The Chemical World This Week
U.S. CHEMICAL TRADE SURPLUS HEADED DOWH At this year's halfway mark, there are strong indications that the U.S. chemical industry's heralded trade surplus will decline. June trade statistics, just released last week, show that the U.S. chemical trade surplus probably will drop about 6% this year and barely remain above the $5 billion mark. The chemical trade surplus (that is, the excess of exports over imports) has been growing steadily since the oil embargo of 1973 and has exceeded $5 billion for the past three years. If the midyear trade trends hold for the remainder of the year, this will mark the first time that the chemical trade surplus has turned downward since 1972. And these trends have some chemical industry trade experts worried. They wonder if some of the fears that they have been expressing to U.S. trade officials may be coming true sooner than expected. U.S. negotiators at the current round of trade talks in Geneva are pushing to reach an agreement on tariff cuts and reductions in nontariff barriers. Chemical industry spokesmen have been telling them that the industry's high-flying trade surplus is a temporary phenomenon, that it is based largely on a temporary feedstock advantage that could soon disappear. And they point out that many recent developments, such as the growth in government-owned chemical companies overseas, increasing competition as a result of buy-back arrangements with Eastern European countries, and now competition from developing nations, will soon be eating away at the industry's trade surplus. Some have gone so far as to say that the U.S. chemical trade surplus could turn into a deficit. That may or may not ever happen. But the June statistics certainly indicate that the chemical trade surplus is declining. Through the first six months of this year, chemical exports were running at an annual rate of $11.4 billion, only 5.4% ahead of last year. Imports, on the other hand, were 16.5% higher, at an annual rate of $6.3 billion. If these trends continue for the rest of the year, the chemical industry will end 1978 with a trade surplus of $5.1 billion. That's still high enough to be the envy of many industries, but it is nevertheless almost 6% lower than it was in 1977. 4
C&EN July 31, 1978
Chemical imports grow faster than exports $ Millions, seasonally adjusted
1200 Exports
1000 800 600 400 Imports 200 0 J J A S O N D J F M A M J 1977 > ' 1978 ' Source: Commerce Department
This rate of decline for the chemical industry's trade surplus seems to have increased in the first half of 1978. On one hand, June chemical exports of a seasonally adjusted $1.01 billion were the best of the year so far, and June chemical imports were a moderating seasonally adjusted $527.7 million, according to the Commerce Department. These figures work out to the industry's best monthly trade balance of 1978 at $482.2 million. On the other hand, the trade balance reached far higher figures in many months of 1977. The result is that the average trade surplus in the first six months of 1978 of $423.3 million is 14% below the average monthly surplus of $489.9 million for the last six months of 1977. Meanwhile, the first-half trade statistics spell even more problems for the overall U.S. trade balance. Through the first six months, total exports were running at an annual rate of $132.7 billion, 9.5% higher than last year. But imports' pace— $65.5 billion on an annual basis—was 20.6% higher than in 1977. That portends a trade deficit this year of $32 billion, which is even higher than last year's record $26.5 billion. To make matters worse, this year's higher trade deficit can't be blamed on oil imports. During the first half, imports of all petroleum products were $19.3 billion. On an annual basis, that's 9% less than last year. With U.S. agricultural exports
doing better this year than last, that means that the blame for this year's higher deficit lies in the country's declining position in trade of manufactured products. And as one trade expert puts it, "If we can't hack it with the dollar as weak as it is, then we're in real trouble." The Carter Administration seems at least to have recognized that U.S. exports need help and may soon come out with a multilevel attack on the problem. Last week, various Administration officials confirmed a Wall Street Journal report that a 12-point memorandum for a national export policy is on President Carter's desk. The chemical industry has looked forward to this submission (C&EN, June 19, page 8). Sent by a Cabinetlevel National Export Policy Task Force headed by Commerce Department Secretary Juanita Kreps, the plan would provide government incentives for a national export drive costing the government $520 million in the first year. The proposal calls for a Presidential declaration on exports plus a number of specific features, some of which will be good news for companies in and around the U.S. chemical industry. For example, the plan calls for an increase of about $500 million to the current $3.8 billion in allowable loans backing exports by the U.S. Export-Import Bank. Another provision would tack on $20 million a year to the Commerce and State departments' own efforts, now running about $47 million a year, to promote U.S. exports. The task force plan also suggests that the Administration consider altering U.S. antitrust practices to give U.S. companies more clout in competing with government-controlled competitors or consortiums abroad. One example would be allowing construction and engineering companies to act jointly in bidding for foreign contracts. To help forestall future export problems, the task force proposes setting up a Regulatory Analysis Review Group, an interagency body to look at the effects on exports of U.S. government regulations. If such a group is formed, it will find plenty of effects to examine and an overall export situation that could get worse in chemicals before it gets better. D
