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PVC market directly affected by NAFTA negotiations

HOUSTON, January 12, 2018 (PCW) -- Mexico will leave the North American Free Trade Agreement (NAFTA) negotiating table if President Donald Trump decides to trigger a 6-month process to withdraw from the trade pact, Reuters reported on Wednesday. While a NAFTA termination letter would start the six-month exit clock ticking, the US would not be legally bound to quit NAFTA once it expires. Washington could use the move to gain leverage over Canada and Mexico in talks to update the 24-year-old trade pact.

President Trump has repeatedly called the treaty a bad deal that hurts American workers. His negotiating team has set proposals that have alarmed their Canadian and Mexican counterparts. Among the most divisive are plans to establish rules of origin for NAFTA goods that would set minimum levels of US content for autos, a sunset clause that would terminate the trade deal if it is not renegotiated every five years, and ending the so-called Chapter 19 dispute mechanism.

A withdrawal from NAFTA would have a significant impact on the North American PVC market. Resin currently moves between the three countries with no duties. Canada’s PVC converters rely almost completely on imported resin, as the only PVC plant in the country is OxyVinyls’ 590 million lbs/yr unit at Niagara Falls, Ontario.

In Mexico, Mexichem’s 2010 acquisition of PVC producer Policyd and pipe converter Plasticos Rex resulted in it becoming the only PVC supplier in the country. The deal was approved by Mexico’s antitrust authorities on the condition that all duties on US PVC be removed, allowing US resin producers to compete on a level playing field and thus preventing Mexichem from holding a monopoly on the market. -- Donna Todd

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