't that a pretty high percentage? Yes, it is. We did it on purpose. When Nalco started as a real company in 1928, our first business was treating boilers on steam locomotives. As diesels replaced steam locomotives, we had to diversify. But after World War II, many of those old steam locomotives were sent to Europe, which was devastat ed by the war. The locomotives became alive again. We just followed the locomotives. Wherever they went, we went. And that got us into the international business. Eventually, the steam locomotive disappeared in Europe just as it had in the U.S., where Nalco had already diversified. So we started forming companies in several countries, doing
the same thing that the now-diversi fied parent was doing in the U.S. "Small Nalcos," I call them. Nalco now has 83 subsidiaries, joint ven tures, affiliates, and offices outside the U.S. serving more than 100 countries. You have said that, over the long term, Nalco's international growth prospects probably are stronger than its domestic growth prospects. Why? There are several reasons. One is that, historically, our growth has been better internationally than it has been domestically. But the prime rea son is that the world is very big, and, when you add it all together, the po tential outside the U.S. is at least as big as in the U.S. We also have a technological op portunity. Some of our technology, for instance, may not be new in the U.S., but it certainly is in many other parts of the world. For example, I'd estimate that some of the technology in Eastern Europe and the former Soviet Union countries is 40 years behind the times, as far as Nalco's businesses are concerned. In the past year, we have formed companies in Hungary, Poland, and other Eastern European countries. And we're not in every country yet. So there's the poten tial for our company to expand geographically. We're grad ually growing in this respect. Do these international opportunities apply only to Nalco or to other U.S. chemical companies as well? They apply to the entire U.S. chemical industry, totally, not just to Nalco. We like to go where our customers are and, naturally, we would like to go faster than practicality al lows. We at Nalco have always started in a new country with just one person. We do not go in and dump a lot of money and capital hoping for something to happen. We send a missionary first and we call that missionary a sales man. If he sells something, we add another salesman, then perhaps an office, and eventually a company. That's how we have developed over the years. Is it this international orientation that led you to accept the chairmanship ofOCITA? I have always been interested in international [affairs!, but I have also had a keener interest in the well-being of our inOCTOBER 11, 1993 C&EN
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BUSINESS So the big push is on? The push is on, and I hope it doesn't run out of steam. There's certainly no reason for it to.
The opposition is always talking about the [U.S.] jobs that will be lost as a result of NAFTA. But nobody's been able to identify one forme
dustry. That's why I went through the chairs to become chairman of CMA and hung around two years ago as OCITA chairman after Dexter Baker [Clark's predecessor at OCITA and former chairman of Air Products & Chemicals]. I will continue there until next summer. As chairman of OCITA, you have two major head aches. One is the Uruguay round (the General Agreement on Tariffs & Trade's [GATT] current round of multilateral trade negotiations). The other is the North American Free Trade Agreement. NAFTA probably will hit Congress first, so let's look at it first. What are its prospects for Congressional approval? If you had been here a few days ago, I'd have been a little discouraged. Today, I'm a whole lot more encouraged—because two things have happened. Along with scores of other business executives and three former presidents of the U.S., I was at the White House for the unveiling of the Administrations's effort to support NAFTA. President Clinton made a very forceful talk in support of NAFTA. Like he really meant it. The three former presidents also made strong, pro-NAFTA talks. I came awav thinking that we've finally got a real start. And today, two minutes before you came in, I was informed that, when President Clinton made his pro-NAFTA junket to New Orleans to talk to "real" workers, not white collar workers, he selected two Nalco people from our plant in Garyville, La. I understand that the President asked them what NAFTA meant for them personally as far as jobs are concerned. I also understand that the interviews went extremely well. To sidetrack a bit, the opposition is always talking about the [U.S1 jobs that will be lost as a result of NAFTA. But nobody's been able to identify one for me. They only talk in generalities. So now the President is doing what he said he was going to do—get behind NAFTA. His Cabinet is fanning out across the country promoting NAFTA. 12
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Earlier this year, you and many other chemical industry executives were in Washington lobbying on behalf of NAFTA. Do you anticipate more of that kind of activity? I certainly do. You know, Americans seem to respond better at the last minute. It must be our nature. I do it myself. I wait until the last minute to get it done, and it always seems to come out alright. The pressure of the deadline. Exactly. Now we have a deadline facing us and I think that, finally, [U.S.] business people are beginning to realize that it isn't going to happen automatically. Unless somebody does something, NAFTA could fail. And they realize that that somebody is them. I think the lobbying must continue. What specifically do you have planned for the chemical industry to promote NAFTA? For one thing, I'm going back to Washington in the morning for the second time in a week to talk to Administration officials about NAFTA. Then we have an OCITA meeting at which trade is on the agenda. We want to figure out how we can get our members to do something, to call on their members of Congress, to get them to see the light. A week or so ago, we had a "NAFTA day" at Nalco. I have alwavs heard that if you want to get the attention of your member of Congress, send him or her a handwritten letter—not typed, not mimeographed, but handwritten. So on NAFTA day, that's what we did. At several Nalco locations, we provided, in our cafeterias, paper and pens and addresses. At lunchtime, we invited anyone who wanted to to sit down and write his or her member of Congress a letter—right there and then. Not go back to the office and do it. That day, we sent more than 650 handwritten letters to members of Congress. That's what I'm talking about. Anything else in the works? There is one more thing I can tell you about. I have made a lot of calls on members of Congress in Washington trying to convince them that NAFTA's benefits far outweigh its disadvantages. Sometimes you feel as if you're talking to that wall over there. My credibility isn't very high. They say that I have a good job and am well paid. They want to know what real workers think. So we at Nalco decided to take some real workers to Washington. We asked for volunteers from our plant here in Chicago and selected eight hourly employees. We took them to Washington and spent all day calling on members of Congress from our area. We did well in some areas and poorly in others. We had a good reception in some cases and a not-so-good reception in others. Not one of these eight people had ever set foot in Washington before. But each of them, whether it was a painter or a security guard or a technician, had an assignment. And they did a marvelous job. By the second meeting, they were really rolling. I was very proud of them. Even if we didn't convince a
single member of Congress, they came back better people and highly motivated to spread the word about NAFTA. The word gets around through local parent-teacher associations and local service organizations. That's something I'm trying to get other chemical companies to do. The chemical industry has supported NAFTA right from the start. Why? That's an easy question to answer, because NAFTA will do a lot for the chemical industry. For the first time, it will really allow us to take advantage of petrochemical and chemical industry opportunities in Mexico. Export opportunities and investment opportunities. I'm not talking about going down there, building a plant, and shipping the goods back to the U.S. I'm talking about producing in Mexico for the Mexican market. Nalco has had a chemical plant in Mexico for more than 30 years. It's doing well, but it could shoot the lights out if growth in Mexico develops as we think it will with NAFTA. I also expect our plants in the U.S. would have to expand if the Mexican market develops as I think it will. We will still make most of the products here and ship them down there. So, for our industry, as well as others, NAFTA represents the opportunity of a lifetime. NAFTA should have been called the North American Free Jobs Agreement, because that's what's going to happen. Jobs are going to be created, contrary to what Ross Perot and those other guys say. At Nalco, we will have to hire about five new employees for every million dollars of new sales in Mexico. And we expect to have many millions of dollars of new business in Mexico. If you take our company and multiply it by hundreds or thousands of other U.S. companies, you are going to need a lot more people. You are going to create a lot of new jobs. Are you satisfied that the U.S. chemical industry got all it could out of the NAFTA negotiations? You are never satisfied. We don't think that the side agreements [on the environment, labor, and protection against surges in imports] are necessary. Nobody likes fines or sanctions hanging over their heads. We can live with them, though. The biggest plus of all is opportunity—opportunity to invest, opportunity to trade. The freer investment climate in Mexico is also a big plus. Mexican tariffs will disappear under NAFTA. It may take 15 years for some of them to go completely, but that's okay. The way things are now, without NAFTA, they would never disappear. Overall, I think it's a pretty comprehensive agreement. Other than the side agreements, it's well thought out. Now, it's a matter of getting it done. You can always tinker with it—adjust it or fix it—later. What happens to the U.S. chemical industry if Congress doesn't approve NAFTA? That's a "reality" type of question. I think we have to face that possibility, and I think that the American people need to hear what may happen and probably will. If NAFTA fails, I think that other countries will come into Mexico to fill our vacuum. If we stiff Mexico—that's a Chicago term I learned when I came here—what I'd do if I were a Mexican
is call my friends in Germany, France, Spain, Japan, or anywhere else and say, "Hey, my next door neighbor says he's not interested. Are you?" And I think those countries definitely will be interested. I think there would be another major problem. There would be a tremendous setback in relations between the two countries—and in the relationships between the U.S. and many other Latin American countries. They are chomping at the bit to get into the free trade club. If we say there's going to be no such club, we will do irreparable damage to relations for many years to come. It would be a tremendous, and unnecessary, setback in our Latin American relations. Let's switch to your other headache, the Uruguay round of trade talks. GATT has a new secretary general who's cracking the whip, and negotiators are shooting for a Dec. 15 deadline. What are the prospects for success? I'm less optimistic on the Uruguay round than NAFTA, because we can do something about NAFTA. It's manageable, one way or another, in this country. But when you're talking about 108 countries with divergent views and different axes to grind, it's much more difficult. There are still a lot of countries that have some reservations about the Uruguay round. And it's going to take more than a deadline from some new guy on the block to force these countries to jump aboard. After all, the round is going into its eighth year now. France is still stalling the agricultural trade negotl· ations in the Uruguay round. Is it possible to have an agreement without agriculture? I think it would be very difficult to get an agreement without France and without agriculture. In France, agriculture is almost like a religion. It will be tough to get an agreement without some type of compromise on the part of the French farmer.
NAFTA will do a lot for the chemical industry. It will allow us to take advantage of petrochemical and chemical industry opportunities in Mexico
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BUSINESS As negotiations stand now, it seems as if the U.S. chemical industry is getting a lot of what it wanted. Agriculture aside, what do you like and what don't you like about the Uruguay round as it stands right now? The industry is coming out in pretty good shape. In the main, there's enough in there, say on intellectual property and dispute settlement, to satisfy the industry. There could be a problem with tariff cuts on import-sen sitive products. / thought tariff cuts on import-sensitive chemicals were to get a lengthy phase-in period. They will, but you can never satisfy everybody, even in the chemical industry. And there are some in the industry who aren't happy about cutting tariffs on their products. But what I like most about the Uruguay round is that it will give us the opportunity to improve trade, country by country by country. Countries that trade don't fight. You don't fight with your customers. Speaking of not fighting, during the Uruguay round, the chemical trade associations of the U.S., Canada, and the European Community were able to come up with joint position papers on many thorny issues. And the chemical trade associations of Canada, Mexico, and the U.S. did the same thing for NAFTA. How come such competitors were able to see eye to eye? Fear [he laughs]. Seriously, it's just that communications among the trade associations are much better than they were years ago. And they see the value of learning from each other and cooperating with each other. We finally realize that we are all in the same boat. If you are in the chemical business, you buy from each other and you sell to each other. I think everyone in the industry un derstands that the chances of doing better are through co operation and not fighting among each other all the time. The Uruguay round, with 108 countries, is a multl· lateral trade negotiation. NAFTA was a threecountry regional trade negotiation. From a chemical industry point of view, which approach will be more effective in future trade negotiations? Regional negotiations certainly will be more effective. And if the GATT Uruguay round gets shot down, what else is left? I see us moving toward regional negotiations because you can get your arms around them a lot easier. Seven years of Uruguay round negotiations prove that.
The Uruguay round will give us the opportunity to improve trade, country by country by country. Countries that trade don't fightYou don't fight with your customers
I think that this year will continue as it has for the past nine months. We're probably talking about revenue in creases of about 2 to 3%. We'll have to squeeze whatever earnings we can out of that. I think it's going to be until the end of next year—1994—before things get rolling again. I can say that because I will be retired by then and you won't remember me or what I said. Nalco's sales and earnings have risen every year since 1986 through some pretty lean economic times. You must know how to cope with lousy economies. People will remember that. Our people are trained to do that. Also, we are spread geo graphically around the world and sell to many different in dustries. When there's a recession or downturn, I tell our people that they don't have all the business yet. Just be cause everybody else is having a recession doesn't mean that we have to have one. If we have only 15% of the business, there's another 85% out there. You have to keep your eye on what's still out there.
If the U.S. goes the regional route in the future, which region should it concentrate on first? Extending NAFTA, if it passes, to other Latin American countries is an obvious thing to do. But I believe this coun try is big enough and strong enough to do more than one thing at a time. I see no reason why we can't negotiate in the Pacific Rim area at the same time. Economic growth there is very high.
Regardless of what happens to the world9s econo mies, most people agree that the U.S. chemical in dustry won't be able to maintain its $16 billion to $18 billion trade surpluses indefinitely. Do you agree? It will be very difficult to sustain the trade surplus at those levels. You would have to have a tremendous boom in the economies of the world. People would have to start buying more cars, more refrigerators—that type of thing. Even then I don't know if our chemical trade surplus could sustain it self at those levels.
Speaking of the economy, what does your crystal ball tell you about the economy for the rest of this year and 1994?
Any idea of what the sustainable level might be? I wouldn't even begin to guess. I don't know, and I don't think anybody else knows either. Π
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