IMPACT OF CERCLA TAXES ON THE U.S. BALANCE OF TRADE
CERCLA SECTION 301(a)(1)(F) STUDY
Final Report
Office of Solid Waste and E-mergency Response
U.S. Environmental Protection Agency
December 1984
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Substantial portions of this report were prepared by ICF Incorporated for
the U.S. Environmental Protection Agency under Contract Number 68-01-6872.
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TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY ES-1
PART I: ECONOMIC ANALYSIS 1-1
Chapter 1: Introduction 1-1
1.1 Background : 1-1
1.2 Purpose of this Report 1-3
1.3 Summary of Analytical Method 1-4
1.4 Summary of Findings 1-5
1.5 Organization 1-6
Chapter 2: Recent Trends in U.S. Chemical Trade 2-1
2.1 U.S. Trade in Chemicals 2-1
2.2 U.S. Trade in CERCLA-Taxed Feedstocks 2-6
2.3- U.S. Trade in Intermediate Chemicals Derived
from CERCLA-Taxed Feedstocks 2-13
Chapter 3: Economic Factors Contributing to Recent Trends in U.S.
Chemical Trade 3-1
3.1 Summary of Economic Factors 3-1
3.2 Description of Each Economic Factor 3-5
3.3 Outlook 3-22
Chapter 4: Economic Impact of CERCLA Tax on U.S. Trade in'
CERCLA-Taxed Feedstocks 4-1
4.1 Introduction 4-1
4.2 Findings 4-oL
Chapter 5: Economic Impact of CERCLA Tax on U.S. Trade
in Intermediate Chemicals 5-1
5.1 Introduction 5-1
5.2 Selection Criteria for Intermediate Chemicals 5-3
5.3 Analysis for Individual Intermediate Chemicals 5-5
5.4 Conclusion 5-39
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TABLE OF CONTENTS (continued)
Page
PART II: COMPARISON OF CERCLA TAX WITH HAZARDOUS WASTE MANAGEMENT
POLICIES OF OTHER COUNTRIES
6-1
CHAPTER 6:
6.1
6.2
6.3
6.4
OVERVIEW 6-1
Introduction 6-1
Current Status in OECD Countries 6-2
Emerging Remedies 6-5
Conclusion 6-8
CHAPTER 7: COUNTRY-BY-COUNTRY REVIEW
7-1
7 .1 Introduction 7-1
7.2 Australia 7-1
7.3 Austria 7-3
7.4 Belgium 7-4
7.5 Canada 7-5
7.6 Denmark 7-7
7.7 Finland 7-8
7.8 France 7-9
7.9 Germany ; 7-11
7 .10 Greece 7-13
7.11 Ireland 7-14
7.12 Italy 7-15
7.13 Japan 7-16
7.14 Luxembourg 7-18
7.15 Netherlands 7-20
7.16 New Zealand 1 7-22
7.17 Norway 7-23
7 .18 Sweden 7-24
7.19 Switzerland 7-25
7.20 Turkey 7-26
7.21 United Kingdom 7-26
BIBLIOGRAPHY B-l
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TABLE OF EXHIBITS
Exhibit Page
1-1 SCHEDULE OF TAXES IMPOSED BY CERCLA BY CERCLA SECTION 211 1-2
2-1 U.S. TRADE BALANCE IN CHEMICALS, 1971-1983 2-2
2-2 CHANGES IN THE TOTAL U.S. BALANCE OF TRADE AND IN THE
U.S. BALANCE OF TRADE IN CHEMICALS, 1979-1983 2-4
2-3 U.S. SHARE OF WORLD CHEMICAL MARKET 2-5
2-4 U.S. BALANCE OF TRADE IN CERCLA-TAXED FEEDSTOCKS, 1980-1983 ... 2-7
2-5 U.S. IMPORTS OF CERCLA-TAXED FEEDSTOCKS, 1980-1983 2-9
2-6 U.S. EXPORTS OF CERCLA-TAXED FEEDSTOCKS, 1980-1983 2-11
2-7 U.S. BALANCE OF TRADE IN SELECTED INTERMEDIATE CHEMICALS
DERIVED FROM CERCLA-TAXED FEEDSTOCKS, 1980-1983 2-14
2-8 U.S. IMPORTS.OF SELECTED INTERMEDIATE CHEMICALS DERIVED FROM
CERCLA-TAXED FEEDSTOCKS, 1980-1983 2-15
2-9 U.S. EXPORTS OF SELECTED INTERMEDIATE CHEMICALS DERIVED FROM
CERCLA-TAXED FEEDSTOCKS, 1980-1983 2-16
3-1 CERCLA TAX AS A SHARE OF FEEDSTOCK PRICES 3-3
3-2 REAL GNP GROWTH FOR SELECTED COUNTRIES 3-6
3-3 INDEX OF CURRENCY EXCHANGE RATES 3-9
3-4 RECENT TRENDS IN CHEMICAL INDUSTRY PRICES IN SELECTED
COUNTRIES 3-11
3-5 INDICES OF RELATIVE UNIT EXPORT VALUES FOR MANUFACTURED
GOODS 3-12
3-6 INDICES OF RELATIVE UNIT LABOR COSTS IN MANUFACTURING 3-13
3-7 PLANS FOR INCREASED CHEMICAL PRODUCTION CAPACITY BY 1986
IN SAUDI ARABIA, MEXICO, AND CANADA 3-15
3-8 NOMINAL IMPORT TARIFF RATES ON CERCLA-TAXED FEEDSTOCKS FOR
SELECTED COUNTRIES 3-18
3-9 CHANGES IN IMPORT TARIFF RATES ON CERCLA-TAXED FEEDSTOCKS
FOR SELECTED COUNTRIES 3-20
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TABLE OF EXHIBITS (continued)
Exhibit Page
4-1 U.S. TRADE POSITION IN CERCLA-TAXED FEEDSTOCKS 4-2
4-2 CHANGES IN THE TOTAL U.S. BALANCE OF TRADE, THE U.S. BALANCE
OF TRADE IN CHEMICALS, AND THE U.S. BALANCE OF TRADE IN
XYLENE, 1979-1983 4-4
5-1 MAJOR PETROCHEMICAL FEEDSTOCKS AND THEIR PRIMARY
INTERMEDIATES 5-4
5-2 EFFECT OF CERCLA TAX INCIDENCE ON PROPYLENE ON
POLYPROPYLENE PRICE 5-8
5-3 PRODUCTION OF POLYPROPYLENE AND OTHER THERMOPLASTIC RESINS 5-10
5-4 MAJOR USES OF POLYPROPYLENE 5-10
5-5 EFFECT OF CERCLA TAX INCIDENCE ON ETHYLENE AND BENZENE
ON STYRENE 5-14-
5-6 EFFECT OF CERCLA TAX INCIDENCE ON PROPYLENE AND BENZENE
ON CUMENE . . 5-22
5-7 EFFECT OF CERCLA TAX INCIDENCE ON ETHYLENE ON ETHYLENE
GLYCOL PRICE 5-28
5-8 EFFECT OF CERCLA TAX INCIDENCE ON AMMONIA AND PROPYLENE
ON ACRYLONITRILE PRICE 5-35
t
5-9 U.S. SYNTHETIC FIBER PRODUCTION 5-37
5-10 SUMMARY OF EFFECT OF CERCLA TAX INCIDENCE ON INTERMEDIATE
CHEMICALS ANALYZED 5-41
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EXECUTIVE SUMMARY
Section 301(a)(1)(F) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA or "Superfund") calls for a
report to Congress on the impact of the taxes imposed by Title II of the Act
on the U.S. balance of trade. This report presents data and analyses for
responding to CERCLA Section 301(a)(1)(F).
CERCLA imposes a tax upon both domestic production and imports of
feedstocks, inorganic raw materials, and "building block" chemicals, but not
upon imports of intermediate and final products made from these basic
chemicals and feedstocks. The prices of American-produced intermediate and
final chemical products thus reflect the CERCLA tax, but foreign-produced
products do not, with implications for American export and domestic markets.
Exports represent a major market for many domestic chemical producers, as well
as a significant positive contributor to the U.S. balance of trade. Because
chemical markets are price-competitive, Congressional concern was expressed
when CERCLA was under consideration that the additional costs imposed by the
tax would lead to untaxed foreign products expanding their market share both
here and abroad.
This study has two objectives. The first is to determine whether the
CERCLA tax has in fact led to higher imports and/or lower exports due to an
increase in prices. The second, objective is to investigate the hazardous
waste management policies of those countries whose chemical producers compete
with our own. Knowledge of whether foreign competitors are required to absorb
costs associated with releases of hazardous substances similar to those
imposed by CERCLA will contribute to an understand!tg of the relative burden
imposed on U.S. producers.
Accordingly, there are two main research questions, both of which are
retrospective in nature, to be addressed when considering CERCLA's effect on
the U.S. balance of trade:
• Has the CERCLA tax hurt the U.S. trade balance,
either in an absolute sense or relative to other
economic factors?
• How do competitor countries internalize costs
associated with hazardous wastes?
The first question, which requires an empirical analysis of recent U.S.
trade in chemicals, is addressed in Part I of this report. Part II provides a
discussion of the second question. This Executive Summary presents highlights
of both parts of the report.
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PART I. ECONOMIC ANALYSIS
Analytical Method
To estimate the potential impact of the CERCLA tax upon the U.S. balance
of trade, this analysis was conducted in four steps:
1. Documenting recent trends in the U.S. balance of trade in chemicals.
Recent U.S. foreign trade in chemicals was documented in both physical
quantities and dollar values at three different levels of aggregation: overall
U.S. chemical trade; U.S. trade in individual CERCLA-taxed feedstocks; and
U.S. trade in intermediate chemicals derived from CERCLA-taxed feedstocks.
This information is presented in Chapter 2 to establish a context for the
subsequent analysis.
2. Identifying and explaining the various economic factors affecting
recent U.S. trade in chemicals and comparing, to the extent possible, the
magnitude of these factors to the potential magnitude of the CERCLA tax. The
following factors were identified: global recession, decontrol of U.S. crude
oil prices, exchange rates (strengthening dollar), differential inflation
rates among countries, gradual restructuring of the U.S. chemical industry
toward downstream chemicals, debt problems abroad, counterfeiting and
trademark infringements, increases in foreign capacity, emerging
protectionism/trade barrierst>and other ways in which foreign governments'
"support" their chemical industries. The influence of these factors is
described in Chapter 3.
3. Examining whether the CERCLA tax affects U.S. trade in taxed
feedstocks. The potential impact of the CERCLA tax is assessed by first
determining whether the U.S. is a net importer or a net exporter of the taxed
feedstocks. Because imports and domestic production of feedstocks are subject
to identical tax treatment under CERCLA, only U.S. exports are potentially put
at a relative disadvantage. If most of the taxed feedstocks are net imports,
then the effect of the CERCLA tax on U.S. trade in the feedstocks is unlikely
to be significant and attention should be turned to potential impacts on U.S.
trade in intermediate chemicals derived from the CERCLA-taxed feedstocks.
Chapter 4 presents this analysis for the•CERCLA-taxed feedstocks.
4. Examining whether the CERCLA tax affects U.S. trade in intermediate
and final chemical products derived from CERCLA-taxed feedstocks. There are
thousands of intermediate and final chemical products which are manufactured
using the CERCLA-taxed feedstocks. Because it is not possible to assess the
impact of the CERCLA tax on U.S. trade in each of these intermediate products,
a set of criteria was developed to aid in the selection for analysis of those
intermediates likely to be most affected by the tax. An empirical,
qualitative analysis of the effect of the tax was performed for each of these
intermediate chemicals; the findings are presented in Chapter 5.
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Summary of Findings
Highlights of the data and analyses in Part I are summarized below.
1. Although the U.S. chemical trade surplus has narrowed since 1980,
this reduction is small relative to the overall deterioration in the U.S.
trade balance. More important, the U.S. has not lost market share in world
chemical exports since the enactment, of CERCLA. The U.S. has historically
maintained a substantial surplus in chemical trade that amounted to a record
$12.1 billion in 1980, $11.7 billion in 1981, $10.4 billion in 1982, and $9.0
billion in 1983. Despite this recent shrinkage, the U.S. share in world
chemical exports in 1983, 17 percent, was the highest in more than 10 years.
2. U.S. imports of CERCLA-taxed feedstocks exceed U.S. exports. The
U.S. trade deficit in taxed feedstocks amounted to approximately $725 million
annually in 1980-1983. This deficit would have been nearly 50 percent larger
had it not been for large U.S. net exports of xylenes, which equaled about
$330 million annually in 1980-1983. The deficit is caused by large net
imports of benzene, butadiene, cobalt, and nickel, which totaled from Sl.O
billion to $1.5 billion annually in this period. Most of the taxed feedstocks
are net import goods, so that the effect of the excise tax on the U.S. trade
balance in feedstocks is unlikely to be significant.
3. Global recession, decontrol of U.S. crude oil prices, changes in
exchange rates, and increases in foreign chemical production capacity
overwhelm any potential effects of the excise taxes imposed by CERCLA on the
U..S. balance of trade. These other economic factors gen-erally influence
trade markets in all sectors of American industry and thus (1) are
substantially more important for explaining changes in the overall U.S. trade
balance, and (2) make it difficult to isolate CERCLA1s trade effects. For
example, while the CERCLA tax represents less than one percent of price for 32
of the 42 taxed feedstocks in mid-1984, the trade-weighted value of the dollar
appreciated 61 percent relative to other currencies between 1980 and mid-1984.
4. There is sufficient empirical evidence to believe that the effect
of the CERCLA tax on U.S. trade in the five intermediate chemicals studied --
cumene, styrene, ethylene glycol, acrylonitrile, and polypropylene -- has
been insignificant compared to the effects of other economic factors. The
percentage increase in price of these intermediate chemicals, assuming full
pass-through of the feedstock tax, is of the same order of magnitude as on
their feedstock inputs (approximately one percent). Recessionary conditions
leading to low capacity utilization, imports from plants in feedstock-rich
countries, and the strong dollar were the primary factors which affected the
trade of these intermediate chemicals since the CERCLA tax was imposed.
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ES-4
PART II. COMPARISON OF CERCLA TAX WITH HAZARDOUS WASTE MANAGEMENT
POLICIES OF OTHER COUNTRIES
To determine whether U.S. producers are potentially at a disadvantage
because they are required to internalize costs associated with releases of
hazardous substances that their foreign competitors are not, a review was
conducted of legislation and policy initiatives for other countries belonging
to the Organization of Economic Cooperation and Development (OECD). Part II
of this study focuses on these countries because the major trading partners of
the U.S. are members of the OECD.
The analysis of hazardous waste legislation and policies of competing
industrial countries leads to the following conclusions:
1. OECD legislation and policy are guided by the "polluter pays"
principle. Members are not bound by actions taken by OECD, but generally
have used OECD policy recommendations or 'guiding principles' in developing or
reviewing legislation on specific issues. Foremost among the principles
concerning environmental issues is the "polluter pays" concept, which suggests
that the burden of pollution control should be borne by the polluter. Most
countries, however, have found the principle to be hard to implement because
often the responsible party is unknown or is unable to pay the costs of
cleanup or remedy. As a result, governments often end up shouldering much of
this burden.
2. There are laws in some OECD countries that address problems similar
to those CERCLA is supposed to remedy, but there is nothing now identical
to the CERCLA tax. Many OECD countries have laws that are comparable to the
U.S. Resource Conservation and Recovery Act (RCRA) -- laws which establish
policy on the control and management of hazardous waste including
transportation, treatment, storage, and disposal. The OECD has developed
procedures for common testing and classification of chemicals and has shared
technical expertise on disposal methods. There appears to be some preliminary
movement in the direction of CERCLA-like legislation in a few countries.
3. In general, some OECD countries lag behind the U.S. in recognizing
the problems of hazardous wastes and in instituting effective remedies. Only
France, Denmark, and the Netherlands have conducted a public, formal national
inventory of abandoned sites or other illegal dumps. Several other countries
either do not have or do not admit to having numerous abandoned hazardous
waste sites. Those countries that do acknowledge these sites may have had
only one or two incidents to date, and therefore, do not regard the problem as
being widespread. As a result of media attention (e.g., attention regarding a
release of dioxin following a 1976 explosion at a Seveso, Italy chemical
factory), however, most OECD countries now prohibit the abandonment of
hazardous wastes and cooperate on issues that require multilateral policy
agreements. This cooperation was evident most recently at a May 1983 OECD
meeting at which specific policies for exporting and importing hazardous
wastes were adopted.
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4. Legislative gaps between the U.S. and its OECD trading partners
are narrowing. The European experience with hazardous wastes seems to be
following the American experience in that early environmental legislation
covers primarily oil spills, water, and air pollution. As more information is
made available on the dangers of hazardous wastes and pollution in general,
attention focuses on developing comprehensive legislation with strong
preventive measures.
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PART I
ECONOMIC ANALYSIS
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1. INTRODUCTION
Section 301(a)(l)(F) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA or "Superfund") calls for a
report to Congress on the impact of the taxes imposed by Title II of the Act
on the U.S. balance of trade. This report presents data and analyses for
responding to CERCLA Section 301(a)(1)(F). This chapter provides background
information, sets out the major objectives of the report, summarizes the
methodology used, presents major findings, and describes the report's
organization.
1.1 BACKGROUND
CERCLA provides the U.S. government with broad authority to monitor and
respond to releases (or threats of releases) of hazardous substances, and
establishes the reimbursable Hazardous Substance Response Trust Fund to
finance that monitoring and response. The Fund, whose cumulative size is
expected to reach $1.6 billion under current law, is financed primarily
(approximately 86 percent) by a tax on the manufacture or import of certain
chemicals and petroleum.
Exhibit 1-1 shows the chemicals that are taxed and the tax rates imposed
by Title II of CERCLA. Title II also imposes, with certain exceptions, a tax
of 0.79 cents per barrel on crude oil received at a U.S. refinery or '
exported.1 Tax collections began'in June 1981. The tax expires ("sunsets")
after September 30, 1985.2 The non-tax portion of the Fund comes from
general revenues, cost recoveries, interest, fines, and other sources.
:The trade impact of the tax on petroleum is not explored in this
study. The CERCLA tax as a percentage of the average composite price of crude
oil facing U.S. refiners ($35.24 per barrel in 1981 and $31.87 per barrel in
1982) amounts to only 0.02 percent. Accordingly, there is a high potential
for the tax to be rendered insignificant by the more dramatic influence of
other market factors affecting oil trade. Similarly, the effect of the
petroleum tax on trade in products derived from petroleum is not investigated
here. According to a recent Staff Paper of the Department of Commerce, the
increased cost of petrochemicals because of the tax on crude oil would be
"insignificant." (Bureau of Industrial Economics, U.S. Department of
Commerce, Staff Paper -- An Assessment of the Relative Effect of Certain
Federal Regulations on the International Competitiveness of the U.S.
Petrochemical Industry (Washington, D.C.: U.S. Department of Commerce, April
1983), BIE-SP83-1, p. 11.)
2CERCLA excise taxes were established pursuant to Sections 4611 and 4662
of the Internal Revenue Code of 1954. Taxes are collected when qualifying
substances are sold or used by a manufacturer, producer, or importer. The
excise taxes are collected only once on a given quantity of any taxable
substance, and the statute calls for certain exemptions.
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EXHIBIT 1-1
SCHEDULE OF TAXES IMPOSED BY CERCLA SECTION 211
Chemical Tax Per Short Ton
Organic
Acetylene $4.87
Benzene 4.87
Butane 4.87
Butadiene 4.87
Butylene 4.87
Ethylene 4.87
Methane 3.44
Naphthalene 4.87
Propylene 4.87
Toluene 4.87
Xylene 4.87
Inorganic
Ammonia 2.64
Antimony 4.45
Antimony -trioxide 3.75
Arsenic 4.45
Arsenic trioxide 3.41
Barium sulfide 2.30
Bromine 4.45
Cadmium 4.45
Chlorine 2.70
Chromium 4.45
Chromite 1.52
Potassium dichromate 1.69
Sodium dichromate 1.87
Cobalt 4.45
Cupric sulfate 1.87
Cuprous oxide 3.97
Hydrochloric acid 0.29
Hydrogen fluoride 4.23
Lead oxide 4.14
Mercury 4.45
Nickel 4.45
Phosphorus 4.45
Stannous chloride 2. 85
Stannic chloride 2.12
Zinc chloride 2.22
Zinc sulfate 1.90
Potassium hydroxide 0.22
Sodium hydroxide 0.28
Sulfuric acid 0.26
Nitric acid 0.24
Source: CERCLA.
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The chemicals taxed under CERCLA are basic building blocks, or feedstocks,
for the chemical industry. Thus, broadly speaking, there are two types of
potential effects on U.S. foreign trade caused by CERCLA taxes:
• First-order effects on U.S. trade in the taxed feedstocks.
The imposition of an excise tax on the production or import of
feedstocks may affect U.S. trade in the taxed feedstocks
themselves, particularly for those taxed feedstocks where the
U.S. is a net exporter.
• Second-order effects on U.S. trade in intermediate and final
chemical products. -Both the domestic production and imports of
the feedstock chemicals are taxed, but not the imports of
intermediate and final products produced from such feedstocks.
American producers of intermediate and final products therefore
use taxed feedstocks, while, in most cases, foreign producers of
intermediate and final products do not. Accordingly, U.S.
exports of intermediate and final chemical products are
potentially hindered because their production involves use of
taxed feedstocks, while foreign-produced goods do not.
Similarly, U.S. imports of intermediate and final products are
potentially enhanced because the foreign-produced chemicals do
not use taxed feedstocks. Concern was expressed in Congress at
the time of CERCLA's consideration regarding the significance of
these potential trade effects.3
Taken together, CERCLA's potential effects on U.S. exports and imports of
taxed feedstocks and intermediate and final chemical products, if not
overshadowed by other market factors, may reduce U.S. competitiveness in
overseas markets and cause a decline in the U.S. balance of trade.
1.2 PURPOSE OF THIS REPORT
This report has two objectives. The first is to determine whether the
CERCLA tax has caused a decline in the U.S. balance of trade, either in an
absolute sense or relative to other economic factors. The second objective is
to assess whether CERCLA imposes burdens on U.S. producers that other
countries do not impose on their chemical industries. Whether or not foreign
producers must absorb costs similar to those imposed by CERCLA will contribute
to an appreciation of whether or not U.S. producers are placed at a
comparative disadvantage because of the CERCLA tax. For this analysis, the
term "balance of trade" means the value of exports (i.e., the physical
quantity of goods multiplied by the goods' prices) minus the value of imports.
The following research questions were developed to conduct this study:
3See pages 148, 149, and 269 of the "Hearings Before the Senate
Committee on Finance," September 11-12, 1980, and pages 9158, 9166, and 9167,
Congressional Record, September 19, 1980.
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• What is the effect of the CERCLA tax on the U.S.
balance of trade in taxed feedstocks (first-order
effects)?
• What is the significance of these effects as measured
against the U.S. balance of trade in chemicals?
• How important are these effects for explaining recent
trends in U.S. chemical trade relative to other market
factors such as changes in exchange rates, petroleum
prices, or foreign protectionism?
• What is the potential effect of the CERCLA tax on
feedstock chemicals on U.S. trade in intermediate and
final chemical products (second-order effects)?
• What burdens associated with cleaning up or managing
hazardous wastes do other countries that trade with the
U.S. place upon their industries?
Part I of this study addresses the first four research questions, while Part
II provides a discussion of the last question.
1.3 SUMMARY OF ANALYTICAL METHOD
To estimate the potential impact of the CERCLA tax upon the U.S. balance
of trade and to address the research questions, this retrospective analysis
was conducted in four steps:
1. Documenting recent trends in the U.S. balance of trade in chemicals.
Recent U.S. foreign trade in chemicals was documented in both physical
quantities and dollar values at three levels of aggregation: overall U.S.
chemical trade; U.S. trade in individual CERCLA-taxed feedstocks; and U.S.
trade in intermediate chemicals derived from CERCLA-taxed feedstocks.
2. Identifying and explaining the various economic factors affecting U.S.
chemical trade and comparing, to the extent possible, the potential magnitude
of CERCLA's effects relative to these other factors. The following factors
were identified: global recession, exchange rates -- overvalued dollar,
decontrol of U.S. crude oil prices, exchange rates (strengthening dollar),
differential inflation rates among countries, gradual restructuring of the
U.S. chemical industry toward downstream chemicals, debt problems abroad,
counterfeiting and trademark infringements, increases in foreign capacity,
emerging protectionism/trade barriers, and other foreign governments'
"support" of their chemical industries.
3. Examining whether the CERCLA tax affects U.S. trade in taxed
feedstocks. The potential impact of the CERCLA tax is assessed by first
determining whether the U.S. is a net importer or a net exporter of the taxed
feedstocks. Because imports and domestic production of feedstocks are subject
to identical tax treatment under CERCLA, only U.S. exports are potentially put
at a relative disadvantage. If most of the taxed feedstocks are net imports,
then the effect of the CERCLA tax on U.S. trade in the feedstocks is unlikely
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to be significant and attention should be turned to potential impacts on U.S.
trade in intermediate chemicals derived from the CERCLA-taxed feedstocks.
Chapters 4 presents this analysis for the CERCLA-taxed feedstocks.
4. Examining whether the CERCLA tax affects U.S. trade in intermediate
and final chemical products derived from CERCLA-taxed feedstocks. There are
thousands of intermediate and final chemical products which are manufactured
using the CERCLA-taxed feedstocks. Because it is not possible to assess the
impact of the CERCLA tax on U.S. trade in each of these intermediate products,
a set of criteria was developed to aid in the selection for analysis of those
intermediates likely to be most affected by the tax. An empirical, qualitative
analysis of the effect of the tax was performed for each of these intermediate
chemicals; the findings are presented in Chapter 5.
1.4 SUMMARY OF FINDINGS
The economic analysis of the CERCLA tax leads to the following conclusions
regarding effects on the U.S. balance of trade.
1. Although the U.S. chemical trade surplus has narrowed since 1980,
this reduction is small relative to the overall deterioration in the U.S.
trade balance. More important, the U.S. has not lost market share in world
chemical exports since the enactment of CERCLA. The U.S. has historically
maintained a substantial surplus in chemical trade that amounted to a record
$12.1 billion in 1980, $11.7 billion in 1981, S10.4 billion in 1982, and $9.0
billion in 1983. Despite this recent shrinkage, the U.S. share in world
chemical exports in 1983, 17 percent, was the highest in more than_10 years.
2. U.S. imports of CERCLA-taxed feedstocks exceed U.S. exports. The
U.S. trade deficit in taxed feedstocks amounted to approximately $725 million
annually in 1980-1983. This deficit would have been nearly 50 percent larger
had it not been for large U.S. net exports of xylenes, which equaled about
$330 million annually in 1980-1983. The deficit is caused by large net
imports of benzene, butadiene, cobalt, and nickel, which totaled from $1.0
billion to $1.5 billion annually in this period. Most of the taxed feedstocks
are net import goods, so that the effect of the excise tax on the U.S. trade
balance in feedstocks is unlikely to be significant.
3. Global recession, decontrol of U.S. crude oil prices, changes in
exchange rates, and increases in foreign chemical production capacity overwhelm
any potential effects of the excise taxes imposed by CERCLA on the U.S. balance
of trade. These other economic factors influence trade markets in all sectors
of American industry and thus (1) are more important for explaining changes in
the overall U.S. trade balance, and (2) make it difficult to isolate CERCLA's
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trade effects.1* For example, while the CERCLA tax represents less than one
percent of price for 32 of the 42 taxed feedstocks in mid-1984, the
trade-weighted value of the dollar appreciated 61 percent relative to other
currencies between 1980 and mid-1984.
4. There is sufficient empirical evidence to believe that the effect of
the CERCLA tax on U.S. trade in the five intermediate chemicals studied --
cumene, styrene, ethylene glycol, acrylonitrile, and polypropylene -- has
been insignificant compared to the effects of other economic factors. The
percentage increase in price of these intermediate chemicals, assuming full
pass-through of the feedstock tax, is of the same order of magnitude as on
their feedstock inputs '(approximately one percent). Recessionary conditions
leading to low capacity utilization, imports from plants on feedstock-rich
countries, and the strong dollar were the primary factors which affected the
trade of these intermediate chemicals since the CERCLA tax was imposed.
1.5 ORGANIZATION
The remainder of Part I is organized as follows:
• Chapter 2, Recent Trends in U.S. Chemical Trade,
documents recent chemical trade trends to establish a
context for the subsequent analysis.
• Chapter 3, Economic Factors Contributing to Recent
Trends in U.S. Chemical Trade, combines the review of
recent U.S. foreign trade, trends presented in Chapter
2 with an analysis of the various economic factors
possibly influencing these trends. This chapter
compares, to the extent possible, the magnitude of
these economic factors to the potential impact of the
CERCLA tax.
• Chapter 4, Economic Impact of CERCLA Tax on U.S.
Trade in CERCLA-Taxed Feedstocks, presents an
analysis of the potential effects of the CERCLA-tax on
U.S. trade in taxed feedstocks.
• Chapter 5, Economic Impact of 'CERCLA Tax on U.S.
Trade in Intermediate Chemicals, presents a
qualitative assessment of the likely effects of the
CERCLA feedstock tax on U.S. trade in selected
intermediate chemical products.
*This result confirms other analyzes conducted by the U.S. government
regarding the trade effects of environmental legislation. See U.S. Department
of Commerce, U.S. Pollution Control Costs and International Trade Effects
(Washington, B.C.: U.S. Department of Commerce, September, 1979) cited in
Organization for Economic Cooperation and Development, The Impact of Chemicals
Control Upon Trade, Innovation and the Small Firm (Paris: OECD, 1982), p. 12;
and Bureau of Industrial Economics, U.S. Department of Commerce, Staff
Paper—An Assessment of the Relative Effect of Certain Federal Regulations on
the International Competitiveness of the U.S. Petrochemical Industry
(Washington, D.C.: U.S. Department of Commerce, April 1983), BIE-SP83-1.
-------
2. RECENT TRENDS IN U.S. CHEMICAL TRADE
This chapter documents recent trends in U.S. chemical trade. Information
is presented at three different levels of aggregation: overall U.S. chemical
trade (Section 2.1); U.S. trade in specific CERCLA-taxed feedstocks (Section
2.2); and U.S. trade in intermediate chemicals derived from CERCLA-taxed
feedstocks (Section 2.3). These data and discussion set the stage for the
subsequent analysis of the potential role of the CERCLA tax, as compared to
other economic factors, in influencing these foreign trade trends.
2.1 U.S. TRADE IN CHEMICALS
Before turning to recent trends in U.S. chemical trade, it is important to
remember that the CERCLA tax is imposed upon both domestic production and
imports of certain feedstock chemicals, but not upon imports of intermediate
and final products. The costs of American-made intermediate and final
products derived from the taxed feedstocks thus include the tax, but the costs
of foreign-produced intermediate and final products do not (assuming, of
course, that the foreign-produced intermediate and final products were not
derived from taxed feedstocks exported by the United States). Therefore, U.S.
exports of feedstocks, intermediates, and final chemical products are
potentially hindered because they would carry the burden of the tax, while
foreign-produced exports would not. (No comparable tax is currently levied by
foreign countries.) U.S. imports of intermediate and final chemical products
are potentially enhanced because they would not carry the burden- of the' tax
(in contrast to U.S. imports of feedstocks, which are potentially diminished
because the tax increases the price of imported feedstocks).
The U.S. has historically maintained a substantial surplus in chemical
trade. This surplus amounted to a record $12.1 billion in 1980, while the
overall U.S. trade balance in that year was a deficit of more than $24.0
billion. Without this chemical trade surplus, the overall deficit would have
been more than 50 percent larger. Accordingly, the U.S. chemical industry is
important in mitigating the nation's recurring deficit in international trade.
The chemical trade surplus, however, has narrowed since 1980, amounting to
$11.7 billion in 1981 (the first decline since 1972), $10.4 billion in 1982,
and $9.0 billion in 1983. 1 This trend is depicted in Exhibit 2-1.2 The
cause of this shrinkage in 1981 was a 10 percent increase in the value of
imports accompanied by only a two percent rise in the value of exports; a one
percent hike in imports accompanied by a sharp six-percent drop in exports in
1982; and a 14 percent rise in imports accompanied by a one percent drop in
1 "Fact and Figures for the Chemical Industry," Chemical & Engineering
News, June 11, 1984, p. 61.
2 Because of the lack of a suitable deflator for foreign trade in
chemicals, the value of imports and exports are reported in current dollars,
-------
2-2
EXHIBIT 2-1
S. TRADE BALANCE IN CHEMICALS, 1971-1983
(Millions of Current Dollars)
Percent
Year
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
Source:
Chemical
Exports
3,879
4,133
5,920
9,116
8,824
9,958
10,827
12,618
17,306
20,740
21,187
19,891
19,751
Change
from
Previous Chemical
Year
1
7
43
54
-3
13
9
17
37
20
2
-6
-1
U.S. Department of
The Kline Guide to
C.H. Kline
& Co. ,
Imports
1,946
2,229
2,649
4,104
3,793
4,829
5,458
6,475
7,518
8,594
9,446
9,494
10,779
Percent
Change
from
Previous
Year
18
15
19
55
-8
27
13
19
16
14
10
1
14
Chemical
Trade
Balance
1,933
1,904
3,271
5,015
5,031
5,129
5,369
6,143
9,788
12,146
11,741
10,397
8,972
Percent
Change
from
Previous
Year
-13
-2
72
53
0
2
5
14
59
24
-3
-11.
-14
Commerce cited in Charles H. Kline & Co., Inc.,
the Chemical Industry (Fairfield, New Jersey:
1980), 4th edition, p. 79;
Figures for the Chemical Industry,
June 13, 1983, p.
54, and June 11,
11 Chemical
1984, p.
and cited in
& Engineering
61.
"Facts and
News ,
-------
2-3
exports in 1983. 3 The reduction in the chemical trade surplus — a 24 percent
drop from 1981 to 1983--was not as large, however, as the deterioration in the
overall U.S. trade balance — the deficit widened by 76 percent in the same
period, as shown in Exhibit 2-2.
Despite the recent shrinkage in the chemical trade surplus, the U.S. has
not lost market share in world chemical exports, as shown in Exhibit 2-3.
The value of world chemical exports has fallen faster than the value of U.S.
chemical exports, a decline of 11 percent in the 1981-1983 period for world
chemical exports compared to a drop of only seven percent for U.S. chemical
exports. Indeed, the U.S. share in world chemical exports in 1983 was the
highest in more than a decade, 17 percent. Meanwhile, the value of U.S.
chemical imports as a share of world chemical imports rose from seven percent
in 1980 to 10 percent in 1983, signifying the increased foreign chemical
companies' share of the U.S. market.
Although chemical imports are capturing a larger share of the U.S. market,
imports represent only a small portion of U.S. consumption. U.S. chemical
exports, on the other hand, are an important part of domestic chemical
output. In 1979, exports accounted for 16 percent of total chemical
shipments.k Rising exports have played an instrumental role for chemical
producers in maintaining their total shipments in recent }'ears by compensating
for declining real domestic demand.5
U..S. chemical exports are-broadly based on a great number, of different
products. The largest group of exports are basic and intermediate' chemicals,
many of them CERCLA feedstocks or their derivatives. The major organics
exported include styrene, toluene, cyclohexane, vinyl chloride, glycols, crude
xylene, toluene diisocyanate, and dimethyl terephthalate.6 The major
inorganics include aluminum oxide, soda ash,
3 As will be discussed in Chapter 3, most observers attribute this
decline in exports to the decontrol of oil prices in 1981, the global
recession, and the high value of the U.S. dollar.
11 Charles H. Kline & Co., Inc., The Kline Guide to the Chemical
Industry (Fairfield, New Jersey: C.H. Kline & Co., 1980), 4th edition, p. 77.
s Bureau of Industrial Economics, U.S. Department of Commerce, Staff
Paper, An Assessment of the Relative Effect of Certain Federal Regulations on
the International Competitiveness of the U.S. Petrochemical Industry
(Washington, B.C.: U.S. Department of Commerce, April 1983), BIE-SP83-1, pp.
26, 27.
6 Charles H. Kline & Co., Inc., p. 77.
-------
2-4
EXHIBIT 2-2
CHANGES IN THE TOTAL U.S. BALANCE OF TRADE AND IN THE U.S.
BALANCE OF TRADE IN CHEMICALS, 1979-1983
(Billions of Current Dollars)
Year
1979
1980
1981
1982
1983
Total U.S.
Balance
of Trade
-40.2
-36.2
-39.7
-42.6
-69.72J
Percent Change
in Total U.S.
Balance of Trade
-1,9271J
10
-10
-7
-64
U.S. Balance
of Trade in
Chemicals
9.8
12.1
11.7
10.4
9.0
Percent Change in
U.S. Balance of
Trade in
59
24
-3
-11
-14
Chemicals
1JLarge percentage decrease results from a 1978 balance-of-trade surplus
of $2.2 billion.
2JPreliminary Estimate.
Sources: "Facts and Figures for the Chemical Industry," Chemical &
Engineering News. June 13, 1983, p. 54, and June 11, 1984, p. 61; Council of
Economic Advisors, Economic Report of the President (Washington, D.C.:
Government Printing Office, 1983 and 1984).
-------
EXHIBIT 2-3
U.S. SHARE OF WORLD CHEMICAL MARKET
P
e
r
c
e
n
13 -
12 -
11 -
10 -
9 -
8 -.
7 -
to
I
6
1971 1972 1973 197* 1975 1976 1977 1978 1979 1980 1981 1982 1983
U.S.EXPORTS
Year
.
U.S.IMPORTS
2/
I/ Defined as U.S. chemical exports as a percentage or estimated world chemical exports, less U.S. Imports.
2/ Defined as U.S. chemical Imports as a percentage of world chemical Imports, less U.S. exports.
Source: "Facts and Figures for the Chemical Industry," Chemical fe Engineering News. June 11, 198U; June
13, 1983; June 8, 1981; and June 9, 1980.
-------
2-6
caustic soda, sodium borates, and sulfur.7 Polymers and additives,
particularly plastic materials, and fertilizers are other significant groups
of chemical exports.8
The largest group of imports is also basic and intermediate chemicals.
The major organics imported are butadiene, alcohols and polyols, halogenated
hydrocarbons, and nitrogen compounds.9 Important inorganics include
aluminum hydroxide, caustic soda, chlorine, and sulfur.10 Fertilizers are
also significant imports.
2.2 U.S. TRADE IN CERCLA-TAXED FEEDSTOCKS
This section supplements the broad review of recent U.S. foreign trade in
chemicals presented in Section 2.1 with disaggregated trade data on individual
CERCLA-taxed feedstocks.
As shown in Exhibit 2-4, the value of U.S. imports of CERCLA-taxed
feedstocks substantially exceeds the value of exports of CERCLA-taxed
feedstocks. For example, as shown in Exhibits 2-5 and 2-6, the value of
imports in 1983 was about $1.5 billion, while the value of exports amounted to
$800 million. Accordingly, the trade deficit in taxed feedstocks was
approximately $700 million in 1983.ll
Both organic and inorganic taxed feedstocks contribute to this deficit.
The principal organic contributors, as shown in Exhibit 2-4, are benzene and
butadiene. Th'e largest inorganic taxed feedstocks with a net trade deficit
are nickel, and cobalt. Without these four feedstocks, whose combined trade
deficit totaled $0.8 to $1.2 billion annually in 1980-1983, the U.S. would
have recorded a trade surplus in taxed feedstocks. Offsetting the importance
7 Charles H. Kline & Co., Inc., p. 77.
* Charles H. Kline & Co., Inc., p. 79.
9 Charles H. Kline & Co., Inc., p. 79.
10 Charles H. Kline & Co., Inc., p. 79.
11 Because of several important exemptions to the CERCLA tax for
feedstocks used for specific purposes, the "true" levels of imports and
exports of feedstocks that are subject to the tax are probably less than the
levels reported in Exhibits 2-4 through 2-6. The exemptions include methane
used as a fuel and ammonia used in the production of fertilizer. The data
presented on methane and ammonia do not include quantities used for these
purposes. However, exemptions for butane used as a fuel; nitric acid,
sulfuric acid, and methane used in the production of fertilizer; sulfuric acid
produced as a by-product of air-pollution control; and chemicals derived from
coal were not taken into account.
-------
U.S.
EXIIIBI I ?.-H
BALANCE OF TRADE IN CERCLA-TAXED FEEDSTOCKS, 1980-83
FEEDSTOCK
1980
Quantity (thousand Short Tons)
IB\ 1982 1983
Va I ue (Hi f lion Current $1 "__
_I_9_8Q _12_8_!_ 1982 _!383_
With A U.S. Trade Surplus:
2/
Naphthalene -0.2 2.80 2 .,8
Xylenes
o-Xylene N/A 181.7 181.6
p-Xylene 389.7 381.9 392.1
3/
Other Xylenes 219.1 175.8 168.3
Sodium Chromate and
Dichromate 22.7 18.5 10.8
Phosphorus 33.3 30.1 >6.3
Zinc chloride 0.5 -0.1 0.6
Potassium Hydroxide
(Caustic Potash) 31.7 17.8 1.1
Sodium Hydroxide (Total) 1281.1 1083.9 115.3
Sulfuric Acid -111.6 -136.2 . -211.1
Subtotal
With a U.S. Trade Deficit:
Benzene -303.1 - 355.5 - 552.3
Butadiene -223.0 -175.0 -325.1
Ethylene -131.3 -192.1 -79.1
Propylene -186.3 -201.6 -227.8
Toluene -133.8 -121.8 -338.1
Antimony -2.3 -2.5 -1.6
Antimony Oxide -11.3 -11.7 -10.1
Cadmium -2.6 -3.1 -2.1
Chromium -3.7 -3.1 -1.6
Chromite -361.1 -321.7 -178.1
Cobalt -6.7 -5.9 -5-5
Hydrochloric Acid -10.8 -66.1 -51.3
Hydrogen Fluoride N/A N/A N/A
Lead Oxide, Total -10.9 -12.5 -11.3
(Pigment Grade) I/
Nickel
Unwrought -102.3 -106.8 -18.6
Flakes 0.1 -0.2 .6
Powders -9.9 -10.7 r8.6
N/A
$ 3.9
$5.7 $ 3.1 $ N/A
62.5
321 .2
162.1
5.2
21.6
-0.2
0.1
585.8
169.9
—
500.1
391.0
N/A
211. 1
173.6
-1.1
-10.2
-2.2
-2.9
-65.9
-7.1
-83.1
N/A
-13.6
-71.1
-0.0
-11.7
N/A
208.2
115.9
18.7
11.7
0.5
9.0
186.5
11.3
$598.7
$-127.8
-102.8
-58.1
-30.9
-28.3
-6.7
-13.8
-13.7
-21.6
-51.9
-312.9
-1.2
N/A
-9.9
-593.9
+1.1
-60.9
91.8
221. 0
88.8
I'l.l
HI. 5
0.2
5.5
225.5
7.0
$700.8
$-151.3
-101.7
-95. '1
-50.9
-12.6
-6.3
-18.7
-12.9
-19.1
-11.1
-222.3
-3.0
N/A
-9.1
-631.1
-1.2
-22.3
83.1
206.9
73.1
6.3
2'4.1
0-3
2.8
91.9
2.6
$'19'!. 8
$-207.0
-175-2
-27.9
-67.6
-91.5
-3.2
-17.0
-2.5
-7.1
-28.1
-129.6
-1.6
N/A
-6.0
-268.6
-0.6
-19.8
23.2
152.1
66.2
2.3
30.9
0.5
1.8
82.9
1.6
$361.1
$-189.3
-199.1
N/A
-50.8
-16.5
-1.3
-12.1
-0.6
-11.1
-8.5
-101.1
-3.1
N/A
-5.6
-321.1
-0.2
-58.6
to
I
Subtotal
$-1169.5 $-1138.1 $-1083.6 $-1016.2
-------
EXHIBIT 2-'i (continued)
U.S. BALANCE OF TRADE IN CERCLA-TAXED FEEDSTOCKS, 1980-83
FEEDSTOCK J./
Quantity (Thousand Short Tons)
1980 I98f 1982 " F983
Va I lie (H j IMon Cur rent TT _
I960 J98J ' ' 1982 Ml9_83_
With Both Surplus and Deficit
In Different Years:
Chi ori ne
Potassium Chromate and
Dichromate
Zinc Sulfate
SubtotaI
Total U.S. Balance of
Trade in CERCLA-Taxed
Feedstocks
-'19.0
-0.1
-3.1
-132.1
0.2
-1.6
-18?.1
-013
-1.5
-173.5
-0.3
-1.2
U.5
0.1
-0.5
$'1.1
-'(. 8
-0. 1
0. 1
$-'1.8
-12.7
-9.1
-0.1 -0.3
P_._QI>/ -0.1
$-12.8
$-9.5
$-866.7 $-?'!?.'I $-601.6 $-661.3
Note: Antimony, arsenic, cobalt, and chromium include unwrought metals, waste, and scrap arid do not. include
alloys. Cadmum includes unwrought metal and does not include alloys or waste and scrap. Mercury does not include
alloys or waste and scrap. Columns may not sura to totals shown because of rounding.
I
03
\_f Because of several important exemptions to the CERCLA tax for feedstocks used for specific purposes, the
"true" levels of imports and exports of feedstocks that are subject to the tax are probably less than tho levels shown
here. The exemptions include methane used as a fuel and ammonia used in tho production of fertilizer. The data
presented on methane and ammonia do not include quantities used for these purposes. However, exemptions for butane
used as a fuel; nitric acid, sulfuric acid, and methane used in the production of fertilizer; sulfnric acid produced
as a by-product of air-pollution control; and chemicals derived from coal wore not taken into account. Acetylene and
barium sulfide are not included in this exhibit because neither import nor export data were available.
2/ Naphthalene exports include all grades; naphthalene imports are of material solidifying under 79°C.
.3/ Other xylenes include imports of m-xylene, 1980 exports of o-xylene, and imports arid exports of xylene NSPF.
U/ Exports were reported as lead oxide, pigment grade; imports were reported as red lead and litharge. The two
import categories were combined.
5_/ Less than $50,000.
Source: Bureau of the Census, U.S. Department of Commerce, U.S. Imports for Consumption and General Imports,
F.T. 2*»6, 1980, 1981, 1982, IM 1«46, December 1983; and Data Resources Incorporated, Chemical Services
Mode I.
-------
EXHIBIT 2-5
U.S. IMPORTS OF CERCLA-TAXED FEEDSTOCKS, 1980-1983
FEEDSTOCK*/
Organic
Acetylene
Benzene
Butylenes?/
Butanes3'
Butadiene
Ethylene
Methane!'
Naphthalene?/
Propylene
Toluene
Xylenes
o-xylene
p-xylene
m-xylene
xylenes NSPF
Inorganic
Ammonia ("non-fertilizer)
Anhydrous Liquid
Aqua
Antimony
Antimony Oxide
Arsenic
Arsenic Tri oxide
Barium sulf ide
Bromine
Cadmium
Chlorine
Chromium
Chromite (Chrome Ore)
Potassium Chromate
and Bichromate
Sodium Chromate
and Dichromate
Cobalt
Copper Sulfate
Cuprous Oxide
Hydrochloric Acid
Hydrogen Fluoride
(Hydrofluoric Acid)
Lead Oxide
Litharge
Red Lead
Mercury
Quantity (Thousand Short Tons)
1980
H/A
346.7
113.4
10.4
287.9
134.5
K/A
3.2
213.4
276.6
K/A
24.3
7.9
170.0
o.oS/
0.5
2.6
12.2
0.3
12.5
H/A
0.0^
2.9
165.9
4.1
367.nl/
0.2
1.2
7.5
0.3
0.4
52.2
98.7
10.4
1.4
0.4
1981
H/A
486.3
121.6
10.9
231.0
193.5
H/A
60.0
249.1
248.4
16.1
34.5
1.1
178.9
18.7
0.3
2.6
12.2
0.3
19.0
H/A
0.05/
3.4
182.4
3.5
328.81/
0.2
1.6
7.0
0.6i/
0.6
74.3
105.6
12.2
1.1
0.5
1982
H/A
583.1
72.6
10.9
376.6
80.5
0.4
0.0
249.8
418.5
11.6
38.2
1.1
145.5
24.3
0.5
1.9
10.4
0.2
16.1
H/A
o.oV
2.5
216.8
1.9
186. 6l/
0.3
4.6
6.0
0.6i/
0.5
74.6
103.0
11.0
0.8
0.3
1983
H/A
540.2
N/A
H/A
442.3
N/A
H/A
H/A
242.3
299.5
12.5
35.0
1.1
166.3
0.9
1.2
1.3
10.6
0.3
11.2
N/A
o.oY
2.4
237.3
3.1
76.91/
0.4
8.9
7.9
0.9§/
0.6
96.9
92.0
12.7
0.9
0.5
1980
$ N/A
146.4
47.6
2.3
139.3
59.2
N/A
1.8
39.9
81.7
N/A
12.6
3.9
56.9
$ 3i/
0.1
7.3
15.8
7.3
7.4
N/A
O.O6/
14.2
15.7
28.4
56.4
0.2
1.0
357.5
0.7
1.0
4.0
94.5
9.2
1.4
2.8
Value (Million Current $)
1981
$ H/A
206.1
53.5
2.6
142.8
96.8
H/A
0.0
68.8
86.5
7.7
20.5
0.4
69.4
$ 2.7
0.1
6.6
19.9
2.1
13.1
H/A
o.o6/
13.2
16.0
24.6
50.0
0.2
1.3
238.8
0.9
1.3
6.2
110.7
8.8
0.8
5.0
1982
$ N/A
218.8
34.8
2.6
209.3
29.0
67.3
0.0
75.9
120.9
4.3
20.9
0.6
49.9
$ 3.0
0.1
3.9
18.1
1.0
15.2
H/A
O.O6/
4.7
19.6
10.1
29.7
0.2
3.3
137.2
0.9
0.8
5.4
101.1
5.7
0.5
3.0
1983
$ N/A
206.1
H/A
N/A
231.0
H/A
H/A
H/A
62.1
99.6
4.8
16.3
0.6
51.6
$ 1.8
0.1
2.0
13.3
1.4
8.4
H/A
O.O6/
3.8
20.7
13.7
10.4
0.3
6.1
110.1
1.3
1.2
6.4
79.3
5.2
0.5
4.2
VD
-------
EXHIBIT 2-5 (continued)
U.S. IMPORTS OP CEROA-TMCED FEEDSTOCKS, 1980-1983
Quantity (Thousand Short TbnisT
FEEDSTOCK?/
value (Million current
1980
1981
1982
1983
1980
1981
1982
1983
Nickel
Unwrought
Flakes
Powders
Phophonts
Stamous Chloride
(Tin diebloride)
Stannic Chlotlde
(Tin tetrachloride)
Sine Chloride
Zinc Sulf ate
Potassium Hydroxide
(Caustic Potash)
Sodium Hydroxide
sulfuric Add
Nitric Acid
116.2
0.1
15.1
0.3
o.o5/
H^K
1.1
4.3
2.9
131.8
430.7
10.5
123.1
0.2
13.9
°-4*/
O.O5/
O.O?/
1.6
3.2
3.5
246.0
400.9
9.7
82.3
0.2
12.0
0.3
o.oy
0.0§/
1.0
2.5
2.6
395.3
431.9
10.7
93.3
0.1
12.6
2.3
o.o?/
o.o?/
1.3
3.6
7.2
437.6
491.0
10.5
708.7
0.7
98.0
0.9
0.3
tVA
0.7
1.4
1.2
16.3
6.6
0.9
747.9
J.4
46.0
1.3
0.1
0.0§/
0.9
1.2
1.7
45.3
7.1
1.1
446.9
1.0
71.8
1.0 ,
0.uV
O.Q6/
0.7
1.0
1.4
66.0
10.8
1.2
423.5
0.4
65.3
3.4
O.«y
0.1
0.9
1.5
2.5
61.1
11.7
1.2
Total
1,957.2
2,131.6
1,799.1
1,531.7
Note: Imports expressed on a customs basis antimony, arsenic, cobalt, and chromium include unwrought metals, waste, and scrap and do not include
alloys. Cadmium includes unwrought metal and does not include alloys or waste and scrap. Mercury does not include alloys or waste and scrap. Colons may
not SUM to totals shown because of rounding.
I/ Because of several important exemptions to the CERCLA tax Cor feedstocks used for specific purposes, the 'true* levels of imports and exports of
feedstocks that are subject to the tax are probably less than the levels shown here, the exemptions include methane used as a fuel and ammonia used in the
production of fertilizer, the data presented on methane and ammonia do not include quantities used for these purposes. However, exemptions for butane used
as a fuel; nitric acid, sulfuric acid, and methane used in the production of fertilizer; sulfuric acid produced as a by-product of air-pollution control;
and chemicals derived fro* coal were not taken into account. Acetylene and barium sulCide are not included in this exhibit because neither import nor
export data were available.
2/Fro» Data Resources Incorporated (DRI) Chemical Service Model.
2/Includes butanes for all uses, from DRI Chemical- Service Model.
^/Includes methane for chemical use only, from DRI Chemical service Model..
?/Less than 50 short tons.
i/Less than $50,000.
I/Chronic oxide content.
f/Copper sulfate content.
Source: Bureau of the Census, U.S. Department of Conwerce, U.S. Imports for Consumption and General imports, FT 246, 1980, 1981, 1982, Dl 146,
1983; and Data Resources Incorporated (DRI) Chemical Service Model.
-------
EXHIBIT 2-6
U.S. EXPORTS OF CERCLA-TAXED FEEDSTOCKS, 1980-1983
FEEDSTOCK^/
Organic
Acetylene
Benzene
Butane
Butadiene
Ethylene
Methane
Naphthalene?/
Propylene
Toluene
Xylenes
o-xylene
p-xylene
m-xylene
xylenes KSPP
Inorganic
Ammonia Tnon-fertilizer)
Anhydrous Liquid
Aqua
Antimony
Antimony oxide
Arsenic
Arsenic Trioxide
Barium Sulfide
Bromine, Fluorine,
and iodine
Cadmium
Chlorine
Chromium
Ch reunite (Chrome Ore)
Potassium Chromate
and Dichromate
Sodium Chromate and
Dichromate
Cobalt
Copper sulfate
Cuprous Oxide
Hydrochloric Acid
Hydrogen Fluoride
(Hydrofluoric Acid)
Lead Oxides, Pigment Grade
Mercury
Quantity (Thousand Short Tons)
1980
H/A
43.4
H/A
64.9
0.2
H/A
3.0
27.1
142.8
241.9
414.0
H/A
185.2
N/A
3.13/
0.3
0.9
H/A
H/A
H/A
2.6
0.3
116.9
0.4
5.9
0.1
23.9
0.7
H/A
H/A
11.4
H/A
0.9
H/A
1981
H/A
130.8
H/A
56.0
1.1
H/A
2.8
47.5
123.6
200.8
416.4
H/A
355.8
H/A
2.8l/
0.1
0.5
H/A
H/A
H/A
2.5
0.3
50.3
0.4
7.1
0.4
20.1
1.1
H/A
H/A
8.2
H/A
0.7
H/A
1982
H/A
30.8
H/A
51.2
1.1
H/A
2.8
22.0
80.4
196.2
430.5
H/A
314.9
H/A
2.2-y
0.3
0.3
H/A
H/A
H/A
2.4
0.1
34.7
0.2
8.2
0.1
15.4
0.4
H/A
H/A
20.3
H/A
0.4
H/A
1983
H/A
40.1
H/A
48.3
0.3
H/A
6.7
28.2
125.9
74.6
356.2
H/A
329.5
H/A
2.7i/
0.2
0.4
H/A
H/A
H/A
2.7
0.2
63.8
0.2
11.0
0.05/
14.2
0.5
H/A
H/A
13.8
H/A
o.oV
H/A
1980
$ N/A
18.6
H/A
36.5
0.8
H/A
5.7
9.0
53.4
98.2
220.8
H/A
78.5
$ H/A
0.4
0.6
2.0
H/A
H/A
H/A
3.2
0.5
20.2
3.8
1.5
0.2
19.7
14.6
H/A
H/A
2.8
H/A
0.7
H/A
Value (Million Current $)
1981
$ H/A
51,8
H/A
38.1
1.4
H/A
5.7
17,9
43.9
99.5
241.5
H/A
158.6
$ H/A
0.3
0.3
1.3
H/A
H/A
H/A
3.0
0.3
11.2
5.2
5.9
0.1
15.3
16.5
H/A
W/A
3.2
H/A
0.6
H/A
1982
$ N/A
11.8
N/A
34.1
1.1
H/A
3.4
8.3
29.4
87.4
227.8
H/A
123.9
* H/A
0.3
0.7
1.1
H/A
H/A
H/A
2.2
0.1
6.9
2.7
1.6
0.1
9.6
7.7
H/A
H/A
3.8
H/A
0.2
H/A
1983
$ H/A
16.8
H/A
31.6
0.6
H/A
4.5
11.3
53.1
27.9
168.4
N/A
118.4
$ H/A
0.2
0.7
1.2
H/A
H/A
H/A
3.2
0.4
11.6
2.6
1.8
o.oi/
8.4
5.7
H/A
H/A
3.0
H/A
O.O6/
H/A
-------
EXHIBIT 2-6 (continued)
U.S. EXPORTS OF CERCLA-TAXED FEEDSTOCKS, 1980-1983
FEEDSTOCK^/
Nickel
Unwrought
Flakes
Powders
Phosphorous
Shannous Chloride
(Tin Dichloride)
Stannic Chloride
(Tin Tetrachloride)
Zinc Chloride
Zinc Sulfate
Potassium Hydroxide
(Caustic Potash)
Sodium Hydroxide,
Liquid
Sodium Hydroxide, Dry
Sulfuric Acid
Nitric Acid
Quantity (Thousand Short Tons)
1980
13.9
0.2
5.2
33.6
N/A
N/A
1.6
1.2
37.6
l^OO.V3/
112.5
319.1
N/A
1981
16.3
0.1
3.2
30.8
N/A
N/A
0.9
1.5
21.3
l,289.3l/
40.6
264.7
N/A
1982
33.7
0.8
3.4
16.6
H/A
K/A
1.6
1.0
6.7
74S.53/
62.1
260.8
N/A
1983
22.2
0.1
0.9
24.0
H/A
N/A
1.1
2.4
7.5
954. 03/
69.4
321.2
H/A
1980
$ 114.8
1.8
37.1
45.6
H/A
H/A
1.2
0.9
10.2
169.2
33.6
17.9
H/A
value (Million Current $)
1981
$ 116.5
0.2
23.7
42.7
N/A
H/A
1.1
1.7
7.2
253.2
17.6
14.1
N/A
1982
$ 178.3
0.5
22.0
25.1
N/A
H/A
1.0
1.0
4.2
141.0
16.9
13.4
N/A
1983
$ 99.1
0.3
6.7
34.2
H/A
H/A
0.7
1.4
4.3
128.7
15.3
16.3
H/A
Total
$1,023.9
$1,199.5
$ 967.3
778.5
Note: Exports are valued on a FAS basis. Antimony, arsenic, cobalt, and chromium include unwrought metals, waste, and scrap and do not include alloys.
Cadmum includes unwrought metal and does not include alloys or waste and scrap. Mercury does not include alloys or waste and scrap. Columns may not sum to
totals shown because of rounding.
}J Because, of several important exemptions to the CERCLA tax for feedstocks used for specific purposes, the "true" levels of inports and exports of
feedstocks that are subject to the tax are probably less than the levels shown here. The exenptions include methane used as a fuel and ammonia used in the
production of fertilizer. The data presented on methane and ammonia do not include quantities used for these purposes. However, exenptions for butane used
as a fuel; nitric acid, sulfuric acid, and methane used in the production of fertilizer; sulfuric acid produced as a by-product of air-pollution control;
and chemicals derived from coal were not taken into account. Acetylene and barium sulfide are not included in this exhibit because neither inport nor
export data were available.
y All grades.
3/ Dry sodium hydroxide content.
£/ Includes oleum.
5/ Less than 50 short tons.
i/ Less than $50,000.
Source: Bureau of the Census, U.S. Department of Commerce, U.S. Exports for Consumption and General Exports, FT 446, 1980, 1981, 1982, EM 246, December
1983.
-------
2-13
of these net imports to the trade balance in taxed feedstocks are relatively
large net exports of xylenes, representing the organics, and phosphorous and
sodium hydroxide representing the inorganics.
2.3 U.S. TRADE IN INTERMEDIATE CHEMICALS DERIVED FROM CERCLA-TAXED
FEEDSTOCKS
With the growth in production in such feedstocks rich areas as Mexico,
Canada, and the Middle East domestic U.S. production of intermediates has been
significantly affected in two ways: by cheap imports into the U.S. from these
countries and by a reduction in demand for U.S. exports.
Export markets have been a major outlet for CERCLA feedstock derivatives.
Over 11% of ethylene derivatives and 20% of propylene derivatives were
exported in 1981.1Z Of the benzene derivatives, styrene exports have been
around 15% of production13 in 1983, but cyclohexane exports, at one time 18%
of production, have declined to 5% in 1983.lfc Twenty-nine percent of
toluene diisocyanate production, the major toluene derviative, was exported in
1982. As is apparent from the data on exports/imports of intermediates15 in
Exhibits 2-7 - 2-9, the trend is towards a decline in exports and and an
increase in imports. This trend is likely to continue16 and could be
exacerbated if the dollar remains strong for an extended period of time.
Other factors which have affected U.S. intermediate chemical trade have been
(i) the slow economic recovery in other developed countries and (ii) the large
debts of many developing countries which has forced them to cut back on their
imports.17 The effects of these factors have been orders of magnitude
larger than the CERCLA feedstock tax effect as will be shown for a few major
derivatives in Chapter 5.
12 A.R. Hirsig and M.D. Schlanger, "How Can the Oletins Industry Survive
in the 80s?," Chemical Engineering Progress, February 1984, p. 28.
13 Chemical Products Synopsis, "Styrene," Mannsville Chemical Products,
Cortland, New York, 1983.
lk Chemical a Engineering News, "Cyclohexane," August 22, 1983.
15 The intermediates listed are those that occur in the Chemical &
Engineering News, List of "Top 50 Chemical Products and Producers," May 7,
1984.
16 James D. Leyerle, "Supply/Demand for Benzene in the 1980"s,"
Chemical Engineering Progress, May 1984, p. 13.
17 Chemical & Engineering News, "Facts and Figures -- U.S. Chemical
Surplus Continues to Narrow," June 11, 1984, p. 61.
-------
EXHIBIT 2-7
U.S. BALANCE OC TRADE IN SELECTED INTERMEDIATE CHEMICALS
DERIVED FROM CERCLA-TAXED FEEDSTOCKS. 1980-1983
INTERMEDIATE
With a U.S. Trade Surplus:
Acetic Acid
Acetone
Acrylonitrile
Cyclohexane
Ethyl benzene
Ethylene Dichloride a/
Ethylene Glycol
Isopropyl Alcohol
Methanol
PhenoI
Polypropylene
Propylene Oxide
Styrene
Terephthalic Acid
Urea
Vinyl Acetate
Vinyl Chloride
With a U.S. Trade Deficit:
Ad i p i c Ac Id
Ctitnene
Ethanol
Ethylene Oxide
FormaIdehyde
Quantity (Thousand short tons)
VaIue (Million $)
1980
19.5
120.7
190.6
8.8
26
NA
111
63.1
'43
150
338.3
1*0
577.3
265
NA
319
366
-18
-121
-165
-2.9
2.9
1981
7.5
93
321
3.1
HO
227
8'4
23.3
330
111
306.7
4i4
560.0
237
NA
312
362
-11
-113
-66
-19.5
-3.5
1982
18
58.1
U02
NA
57
310(E)
2'H
32.7
938
56
366. 1
U7
507.5
1H8
NA
3'4«4
'435
-16
-75
NA
-1.8
-«4.9
J5.83
25
NA
NA
NA
50(E)
NA
302(E)
50(E)
311
NA
NA
67
NA
NA
NA
222
NA
-57
NA
NA
NA
NA
1980
7.0
148.1
105.3
'1.3
12
NA
59.5
29.6
12.6
90
225.2
28
I»0i4 . 3
186
NA
159
132
NA
-60.3
-91
-1.8
0.2
1981
20.8
Ml
218
1.7
15
39-7
'47
16.5
62.3
66
2314.2
37
'406.0
180
NA
155. 5(E)
123
-15
-59. 1
-2«4
-13.1
-0.8
1982
18.9
21. «4
257
NA
214
38.9(E)
116.1
13.8
66.6
32(E)
279.0
'l'4
300.0
102
NA
166(E)
130
-11
-3H.5
NA
-3.6
-1.0
1983
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
6M
NA
NA
NA
16U.5(E)
NA
NA
NA
NA
NA
NA
I
(-•
•fc.
NA: not ava i table
Neg: negIig ible
E: estimate
a/ Imports include propylene dichloride.
Sources: Exhibits 2-8 and 2-9.
-------
EXHIBIT 2-8
U.S. IMPORTS OF SELECTED INTERMEDIATE CHEMICALS
DERIVED FROM CERCLA-TAXED FEEDSTOCKS, 1980-1983
INTERMEDIATE
Acetic Acid
Acetone
Acrylonitrile
Adipic Acid
dime ne
Cyclohexane
Etnano I
Ethylbenzene
Ethylene Dichloride a/
Ethylene Glycol
Ethylene Oxide
FormaIdehyde
I sopropyI Alcohol
Methano I
PhenoI
Polypropylene
Propylene Oxide
Styrene
Terephthalic Acid
Urea
Vinyl Acetate
Vinyl Chloride
Quantity {Thousand short tons)
Value (Hi I I ion $)
1980
0.5
2.3
1.U
18
153
10.2
198
Neg
NA
12
2.9
5.1
23.9
119
0.1
1.7
27
25.7
Neg
1,017
1
70
1981
0.5
Neg
Neg
11
115
9.9
99
Neg
81
3l4
19.5
9.5
11.7
86
Neg
3.3
15
11.0
Neg
853
5
56
1982
13
27.9
Neg
16
86
15.3
117
Neg
65
19
if. 8
9.9
38.3
178
Neg
2.9
26
10.5
Neg
1,107
1
26
1983
30
NA
NA
57
NA
NA
NA
Neg
NA
23
-------
EXHIBIT 2-9
U.S. EXPORTS OF SELECTED INTERMEDIATE CHEMICALS
DERIVED FROM CERCLA-TAXED FEEDSTOCKS, 1980-1983
INTERMEDIATE
Acetic Acid
Acetone
Acryloni trile
Ad!p i c Ac i d
Cumene
Cyclohexane
Ethanol
Ethyl benzene
Ethylene Dichloride
Ethylene Glycol
Ethylene Oxide
FormaIdehyde
I sopropy I Alcohol
Methano I
PhenoI
Polypropylene
Propylene Oxide
Styrene
Terephthalic Acid
Urea
Vinyl Acetate
Vinyl Chloride
a/
Qua n t i t.v
1980
20
123
195
Neg
32
19
33
26
306
123
Neg
8
87
162
150
310
67
603
265
NA
323
136
( Thousand
short
1981 1982
58
93
321
Neg
32
13
33
10
308
118
Neg
6
65
116 1
111
310
89
571
237
NA
317
ill 8
61
86
102
Neg
'11
NA
NA
57
375(E)
260
Neg
5
71
116
56
369
,73
518
118
NA
319
161
tons)
1983
55
NA
386
NA
NA
NA
NA
50(E)
NA
325(E)
NA
NA
95(E)
651
NA
395
83
550(E)
NA
NA
225
NA
12.8JL
7.2
19
109
Neg
16
9.6
18
12
61
66
Neg
1.1
10
29
90
228
17
121
186
NA
161
157
Value (Mi I I ion $)
1981
21
11
218
Neg
16
7.3
12
15
19
66
Neg
0.9
31
76
66
237
73
115
180
NA
158(E)
112
1982
21
31
257
Neg
5
NA
NA
21
17(E)
125
Neg
1.0
30
90
32(E)
282
68
306
102
NA
168(E)
138
1983
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
12(E)
NA
282
79
331(E)
NA
NA
166(E)
NA
NJ
NA: not ava i(able
Neg: negIigible
E: estimate
a/ Includes propylene dichloride.
Sources: Mannsville Chemical. Products Corp., ChemlcaI
various dates; Modern Plastics. January 1982, 1981.
Products Synopsis. Cortland, NY,
-------
3. ECONOMIC FACTORS CONTRIBUTING TO RECENT TRENDS
IN U.S. CHEMICAL TRADE
This chapter combines the review of recent U.S. foreign trade trends
presented in Chapter 2 with an analysis of the various economic factors
possibly influencing these trends. Specifically, a number of market factors
recently affecting the U.S. balance of trade are described, including the
global recession, the increasing value of the dollar, and the decontrol of
U.S. crude oil prices. The magnitude of these factors are then compared to
the potential impact of the CERCLA tax. These comparisons illustrate the
extent to which the effect of the tax on the balance of trade may be submerged
in other more significant developments affecting U.S. foreign trade.
This chapter is organized in three parts. Section 3.1 summarizes the
combined impact of various economic factors on the balance of trade relative
to the CERCLA tax. Section 3.2 discusses individually each of the market
factors and compares the magnitude of each, to the extent possible, to the
potential magnitude of the tax. Section 3.3 briefly presents the outlook for
U.S. trade in chemicals based on the economic factors discussed in this
chapter.
3.1 SUMMARY OF ECONOMIC FACTORS
This section summarizes the many-economic factors affecting recent U.S.
chemical trade and compares --_ in' a qualitative sense -- their combined impact
to the potential effect of the CERCLA tax.
As observed in Chapter 2, the U.S. trade surplus in chemicals has narrowed
since 1980, due to increases in imports accompanied by decreases in exports.
The reduction in the chemical trade surplus -- a 24-percent drop from 1981 to
1983 -- was not as large, however, as the deterioration in the overall U.S.
trade balance; the deficit widened by 76 percent in the same period. Many
economic factors contribute to the recent worsening trade picture in
chemicals. These factors are highlighted below:
• Global recession;
• Exchange rates -- overvalued dollar;
• Decontrol of U.S. crude oil prices;
• Differential inflation rates among countries;
• Increases in foreign capacity -- Canada, Mexico,
Saudi Arabia, Western Europe, Japan, Taiwan, and other
nations.
• Gradual restructuring of the U.S. chemical industry
toward downstream chemicals;
• Debt problems abroad;
-------
3-2
• Counterfeiting and trademark infringements;
• Protectionism and trade barriers; and
• Other ways in which foreign governments "support"
their chemical industries.
Although difficult to estimate analytically, taken together these market
factors appear to render insignificant the impact of the CERCLA tax on U.S.
chemical trade. For example, Exhibit 3-1 shows the magnitude of the CERCLA
tax on each of the 42 taxed feedstocks in relation to feedstock prices on May
18, 1984. Assuming full pass-through of the tax,1 only 10 of the feedstocks
would increase in price by more than one percent. The potential increase in
the prices of intermediate and final chemicals derived from taxed feedstocks
would be even less, depending on how important the feedstock is in producing
the end product. The consequences of these small potential price hikes on
U.S. foreign trade in chemicals would be minimal and submerged by the other
more significant developments affecting chemical trade.
These other developments hurt the chemical trade balance in a more
fundamental way: the global recession shrank markets; the high value of the
U.S. dollar made U.S. products more costly on export markets while at the same
made the U.S. market more attractive to importers; the decontrol of U.S. oil
prices erased a part of the U.S. feedstock cost advantage; and the low-cost
exports from foreign competitors cut into overseas sales. Because this array
of market factors.is so powerful, it is difficult to isolate the impact of a
small excise tax on trade in chemicals. F.or example, the trade-we'ighted value
of the dollar appreciated 61 percent relative, to other currencies between 1980
and mid-1984, U.S. crude oil prices increased 24 percent between January 1980
and January 1983, and growth in real GNP of the OECD countries averaged only
1.2 percent in 1981 and fell 0.2 percent in 1982.2
Although the relative impact of the CERCLA tax on overall U.S. chemical
trade appears minor in terms of these other factors, the situation is less
straight forward for trade in individual chemicals. Again, assuming full
pass-through of the tax, the resulting small price differential between U.S.
and foreign producer prices could possibly cause a noticeable decline in U.S.
exports or an increase in U.S. imports in price-competitive, commodity-type
markets. The U.S. Department of Commerce, in an attempt to determine whether
1 Although this is a common assumption, in practice, the pass-through
effects of the CERCLA tax may be relatively small. Since 1981, for example,
chemical prices have been falling as weak international demand put the
chemical industry in an overcapacity situation. The pass-through effects will
vary according to market conditions within specific industries and segments of
that industry.
2 International Trade Administration, U.S. Department of Commerce,
"international Economic Indicators" (Washington, D.C.: U.S. GPO, September
1984), Volume X, Number 3, p. 58; O.E.C.D., OECD Economic Outlook (O.E.C.D.:
Paris, July 1982 and July 1983), numbers 31 and 33; Energy Information
Administration, U.S. Department of Energy, Monthly Energy Review (Washington,
D.C.: U.S. GPO, July 1983).
-------
3-3
EXHIBIT 3-1
CERCLA TAX AS A SHARE OF FEEDSTOCK PRICES
Price per Tax as a
CERCLA Tax Short Ton ($) Percent
Feedstock $/Short Ton on 5/18/84 of Price
Organic
Butane 4.87 268 a/ 1.81
Benzene 4.87 404 1.20
Ethylene 4.87 440 1.11
Xylene
Petroleum 4.87 342 b/ 1.42
Coal tar 4.87 358 1.36
o-Xylene 4.87 420 1.16
p-Xylene 4.87 540 .90
m-Xylene 4.87 720 .68
Propylene
Chemical grade 4.87 390 1.25
Polymer grade 4.87 400 1.22
Naphthalene
Crude 4.87 440 1.11
Petroleum 4.8.7 600 0.81
Butadiene 4.87 640 .76
Butylene
Isobutylene 4.87 640 .76
1-Butene 4.87 540 .90
Acetylene 4.87 1,910 .25
Toluene
Petroleum 4.87 331 1.47
Methane 3.44 168,300 a/ .00
Inorganic
Ammonia
Anhydrous 2.64 210 1.26
Chlorine 2.70 195 1.38
Chromite
Turkish 1.52 100 c/ 1.52
South African 1.52 48 b.c/ 3.17
Bromine
Bulk 4.45 660 .67
Purified 4.45 1,500 .30
Lead Oxide 4.14 700 d/ .59
Barium Sulfide 2.30 460 .50
Arsenic Trioxide 3.41 800 .43
Sulfuric Acid 0.26 60 b/ .43
Hydrochloric Acid 0.29 83 b/ .35
-------
3-4
EXHIBIT 3-1
(Continued)
CERCLA TAX AS A SHARE OF FEEDSTOCK PRICES
Feedstock
Inorganic (continued)
Zinc Sulfate
Hydrogen Fluoride
Phosphorus
Antimony Oxide
Cadmium
Potassium Bichromate
Cuprous Oxide
Sodium Bichromate
Cupric Oxide
Antimony
Nitric Acid
Cupric Sulfate
Arsenic
Zinc Chloride
Nickel
Chromium
Sodium Hydroxide
Mercury
Stannous Chloride
Stannic Chloride
Potassium Hydroxide
Cobalt
CERCLA Tax
$/ Short Ton
1.90
4.23
4.45
3.75
4.45
1.69
3.97
1.87
3.59
4.45
0.24
1.87
4.45
2.22
4.45
4.45
0.28
4.45
2.85
2.12
0.22
4.45
Price per
Short Ton ($)
on 5/18/84
530
1,375
1,822
3,000
2,300
960
2,380
1,100 e/
2,420
3,160
195
909 f/
800
674 b/
6,900
8,200 %/
1,200
10,263 h/
10,802
7,010
2,140
25,000 £/
Tax as a
Percent
of Price
.36
.31
.24
.13
.19
.18
.17
.17
.15
.14
.12
.21
.56
.33
.06
.05
.02
.04
.03
.03
.01
.02
a/ Average 1982 price.
b/ Mean of prices used.
c/ Average 1981 price.
d/ Price derived from red lead (97 percent Pb.O,).
e/ Price derived from anhydrous sodium chroma^e.
f/ Price derived from pentahydrate copper sulfate.
S/. Price on July 29, 1983.
h/ Average 1982 price.
SOURCES: Chemical Marketing Reporter. May 21, 1984; Bureau of Mines, U.S.
Department of Interior, Minerals Yearbook. Volume 1, Metals and
Minerals, 1982; U.S. Department of Energy, Monthly Energy Review.
January 1984; Data Resources Incorporated (DRI) Chemical Service
Model (for methane price).
-------
3-5
exports were affected by CERCLA in this manner, contacted several petrochemical
manufacturers.3 The companies indicated that any possible consequences of
CERCLA would be dwarfed by other developments affecting U.S. and foreign price
changes. ** The Department of Commerce did not find any instances of current
U.S. pollution abatement regulations (note that this includes more than just
the CERCLA tax) hurting the competitive position of U.S. chemical exports in
commodity-type markets.5
A more likely scenario for feedstock manufacturers might be to absorb the
costs of the CERCLA tax rather than pass them through and risk losing market
share overseas in price-competitive markets. Such a response is particularly
likely when international market conditions are weak, as they have been since
1981. According to industry sources, demand is believed to be more responsive
to price at the bottom of the business cycle than at the top.6 Accordingly,
any negative effect of the CERCLA tax on industry profits would be most
noticeable during periods of slack demand.
3.2 DESCRIPTION OF EACH ECONOMIC FACTOR
This section describes the trade effects of each of the market factors
identified in the previous section and, to the extent possible, compares their
magnitude to the potential impact of the CERCLA tax.
3.2.1 Global Recession
Beginning in 1980, weak international demand put the world chemical
industry in an overcapacity situation and, in turn, led to increased price
competition. Exhibit 3-2 shows the downturn in real GNP growth beginning in
1980 for important U.S. trading partners. Because the chemical-related
industries are particularly sensitive to the business cycle, their sales,
production, and capacity utilization fell significantly in response to this
decline in demand. From 1979 to 1980, U.S. capacity utilization for certain
chemicals fell as follows: propylene fell from 73 percent to 63 percent,
benzene fell from 75 percent to 64 percent and butadiene fell from 91 percent
to 70 percent.7 In 1982, capacity utilization for the chemical industry
overall was only 67.6 percent, far below normal.8
3 Bureau of Industrial Economics, U.S. Department of Commerce, An
Assessment of the Relative Effect of Certain Federal Regulations on the
International Competitiveness of the U.S. Petrochemical Industry (Washington,
D.C.: U.S. Department of Commerce, April 1983), BIE-SP83-1, p. 11.
* Ibid-
3 Bureau of Industrial Economics, p. 2.
6 Bureau of Industrial Economics, p. 2.
7 International Monetary Fund, Trade Policy Developments in Industrial
Countries (Washington, D.C.: I.M.F., July 1981), p. 45.
8 "Forecast 1983 Sales and Profits Will be Up," Chemical Week, January
5, 1983, p. 38.
-------
UJ
O
O
u
I
UJ
U
G£
LJ
CL
<
-3
1977
n
United States
EXHIBIT 3-2
REAL CNP GROWTH FOR SELECTED COUNTRIES
U)
1978
1979
+
Canada
o
Japan
1980
France
1981
1982
1983
x v
United Kingdom West Germany
Source: Council of Economic Advisors, Economic Report of the President (Washington, D.C.: Government
Printing Office, 1982 and 1984).
-------
3-7
The presence of excess capacity usually leads to price cutting as chemical
producers try to utilize plant and equipment to cover their fixed costs. Real
chemical prices weakened substantially in 1981-1982. Price cutting on export
goods, in turn, leads to foreign trade friction, such as the imposition of
temporary quotas on imports. Such protectionist measures are discussed below.
In 1983, the U.S. was the first nation to recover from the worldwide
recession. As result, U.S. demand for chemical products in 1983 increased
heavily, especially for their end uses in housing, home furnishings, and
automobiles.9 The increased demand for chemicals in the U.S. due to this
recovery was matched largely by increases in domestic chemical production
(rather than by increases in U.S. chemical imports). For instance, the
industry's capacity utilization increased to a rate of approximately 70
percent in 1983.1B The value of U.S. foreign trade in chemicals, on the
other hand, declined in 1983, with imports down by nine percent and exports
down by 10 percent.11
Although U.S. chemical imports decreased in 1983, they would probably have
decreased even more if U.S. demand for chemicals had not expanded due to the
recovery. The increased demand in the U.S., however, did not coincide with
comparable increases in demand abroad because most of the other nation's were
still experiencing a recession. Thus, the worldwide demand for U.S. chemical
exports remained weak, which partially accounted for the 10 percent drop in
U.S. chemical exports. This effect may not occur in 1984 to the same extent,
because a worldwide economic recovery could induce an increased demand for
U.S. chemical exports, especially by Europe and Japan.12
3.2.2 Decontrol of U.S. Crude Oil Prices
One reason for the large increase in chemical exports in the mid-to-late
1970s was the feedstock cost advantage enjoyed by U.S. producers because of
energy regulation. European firms, which depend on crude oil for meeting an
estimated 95 percent of fuel and feedstock requirements (measured on a BTU
basis), had to pay world market prices.13 U.S. firms, which are an
estimated 60 percent dependent on crude oil for fuel and feedstock, benefited
from U.S. oil price controls.1* With the decontrol of oil prices in 1981,
9 David M. Kiefer, "Business Expected to Improve Further for Chemical
Producers," Chemical &. Engineering News, December 19, 1983, p. 24.
18 Bureau of Industrial Economics, U.S. Department of Commerce, 1984
U.S. Industrial Outlook (Washington, D.C.: BIE, 1984), p. 9-1.
11 Ibid.
12 Earl V. Anderson, "U.S. Surplus in Chemical Trade Narrows Again as
Exports Drop," Chemical & Engineering News. December 19, 1983, p. 27.
13 Bureau of Industrial Economics, p. 28.
111 Ibid.
-------
3-8
U.S. producers lost this cost advantage. Between January 1980 and January
1983, for example, crude oil prices increased by 24 percent, compared to a
maximum potential hike of less than two percent in the price of certain
feedstock chemicals due to the CERCLA tax.
3.2.3 Exchange Rates - Stronger Dollar
A steady rise in the value of the U.S. dollar, as depicted in Exhibit 3-3,
has the effect of decreasing the export demand for U.S. goods because dollars
become more expensive to purchase. Similarly, a rise in the dollar also has
the effect of increasing imports in the U.S. because foreign currencies become
cheaper to U.S. importers. It is interesting to note that in the period from
July 1980 to June 1983, the dollar appreciated 46 percent relative to the
German mark, 53 percent relative to the British pound, and 89 percent relative
to French franc, compared to a potential hike of less than two percent in the
price of feedstock chemicals because of the CERCLA tax. In September 1983,
the Institute for International Economics estimated that the dollar was
overvalued in real effective terms by some 24 percent.15 Several experts
have remarked that the current overvaluation of the dollar has the same effect
as the placement of a 20 to 25 percent tax on all U.S. exports, plus a
comparable subsidy on U.S. imports.16 Hence, the CERCLA tax on feedstocks
appears to be a minor factor affecting the chemical industry in relation to
the overvalued dollar.
3.2.4 Differential Inflation Rates Among Countries
Variations among countries in the 'rate of change in production costs and,
in turn, chemical prices can play key roles in changing trade flows. For
example, as shown in Exhibit 3-4, the rate of increase'in chemical prices in
1979-1983 varied widely among countries. For example, Norwegian chemical
prices increased 11.4 percent annually in this period, U.S. chemical prices
increased 8.1 percent annually, and Swiss chemical prices increased 3.0
percent annually.
Another example of variations in prices among countries is presented in
Exhibit 3-5, which shows recent changes in export prices of manufactured
goods for 14 industrial countries. As expected, unit export values in the
U.S. have been escalating more rapidly than all other industrial countries
since 1980. Underlying such price changes are changes in the factor costs of
production. Exhibit 3-6, for example, shows' the recent trend in labor costs
in manufacturing for 14 countries. Again, relative unit labor costs in the
U.S. have increased faster than in the other thirteen industrial countries.
15 John Williamson, Institute for International Economics, The Exchange
Rate System (Cambridge: MIT Press, September 1983), p. 34.
16 Anderson, pp. 27-28.
-------
EXHIBIT 3-3
INDEX OF CURRENCY EXCHANGE RATES
1.3
Exchange
Rates
In
Various
Years
Divided
By
Exchange
Bate
In
January
1978
0.8
1978
D U.K.
OJ
i
VD
1979
+ Canada
1980 1981
Year
O Japan
1982 1983
A W«»t Germany
Source: International Monetary Fund (IMF). International Financial Statistics (Washington, O.'C.: IMF, May
1984).
-------
EXHIBIT 3-3 (continued)
INDEX OF CURRENCY EXCHANGE RATES
Exchange
Rates
In
Various
Years
Divided
By
Exchange
Rate
In
January
1978
t
(-•
o
1978
a
Belgium
1979
Denmark
1980
Year
o
France
1981
A
Mexico
1988
X
Italy
1983
Source: International Monetary Fund (IMF), International Financial Statistics (Washington, D.C.: IMF, May
•198*).
-------
3-11
EXHIBIT 3-4
RECENT TRENDS IN CHEMICAL INDUSTRY PRICES IN SELECTED COUNTRIES
(Percent Change from Previous Year)
Country
United States
Canada
West Germany
1979
11.8
13.5
7.7
1980
17.1
17.1
7.9
1981
10.5
13.8
8.7
1982
1.7
7.2
4.6
1983
0.2
N/A
0.18
United Kingdom-/ 12.5 15.7 6.3 6.8 4.8
France-/ 15.4 19.0 14.2 11.6 9.0
Italy 22.9 20.6 11.9 10.9 8.7
Belgium 2.8 13.1 10.7 13.8 6.1
Netherlands 10.7 '9.6 14.4 -.35 0.88
Spain N/A 19.3 16.9 12.1 12.5
Switzerland 1.8 7.0 4.9 1.8 -0.37
Sweden 13.6 14.2 8.8 10.7 12.5
Norway 12.6 23.6 12.5 4.8 4.8
Japan N/A N/A -0.7 1.4 N/A
a/ Excludes fibers.
Source: "Facts and Figures for the Chemical
Industry," Chemical & Engineering News,
June 13, 1983, pp. 28-67, and June 11,
1984, pp. 32-74.
-------
3-12
EXHIBIT 3-5
INDICES OF RELATIVE UNIT EXPORT VALUES
FOR MANUFACTURED GOODS
(1980=100)
Country 1978 1979 1980 1981 1982 1983
United States 99.3 101.8 100.0 119.5 131.5 137.7
Canada
Japan
Austria
Belgium
Denmark
France
West Germany
Italy
Netherlands
Norway
Sweden
Switzerland
100.0
115.8
105.3
99.2
104.7
97.8
107.7
91.7
94.3
91.5
96.8
111.4
96.2
104.9
103.6
99.9
103.9
99.5
105.4
94.1
97.0
94.9
99.1
106.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.3
109.5
93.2
95.0
97.3
92.6
89.6
96.9
99.0
97.3
96.7
99.7
95.2
103.2
93.4
90.5
95.8
90.6
91.9
95.3
98.7
93.2
90.0
104.5
95.6
103.9
91.9
90.1
97.8
88.9
92.5
92.7
96.0
92.4
85.3
109.1
United Kingdom 84.6 89.5 100.0 98.0 92.3 89.5
Note: These indices serve as proxies for data on final product prices for
traded goods. The indices represent the ratio (expressed on base 1980=100)"of
unit export values of manufactured goods in a given country to a weighted
geometric average of unit export values for the other thirteen countries,
after expression of these prices in terms of a common currency. The indices
thus take account of changes in exchange rates.
Source: International Monetary Fund, International Financial Statistics,
(Washington, D.C.: I.M.F., May 1984), p. 48.
-------
3-13
EXHIBIT 3-6
INDICES OF RELATIVE UNIT LABOR COSTS
IN MANUFACTURING
(1980=100)
Countrv
1978
1979
1980
1981
1982
1983
United States
Canada
Japan
Austria
Belgium
Denmark
France
West Germany
Italy
Netherlands
Norway
Sweden
Switzerland
United Kingdom
98.1
102.5
141.6
104.9
107.2
108.9
92.5
100.7
99.5
105.8
102.0
105.3
115.7
68.2
98.2
98.3
118.9
101.6
103.3
108.9
96.9
102.1
100.8
105.0
96.6
99.8
110.2
80.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
112.9
106.8
111.3
95.4
91.3
88.7
95.8
90.9
98.0
89.0
102.4
99.6
100.4
101.2
125.4
115.5
105.7
96.0
78.4
87.2
89.5
92.8
100.2
92.2
106.7
88.5
107.1
94.4
129.4
119.5
118.6
N/A
74.4
90.2
85.6
91.7
N/A
90.2
N/A
N/A
N/A
85.4
Note: Unit labor costs are defined as compensation of employees per unit
of real output in the manufacturing sector. Account is taken of employer-paid
social insurance premia and other employment taxes as well as wages and
salaries. The indices represent the ratio (expressed on base 1980=100) of
unit labor costs in manufacturing in a given country to a weighted geometric
average of unit labor costs for the other thirteen countries, after expression
of these costs in terms of a common currency. The indices thus take account
of changes in exchange rates.
Source: International Monetary Fund, International Financial Statistics,
(Washington, D.C.: I.M.F., May 1984), p. 48.
-------
3-14
3.2.5 Increases in Foreign Capacity—Canada, Mexico, Saudi
Arabia, Western Europe, Japan, Taiwan, and Other Nations
With new foreign plants or technology, the U.S. may be losing some of its
advantages in economies of scale, higher operating rates, technological
superiority, and better inter-plant distribution networks. In the coming
years, new competition is expected from natural gas-rich countries such as
Saudi Arabia, Mexico, and Canada.17 These countries are building modern
facilities in commodity chemicals. Exhibit 3-7, for example, displays the
plans currently being made in these countries for new capacities in 1986.
Less developed countries that have high levels of natural resources have a
natural tendency to become more developed by shifting from being exporters of
natural, resources to exporters of intermediate or finished products that use
the natural resources as inputs. For example, Mexico and Saudi Arabia are
devoting substantial resources to expand their capacities to refine petroleum
and thereby produce and export petrochemicals, as opposed to their current
tendency simply to export petroleum. However, this tendency toward the
development of less developed countries could create problems for the chemical
industries of the developed countries. For instance, Chemical Week reports,
"When the chilling prospect of new capacity for organic commodity chemicals in
the Mideast is added to the equation, the logic in favor of U.S. and Western
European producers abandoning commodities looks compelling."11
To remedy this problem of the tendency toward increased competition among
the producers of commodity chemicals, many U.S. firms are considering the
prospect of moving further downstream into products that have higher
value-added, such as specialty chemicals, and sideways into new areas like
.biotechnology.19 However, this restructuring takes time, as well as
considerable resources for the "administration of such adjustments' and for
research and development. Therefore, this restructuring, and the
international competition associated with it, may'constrain U.S. chemical
firms in the short term from achieving the trade surpluses that they had
received in recent years. This effect is likely to be more substantial than
the effect of the CERCLA tax.
3.2.7 Debt Payments Abroad
Payment defaults and other types of contract breaches have created
substantial problems in recent years for the U.S. chemical industry. These
payment problems generally have involved developing countries, e.g., Mexico,
Brazil, and Zaire; and East European countries such as Yugoslavia.' For
17 Bureau of Industrial Economics, p. 2.
11 "Restructuring; How the Chemical Industry is Building Its Future,"
Chemical Week, October 26, 1983, p. 31.
19
Ibid., p. 27.
-------
3-15
EXHIBIT 3-7
PLANS FOR INCREASED CHEMICAL PRODUCTION CAPACITY BY 1986 IN
SAUDI ARABIA, MEXICO, AND CANADA
Country
Saudi Arabia
Companies
AGIP
Arab Perroleum
Investment
Celanese/Texas Eastern
Exxon
Japan Saudi Methanol
Lucky
Mobil
Neste
SPDC
Shell
Taiwan Fertilizer
Private
Not yet
SABIC
Saudi interests
determined
Mexico
Petroleos Mexicanos
(Pemex)
Canada
Alberta Gas Ethylene
Nova
Union Carbide Canada
Products
Capacity in Thou-
sand .Metric ..Tons.
Methyl tertiary butyl ether 500
Butene-1 80
Methanol 600
LDPE 260
Methanol 600
Vinyl chloride monomer 300
Ethylene 450
Ethylene glycol 220
LDPE 200
HDPE 90
Butadiene 124
Ethylene glycol 300
LDPE 130
Ethylene 656
Ethylene dichloride 456
Caustic soda 377
Styrene 295
Ethanol 281
Urea 500
Ammonia 300
Polyvinyl chloride 200
Polystyrene 95
Ethylene 500
Acrylonitrile 100
Carbon tetrachloride 16
Cyclohexane 120
Dichloroethane 115
Dodecylbenzene 70
Ethylene 500
Ethylene oxide 200
Perchloroethylene 16
HDPE 100
LDPE 240
Styrene 150
Ethylene 680
LLDPE 270
Styrene 300
Benzene 236
Ethylene glycol 230
Source: "Restructuring; How the Chemical Industry is Building Its Future,"
Chemical Week. October 26, 1983, p. 30.
-------
3-16
example, many of the U.S. chemical firms trading with Mexico have receivables
still outstanding from contracts that in some cases were negotiated over ten
years ago.20
These payment problems tend to reduce the amount of U.S. chemical exports
sold by the U.S. to these countries, because:
• These importing countries will tend to receive fewer
loans, and thus, will tend to be less able to purchase
U.S. chemicals; and
• U.S. chemical exporters tend to be more hesitant to
deal with these countries for fear that financing
arrangements with these countries may fall through.
Hence, in recent years, these payment problems have tended to reduce the
U.S. balance of trade in chemicals.
3.2.8 Counterfeiting and Trademark Infringements
Another difficulty that U.S. chemical firms have encountered in recent
years has been from the illegal use of the names and trademarks of U.S.
chemicals, i.e., counterfeiting and trademark infringement. For example, many
chemicals produced by foreign companies are counterfeited with the names of
U.S. products and are thereby sold at higher prices than they would be sold
otherwise. According to Chemical Marketing Reporter, " [counterfeiting and
trademark, infringement is the leading cause of lost trade -revenue among
chemical corporations, and it is by far the most potentially harmful practice
encountered by American companies in foreign markets."21 Furthermore, no
general method is available for solving this problem, because it heavily
depends on international cooperation and enforcement, which, in turn, are
often highly dependent on political factors. Nevertheless, the burdens
imposed on the U.S. chemical industry from counterfeiting and trademark
infringements may overshadow any effects caused by the CERCLA tax.22
3.2.9 Emerging Protectionism/Trade Barriers
With the recent worldwide recession, some countries began to adopt
protectionist measures limiting imports. The European Community, for example,
introduced temporary quotas in 1980 on U.K. imports of two types of synthetic
fibers.2* Similarly, following complaints from the Community's chemical
20 Ibid., p. 29.
21 Mark Perry, "The Minus Side of Oversees Chemical Trade," Chemical
Marketing Reporter, December 12, 1983.
22 Ibid.
23 International Monetary Fund, p. 20.
-------
3-17
industry in 1980, provisional antidumping duties were imposed by the European
Commission on imports by the U.K. from the U.S. of a chemical used in the
manufacture of plastics (vinyl acetate monomer) and chemical fertilizers.2k
Complaints have also been made by European Community producers concerning U.S.
exports of liquid fertilizers, xylenes, phenol, panoxylene, and
arthoxylene.25
Such protectionist moves contrast somewhat with the gradual reduction in
import tariff rates for feedstocks under the General Agreement on Tariffs and
Trade (G.A.T.T.). Nominal import tariff rates for CERCLA-taxed feedstocks are
shown in Exhibits 3-8 and 3-9. Note that in the 1980-1983 period, reductions
in tariff rates exceeded the amount of the CERCLA tax for several of the
feedstocks. For example, the tariff imposed by European Community member
countries on benzene imports from outside the Community declined from 16
percent of the price of benzene in 1980 to 12 percent of price in 1983. This
four percentage point decline is almost four times the magnitude of the
potential maximum hike in the price of U.S. exports of benzene because of the
CERCLA tax. The tax as a share of the price of benzene in mid-1984 was 1.2
percent.
3.2.10 Other Ways in Which Foreign Governments "Support" Their
Chemical Industries
Government "support" may include such measures as providing liberal
export financing, encouraging banks to provide favorable loans, allowing
producers to cooperate, subsidizing input prices, and substituting other
motives for profit motives as the basis for competition. U.S. chemical
producers, for example, have charged that'Mexico's national oil and gas
corporation, Pemex, is unfairly subsidizing the cost of Mexican natural gas
used in the production of ammonia, allowing Mexico to sell ammonia in the U.S.
at below-market rates.26 The Department of Commerce, however, has ruled
that Pemex is not subsidizing ammonia producers because it charges other
Mexican users the same price.27
Similarly, German and French ammonia producers have complained to the
European Community that their Dutch counterparts receive a 30 percent discount
on the price of natural gas (which accounts for 80 percent of the cost of
producing ammonia) from the state-owned company that sells Dutch gas.28 The
Germans and French assert that this allows the Dutch to undercut ammonia
prices in their home markets.
2<* International Monetary Fund, p. 20.
25 International Monetary Fund, p. 20.
26 "Industry Rises to Shutter the Open Trade Door," Chemical Week,
July 6, 1983, p. 10.
27 Ibid.
28 "Competitors Charge that the Dutch Aren't Fair," Chemical Week,
July 27, 1983, p. 39.
-------
EXHIBIT 3-8
NOMINAL IMPORT TARIFF RATES ON CERCLA-TAXED FEEDSTOCKS FOR SELECTED COUNTRIES
Import Tariff Rate As Percentage Of Feedstock's Price
Feedstock
Acetylene c/
Benzene
Butane
Butylene
Butadiene
Ethylene
Methane
Naphthalene c/
Propylene
To Iuene
Mixed Xylenes
Inorganic
Arnrnon i a
Antimony c/
Antimony Trioxlde
Barium Sulfide
Bromine
Cadmium
Chlorine
Chromium c/
Chromite c/
Potassium Dichrowate
Sodium Dichromate
Cobalt c/
Cupric Sulfate
Hydrochloric Acid
Hydrogen Flouride
Lead Oxide
Mercury c/
Nickel c/
Phosphorous
Stannous Chloride
Zinc Chloride
Z i nc Su I fa te
0.
1.
8.
1.
1980
a/
U.S.
7.2
Free
Free
Free
Free
Free
Free
6«yton-«-3.8
Free
Free
Free
3.9
9.6
9.6
1.8
6C/ton
NA
1.1
1.8
NA
1.6
2.8
5.8
1.1
Free
Free
7.2
6C/flask+5.8
1.8
70/ton
5.8
1.8
1.6
by
E . C.
17.5
16.0
17.5
NA
NA
17.5
1.5
3.0
17.5
16.0
16.0
11.2
NA
11.2
8.1
11.6
11.1
11.2
12.8
12.8
12.1
12.1
NA
3.2
9.2
7.9
12.0
6.7
10.1
9.2
NA
9.2
10.9
1981
t
U.S.
6.9
Free
Free
Free
Free
Free
Free
0.6C/ton+3.7
Free
Free
Free
3.8
9.0
9-0
1.7
1.30/ton
NA
3.8
1.7
NA
1.6
2.8
5.6
1.1
Free
Free
6.8
8.2lC/flask+5.
1.7
1.50/ton
5.8
1.8
1.6
L^.
16.1
11.0
16.1
NA
NA
16.1
1.5
2.9
16.1
11.0
11.0
11.2
NA
11.2
8.0
11.3
12.7
11.2
12.6
12.6
12.1
12.1
NA
3.2
8.7
7.8
11.8
5 6.7
9.7
8.7
NA
8.7
10.7
1982
U.S.
6.5
Free
Free
Free
Free
Free
Free
0.6C/ton+3.5
Free
Free
Free
3.7
8.5
8.5
1.5
3.90/ton
NA
3.1
1.5
NA
1.6
2.7
5.3
1.1
Free
Free
6.5
7.80/f lask+5.3
1.5
1.20/ton
5.3
1.8
1.6
E.C.
15.1
13.0
15.1
NA
NA
15-1
1.5
2.8
15.1
13.0
13.0
11.2
NA
11.1
7.6
10.9
11.9
11.1
12.5
12.5
12.1
12.1
NA
3.2
8.3
7.6
11.6
6.7
9.5
8.3
NA
8.3
10. 1
1983
U.S.
6.2
Free
Free
Free
Free
Free
Free
0.6C/ton+3-U
Free
Free
Free
3.6
8.O
8.0
1.1
3.50/ton
NA
2.5
1.1
NA
1.6
2.7
5.1
1.1
Free
Free
6.2
7.80/flask+5-O
NA
l.lC/ton
5.1
1.8
1.6
E.C.
11.8
12. 0
11.8
NA
NA
11.8
1.5
2.8
11.8
12.0
12, 0
11.1
NA
11.1
7.3
10.5
11. 0
11.1
12.1
12.1
12.1
12.1
NA
3.2
7.8
7.5
11.1
6.7
9.2
7.8
NA
7.8
10. 1
I
t-*
QO
Footnotes at end of table.
-------
EXHIBIT 3-8 (Continued)
NOMINAL IMPORT TARIFF RATES ON CERCLA-TAXED FEEDSTOCKS FOR SELECTED COUNTRIES
Import Tarifr Rate As Percentage or Feedstock's Price
Fgedstock
Potassium Hydroxide
Cupric Oxide
Sodium Hydroxide
Su I ru r i c Ac i d
Nitric Ac i d
Arsenic c/
Arsenic Trioxide c/
0.
0.
1980
a/
U.S.
13C/ton
6.1
15C/ton
Free
Free
U.8
Free
E.
1 1
3
12
3
9
2
1981
b/
C. U.S.
.7
.5
. 7
.2
.2
.'4
NA
0. 1 iC/ton
5.8
0. 150/ton
Free
Free
M.7
Free
E.
1 1
3
12
3
8
2
C.
.6
.5
.6
.2
.7
.3
NA
1982
U.S.
0. 090/ ton
5.6
0. 10
-------
3-20
EXHIBIT 3-9
CHANGES IN IMPORT TARIFF RATES ON CERCLA-TAXED FEEDSTOCKS
FOR SELECTED COUNTRIES
Feedstock
Percentage Decrease in Tariff Rate
From Previous Year
1981 1982 1983
a/ b/
U.S. E.G. U.S. E.G. U.S. E.G.
Organic
Acetylene c/
Benzene
Butane
Butylene
Butadiene
Ethylene
Methane
Napthalene c/
Propylene
Toluene
Mixed Xylenes
Inorganic
Ammonia
Antimony c/
Antimony Trioxide
Barium Sulfide
Bromine
Cadmium
Chlorine
Chromium c/
Chromite c/
Potassium Bichromate
Sodium Bichromate
Cobalt c/
Cupric Sulfate
Hydrochloric Acid
Hydrogen Flouride
Lead. Oxide
Mercury c/
Nickel c/
Phosphorous
Stannous Chloride
4.2
Free
Free
Free
Free
Free
Free
2.6
Free
Free
Free
8.0
12.5
8.0
NA
NA
8.0
0.0
3.3
8.0
12.5
12.5
5.8
Free
Free
Free
Free
Free
Free
2.7
Free
Free
Free
4.3
7.1
4.3
NA
NA
4.3
0.0
3.4
4.3
7.1
7.1
4.6
Free
Free
Free
Free
Free
Free
2.9
Free
Free
Free
3.9
7.7
3.9
NA
NA
3.9
0.0
0.0
3.9
7.7
7.7
2.6
6.3
6.3
2.1
6.5
NA
13.6
2.1
NA
0.0
0.0
3.4
0.0
Free
Free
5.6
5.2
2.1
11.8
0.0
0.0
NA
0.0
4.8
2.6
11.8
0.0
1.6
1.6
0.0
0.0
NA
0.0
5.4
1.3
1.7
0.0
6.7
5.4
NA
2.6
5.6
5.6
4.3
9.3
NA
18.4
4.3
NA
0.0
0.0
5.4
0.0
Free
Free
4.4
3.6
4.3
20.0
8.6
0.0
NA
0.9
5.0
3.5
6.3
0.9
0.8
0.8
0.0
3.6
NA
0.0
4.6
2.6
1.7
0.0
2.1
4.6
NA
2.7
5.9
5.9
2.2
10.3
NA
19.4 •
2.2
NA
0.0
0.0
3.8
0.0
Free
Free
4.6
5.7
0.0
8.3
3.8
0.0
NA
0.0
3.9
3.7
7.6
0.0
0.8
0.8
0.0
0.0
NA
0.0
6.0
1.3
1.7
0.0
3.2
8.4
NA
Footnotes at end of table.
-------
3-21
EXHIBIT 3-9 (continued)
CHANGES IN IMPORT TARIFF RATES ON CERCLA-TAXED FEEDSTOCKS
FOR SELECTED COUNTRIES
Percentage Decrease in Tariff Rate
From Previous Year
1981 1982 1983
Feedstock
a/
U.S.
b/
E.G. U.S. E.G. U.S. E.G.
Inorganic (Continued)
Zinc Chloride 0.0 5.4 0.0 4.6 0.0 8.4
Zinc Sulfate 0.0 1.8 0.0 2.8 NA 2.9
Potassium Hydroxide 15.4 0.9 18.2 0.9 22.2 0.9
Cupric Oxide 4.9 0.0 3.4 0.0 5.4 0.0
Sodium Hydroxide 0.0 0.8 33.3 0.8 0.0 0.8
Sulfuric Acid Free 0.0 Free 3.1 Free 0.0
Nitric Acid Free 5.4 Free 4.6 Free 6.0
Arsenic c/ 2.1 4.2 4.3 0.0 2.2 0.0
Arsenic Trioxide c/ Free NA Free NA Free NA
a/ Percentage reduction in tariff rate app.lies to U.S. imports of the
feedstock from IMF member countries.
b/ Percentage reduction in tariff rate applies to imports of the feedstock
by a European Community member country from other EC countries.
c/ Not necessarily a pure feedstock.
SOURCES: Official U.S. Tariff Schedule; Council Regulation and Common Customs
Tariff, European Community.
-------
3-22
3.3 OUTLOOK
The negative effect of the economic factors identified in this chapter on
U.S. chemical trade do not leave much room for optimism on the future
international competitiveness of U.S. commodity-type chemicals. The U.S.
competitive position in this area will likely continue to decline gradually in
the 1980s. Major reasons for this decline are highlighted below.
• The U.S. will face new competitition from oil- and
gas-rich nations with state-of-the-art capacity,
economies of scale, and direct government support.
• If the dollar remains strong in the next few years,
U.S. exports of price-sensitive, bulk commodities will
be adversely affected.
• With the expected further deregulation of U.S.
natural gas prices, the U.S. may lose an important
feedstock cost advantage. It is unclear, however, to
what extent natural gas prices will increase under
decontrol; some studies support higher prices while
others suggest that prices may not increase.29
U.S. chemical companies recognize these difficulties and have been shedding
overseas investments in petrochemical commodities, constructing smaller
operations in specialty chemicals.-30
In conclusion, there are several factors that can influence the
international competitiveness of U.S. chemical companies. Although the CERCLA
tax can, in theory, be included with these factors, at current tax levels the
effect of the CERCLA tax on the U.S. balance of trade would seem to be
relatively minor. The overvalued dollar alone, for example, may affect the
relative price of feedstocks by 20 percent or more, while the CERCLA tax is at
most two percent of the feedstock's price and is more likely to be less than
one percent of the feedstock's price. Furthermore, the CERCLA tax as a
percent of feedstock price tends to overstate rather than understate the
potential burden of the tax on the chemical industry, because:
1. Much of the CERCLA tax may be passed on to the
purchasers of chemicals, and thus, the burden may not
have to be totally absorbed by the industry;
29 Bureau of Industrial Economics, U.S. Department of Commerce, An
Update on the Effect of Energy Deregulation on the International
Competitiveness of the Petrochemical Industry, (Washington, D.C.: U.S.
Department of Commerce, August 1, 1983), p. 2.
3""The New Pattern of Overseas Investment," Chemical Week. August 3,
1983, pp. 26-30.
-------
3-23
2. The price effect of the CERCLA tax on intermediates
and downstream products is not likely to be greater
than the price effect on feedstocks, and in fact it is
likely to be smaller} and
3, The CERCLA tax on feedstocks is tax-deductable, which
indicates that the effective burden on the industry is
lower than it would be otherwise.
-------
4. ECONOMIC IMPACT OF CERCLA TAX ON U.S. TRADE
IN CERCLA-TAXED FEEDSTOCKS
Chapters 2 and 3 documented recent changes in the U.S. balance of trade
and explained the major economic factors that influence these trends. The
decontrol of oil prices in 1981, the global recession, and the high value of
the U.S. dollar are most frequently cited as the major influences on recent
U.S. chemicals trade and appear to overwhelm the potential impact of the
CERCLA tax. This chapter examines whether the CERCLA tax measurably affects
U.S. trade in the taxed feedstocks. Chapter 5 then examines the potential
impact of the CERCLA tax on U.S. trade in intermediate chemicals derived from
CERCLA-taxed feedstocks. The results in both of these chapters are
supplemented using a partial equilibrium supply-demand economic framework
geared towards isolating the effect of the CERCLA tax on U.S. trade in
feedstocks and intermediates.1 These results are presented under separate
cover.
4.1 INTRODUCTION
The potential impact of the CERCLA tax on U.S. trade in the taxed
feedstocks is assessed by first determining whether the U.S. is a net importer
or a net exporter of each of the taxed feedstocks. Because U.S. imports and
domestic production of feedstocks are subject to identical tax treatment under
CERCLA, only U.S. exports of taxed feedstocks are potentially put at a
relative disadvantage. If most of the taxed feedstocks are net imports, then
the effect of the CERCLA'tax on U.S. trade in the feedstocks is unlikely to be
significant and attention should be turned to potential impacts on U.S. trade
in intermediate chemicals derived from the CERCLA-taxed feedstocks.
If, qn the other hand, most of the taxed feedstocks are net exports, then
the potential effect of the CERCLA tax on U.S. trade in the feedstocks must be
examined more closely. For example, those net exported feedstocks where (1)
the magnitude of the CERCLA tax as a percent of feedstock price is relatively
high, and (2) U.S. trade turnover in the taxed feedstock is relatively high
could be analyzed in depth. By focusing on those feedstocks that are likely
to experience the largest balance-of-trade effects, the results of the
analysis would not be impaired. A supplementary report (presented under
separate cover) presents a partial equilibrium supply-demand framework that
can be used to estimate the impact of the CERCLA tax on U.S. trade in
individual taxed feedstocks and intermediate chemicals.
1The potential equilibrium model attempts to isolate the economic
effects of the CERCLA tax with events in all other sectors of the economy held
constant. This framework is reasonable, given the existing levels of the
tax. However, if significantly higher tax rates are considered, the interplay
between tax rates and other economic factors not considered in the partial
equilibrium framework becomes potentially significant. In addition, if
significantly higher tax rates are considered, it may be important to assess
the effects on the domestic chemical industry.
-------
4-2
4.2 FINDINGS
As indicated in Chapter 2, U.S. imports of CERCLA-taxed feedstocks exceed
U.S. exports. The U.S. trade deficit in taxed feedstocks amounted to an
estimated S725 million annually in 1980-1983. This deficit would have been
nearly 50 percent larger had it not been for large U.S. net exports of
xylenes, which equaled an estimated $330 million annually in 1980-1983. The
deficit is caused by large net imports of benzene, butadiene, cobalt, and
nickel, which totaled from $1.0 to $1.5 billion annually in this period.
As shown in Exhibit 4-1, most of the taxed feedstocks for which trade data
are available are net import goods. This, together with the fact that the
U.S. is an overall net importer of taxed feedstocks, suggests that the
potential for the CERCLA tax to adversely affect the U.S. trade balance in
taxed feedstocks is small. Nevertheless, those taxed feedstocks that are net
exports could experience a measurable decline in exports -- especially those
net exported feedstocks where the tax is a relatively high proportion of
feedstock price, the feedstock is a commodity, and the market is price
sensitive.
However, significant declines in these net exported feedstocks are
unlikely because only two of them incur a tax that is greater than one percent
of price -- xylenes and naphthalene -- with the remainder of the net exported
feedstocks facing a tax that is less than 0.5 percent of price (see Exhibit
3-1). For two of these net exported feedstocks -- sodium hydroxide and
potassium hydroxide -- the tax is less than 0.02 percent 6f price.
Furthermore, except for relatively large net exports of xylenes, U.S. trade in
these net exported feedstocks is small' and well below that of intermediate
products derived from the CERCLA taxed feedstocks. Thus, with the possible
exception of xylenes, it is unlikely that any declines in feedstock exports
would measurably worsen the overall U.S. trade deficit in CERCLA-taxed
feedstocks.
Even for xylenes, it would appear that the CERCLA tax has not been a
significant factor in explaining U.S. trade trends. Exhibit 4-2 compares U.S.
trade trends in xylenes with trends in the U.S. trade balance.in chemicals as
well as with trends in the total U.S. trade balance. It is important to keep
in mind that the CERCLA tax represents about 1.4 percent of the xylene price
as presented previously in Exhibit 3-1. The data from Exhibit 4-2 show that
xylenes have fared better than the U.S. trade balance generally and roughly on
par with the U.S. trade balance in chemicals, at least for the small amount of
data available.
Reasons for the poor U.S. trade performance of xylenes include its heavy
dependence on the market for polyesters, demand for which fell significantly
in the recession. U.S. export markets for polyester for fibers, however, are
due for a large increase as China, which stopped importing the U.S. product in
1982 and 1983 while negotiating a new textile trade agreement with the U.S.,
is expected to take a large amount of U.'S. polyester in 1984.* In the
2 Chemical & Engineering News, "Key Chemicals: p-Xylene," October 24,
1983, p. 17.
-------
EXHIBIT 4-1
U.S. TRADE POSITION IN CERCLA-TAXED FEEDSTOCKS a/
U.S. Net Imported Feedstock
U.S. Balance
Qua n t i ty
Feedstock {Thousand short
Benzene -500.1
Butadiene -394.0
E thy lene b/ -79.4
P ropy lene -214.1
Toluene -173.6
Ant imony -1.1
Antimony Oxide -10.2
Cadmium -2.2
Chromium -2.9
Chromite -65.9
Cobalt -7.4
Hydrochloric Acid -83.1
Lead Oxide -13.6
Nickel -82.8
Chlorine -173.5
Potassium Chroma te
and Dichromate -0.3
Z i nc Su I f a te -1.2
of Trade in 1983
Va I ue
tons) (Hi I I ion $)
-189.3
-199.4
-27.9
-50.8
-46.5
-1.3
-12.1
-0.6
-11.1
-8.5
-104.4
-3.4
-5.6
-383.2
-9.1
-0.3
-0.1
U.S. Net Exported Feedstock
U.S. Balance of Trade in 1983
Quant i ty
Feedstock (Thousand short tons!
Naphthalene b/ 2,8
Xylenes 545.8
Sodium Chromate
and Dichromate 5.2
Phosphorus 21.6
Zinc Chloride -0.2
Potassium Hydroxide 0.4
Sodium Hydroxide 585.8
Sulfuric Acid -169.9
Va I ue
(Hill ion .._$;
3.4
241.5
2.3
30.9
0.5
1.8
82.9
14.6
a./ Based on the estimated value traded in 1983. U.S. import and export
data~were unavailable for many or the CERCt.A-taxed feedstocks.
b/ U.S. balance of trade in 1982.
Source: Bureau of the Census, U.S. Department of Commerce, U.S. Imports
for Consumption and General Imports. F.T. 246, 1980, 1981, 1982, IM 146,
December 1983; and Data Resources Incorporated, Chemical Services Model.
-------
EXHIBIT H-2
CHANGES IN THE TOTAL U.S. BALANCE OF TRADE,
THE U.S. BALANCE OF TRADE IN CHEMICALS, AND
THE U.S. BALANCE OF TRADE IN XYLENE, 1979-1983
(Billions or Current Dollars)
Year
Total U.S.
Balance
of Trade
AnnuaI
Percent Change
in TotaI U.S.
Balance of Trade
U.S. Balance
of Trade in
ChemicaIs
AnnuaI
Percent Change in
U.S. Balance of
Trade in Chemicals
U.S. Balance
of Trade in
Xylenes
AnnuaI
Percent Change in
U.S. Balance of
Trade in Xylenes
1979
1980
1981
1982
1983
-10.2
-36.2
-39.7
-69^7 c/
-1,927 a/
10
-10
-7
-6U
9.
12.
11.
10. U
9.0
.8
.1
.7
59
2t»
-3
-11
N/A
0.32U b/
O.l»02
0.363
0.2U2
-10
-33
a/ Large percentage decrease results from a 1978 balance-of-trnde surplus
of $2.2 biI I ion.
b/ Excludes U.S. trade in o-xytene,
c/ Preliminary Estimate.
Sources: "Facts and Figures for the Chemical Industry," Chemical &
Engineering News. June 13, 1983, p. 5*4, and June 11, 198*4, p. 61: Council of
Economic Advisors, Economic Report of the President (Washington, D.C.:
Government Printing Office, 1983 and 198U).
-------
4-5
longer-run, completion of xylene plants abroad may have negative effects on
U.S. xylene exports. These factors, along with the general factors mentioned
in Chapter 3, appear to dominate the CERCLA tax in terms of explaining U.S.
trade in xylene.
The supplementary report presents estimates of the impact of the CERCLA
tax on xylenes and other selected taxed feedstocks using a partial equilibrium
supply-demand framework. Essentially, the framework predicts that in the case
of net exported feedstocks, an excise tax will lower the total value of
exports if the price elasticity of demand for U.S. exports in the rest of the
world is larger than one (an elastic or relatively "flat" demand curve).3
Such a tax will raise the total value of exports if the price elasticity of
demand for U.S. exports in the rest of the world is less than one (an
inelastic or relatively "steep" demand curve). In both cases, the quantity of
exports will decline because the rest of the world will purchase lower
quantities in response to the higher prices of U.S. exports. Thus, although
the physical quantities of feedstocks which are net exports will theoretically
decline because of the excise tax, exports of net exported feedstocks as
measured in dollars may or may not decline, depending upon demand elasticities.
3 Elasticity of demand is a number indicating how responsive consumers
are to price changes. The elasticity of demand coefficient reflects the
percent change in quantity demanded resulting from a one percent change in
price. Demand is termed elastic if the coefficient is greater than one,
indicating that quantity demanded changes by more than one percent when price
changes one percent. Demand that is highly elastic is illustrated by a
relatively "flat" demand curve. Demand is inelastic if the coefficient is
less than one, indicating that quantity changes by less than one percent when
price changes one percent. Demand that is inelastic is represented by a
"steep" demand curve.
Two economic factors affecting the elasticity of demand are the number and
acceptability of substitute products, and the importance of the product in the
purchaser's budget. Demand for a product with many good substitutes tends to
be elastic. Also, demand for a product that is a large item in the
purchaser's budget tends to be elastic.
-------
5. ECONOMIC IMPACT OF CERCLA TAX ON U.S.
TRADE IN INTERMEDIATE CHEMICALS
5.1 INTRODUCTION
The effects of the CERCLA tax on the U.S. balance of trade in intermediate
and final products are potentially important given the structural changes that
are taking place throughout the chemical industry. With the development of the
commodity petrochemical industry in feedstock-rich countries like Mexico,
Canada, Indonesia and Saudi Arabia, where natural gas feedstock cost advantages
are significant, the growth rate of the large-volume commodity chemicals
business in the United States and Western Europe is likely to be small.
Therefore, American and European companies which are highly dependent on
commodity chemicals are moving downstream into higher value-added products which
are more technology-intensive and less vulnerable to variations in raw material
prices. With an accelerating trend for U.S. companies to manufacture specialty
chemicals and high value-added intermediates, the assessment of the likely
effect of the CERCLA tax on downstream products becomes increasingly important.
Intermediate products, by definition, can be formed by one of the
following two processes:
polymerization of a single basic feedstock chemical; and
combination of two or more basic feedstock chemicals.1
In each of these cases, the process yield (i.e., the level of actual
output obtained for the level of input used) will determine the degree to
which the feedstock tax affects the intermediate's cost of production and
price. The higher the yield, the less the amount of raw material required to
produce each unit of output and therefore the lower the potential for
significant CERCLA tax effects. If production of a ton of intermediate
requires more than a ton of feedstock material, the feedstock tax could
produce a more than proportionate effect on the intermediate's cost of
production.2 Further, if each of the chemicals used to produce the
intermediate are taxed, then the effect of the CERCLA tax is likely to be more
than if only, say, one of them is taxed (e.g., ethylene oxide, a combination
of ethylene (taxed) and oxygen is likely to be affected less than
acrylonitrile, a combination of propylene'(taxed) and ammonia (taxed)). The
impact of the tax therefore is not likely to be uniform across intermediates.
:In some cases, this new material can be subsequently polymerized to
form another intermediate.
2That is an X percent tax on feedstocks could lead to an effect of
greater than X percent on the cost of producing intermediates. This would
affect the costs of producing intermediates, not necessarily their final
prices. The potential for such an effect on intermediate prices requires
that two conditions exist: (1) more than one ton of taxed feedstock is
required to make a ton of intermediate (i.e., yields are relatively low) and
(2) the intermediate can be made with minimal value-added.
-------
5-2
CERCLA tax effects are likely to be more pronounced on materials which
have high elasticities of both supply and demand.3 In the case of an
intermediate which has a large number of similarly priced substitutes, a small
increase in price may result in a relatively large reduction in the quantity
demanded. While it is difficult to obtain data on the demand elasticity of a
particular intermediate, an indirect indication of its magnitude may be
obtained from data on the availability of substitutes for the
intermediate.* In the analysis which follows, a substitutes analysis has
been attempted wherever possible, given the constraints on data availability
and resources. However, it must be remembered that most substitute materials
for these intermediates would be derivatives of other CERCLA-taxed feedstocks
and would themselves be subject to a possible price increase because of the
tax. Thus, the existence of substitutes is not by itself sufficient to
suggest that market effects due to the tax would be significant. However, the
existence of such substitutes does constitute a necessary pre-condition for
significant market effects due to the tax.
The concept of elasticity of supply is similar to elasticity of demand.
It measures the responsiveness of producers to a price change and is defined
as the percentage change in quantity supplied resulting from a one percent
change in price. The main factors influencing elasticity of supply are the
availability of substitute inputs, the time required for adjustment to take
place, and the availability of excess capacity.
A rough indication of the short-run elasticity of supply for an
intermediate can be obtained from capacity utilization. Low capacity
utilization (less than 80 percent is a good rule of thumb) can be used as one
rough indication of high short-run supply elasticities, because for a slight
increase in price, a manufacturer will increase production rapidly to cover
costs or maximize profits. For the petrochemical industry, capacity
utilization figures for the U.S. and European industry have been low over the
Elasticity of demand is a number indicating how responsive consumers
are to price changes. The elasticity of demand coefficient reflects the
percent change in quantity demanded resulting from a one percent change in
price. Demand is termed elastic if the coefficient is greater than one,
indicating that quantity demanded changes by more than one percent when price
changes one percent. Demand that is highly elastic is illustrated by a
relatively "flat" demand curve. Demand is inelastic if the coefficient is
less than one, indicating that quantity changes by less than one percent when
price changes one percent. Demand that is inelastic is represented by a
relatively "steep" demand curve.
* Two factors which suggest relatively elastic demand are (1) good
substitutes and (2) the item being a relatively large fraction of the
purchasers budget.
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5-3
past few years (60-65 percent over the period 1980-82)5 indicating high
short-run supply elasticities. In the analysis which follows, capacity
utilization figures will be examined to assess the likely short-run price
elasticity of supply for the intermediate.
Finally, it is interesting to note that in the course of the analysis of
effects of CERCLA tax on intermediates, the trade literature discussing the
performance and outlook of each of these intermediate chemicals did not, in
any instance, mention the CERCLA feedstock taxes as one of the factors
affecting production, sales, or trade of these chemicals. In most cases
competition from plants in feedstocks-rich countries, the strength of the
dollar, the recessionary conditions prevailing from 1980-82, and the economic
recovery since 1982 were stated as the factors responsible for the economic
performance of the chemical intermediate. This is significant because the
trade literature inevitably relies on statements from spokesmen of companies
producing that chemical or market research firms closely following capacity,
production and trade trends in the industry. It is reasonable to say that had
CERCLA taxes been significantly detrimental to the economic performance of the
chemical intermediates, industry insiders or industry watchers would have
raised the issue a number of times in the past four years.
5.2 SELECTION CRITERIA FOR INTERMEDIATES
Exhibit 5-1 lists the primary intermediates of the major organic chemical
feedstocks on which CERCLA taxes are levied. The criteria applied for
selection of these intermediates are as follows:
• The intermediate is traded significantly;
• The intermediate is manufactured with CERCLA-taxed
feedstocks as primary inputs;
• The intermediates selected reflect those where the tax
is a relatively large percentage of price;
• The intermediate has relatively little value-added,, so
the tax could represent a significant percentage of the
price of the intermediate;
• Data are available for the intermediate.
As Exhibit 3-1 showed, the CERCLA tax tends to be on the order of one
percent for organics, and much lower for inorganics (with the exception of
ammonia, chlorine, and chromite). Therefore intermediates selected tend to
represent organic chemicals to a great extent.
50ffice of Competitive Assessment, A Competitive Assessment of the U.S.
Petrochemical Industry, U.S. Department of Commerce, Washington, D.C., 1982,
p. 41.
-------
5-4
EXHIBIT 5-1
MAJOR PETROCHEMICAL FEEDSTOCKS AND THEIR PRIMARY INTERMEDIATES
CERCLA Feedstock
Benzene
Butadiene
Isobutane
n-Butane
Butylenes
Ethylene
Methane
Naphthalene
Propylane
Toluene
Xylene
First Level Intermediate
Ethylbenzene/styrene
Cumene
Cyclohexane
Maleic Anhydride
Nitrobenzene
Nitrile rubber
Neoprene
Polybutadiene
Styrene butadiene latex
tert-Butyl Alcohol
Acetic Acid
Butadiene
Maleic Anhydride
Butadiene
sec-Butyl Alcohol
Ethanol
Ethylene Bichloride
Ethylene Oxide/Ethylene Glycol
Acetaldehyde
Ethylbenzene
Polyethylene
Acetylene
Ammonia
Methano.1
Phosgene
Phthalic Anhydride
Polypropylene
2-Ethylhexanol
n-Butyl Alcohol
Acrylic Acid
Isopropyl Alcohol
Acrylonitrile
Dinitrotoluene
Toluene Diisocyanate
PTA/DMT
Source: Chemical & Engineering News, "Natural Gas Liquids Remain Strong
Petrochemical Feedstocks," March 12, 1984, pp. 17-51.
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5-5
The intermediates studied in this analysis are as follows:
CERCLA Feedstock Intermediate
Propylene Polypropylene
Benzene, Propylene Styrene
Benzene Cumene
Ethylene Ethylene Glycol
Ammonia, Propylene Acrylonitrile
5.3 ANALYSIS FOR INDIVIDUAL INTERMEDIATE CHEMICALS
The analytical framework followed in the analysis of each intermediate is
as follows:
A. Document that the chemical meets criteria for selection:
a. Is it traded significantly?
b. Is the price effect due to the feedstock tax of
sufficient order of magnitude?
B. Observe the trade trends from 1980 to the present.
C. Assess the relative importance of the feedstock tax in
determining those trade trends.
D. Briefly assess the trade outlook for this chemical and
specify the factors expected to govern this outlook.
E. Provide conclusions as to the effect of the CERCLA tax
on the U.S. balance of trade for this intermediate.
While the attempt has been to assess the tax effects on the chemicals
using similar analytic constructs in each of the profiles, this has not always
been possible on account of data gaps. An exhaustive data source for one
intermediate was not always sufficient for another. Therefore, the analysis
has had to rely on multiple data sources; care has been taken to ensure,
however, that the data is consistent and comes from reliable sources.
The analysis described above is useful for determining the relative
importance of the maximum CERCLA tax effect on these five intermediates, as
compared to other economic factors. Although it can be shown that other
economic factors better explain the trade trends in these intermediates, and
that the CERCLA tax at current levels is at most a minor influence, the
question still remains as to how the trade trends in these intermediates would
have differed, had the CERCLA tax not been in effect. An analysis to isolate
the trade effects of the CERCLA tax requires an economic model. The partial
equilibrium supply/demand framework discussed in Chapter 4 is used to estimate
the incremental effects of the CERCLA tax on the U.S. balance of trade in four
of these five intermediates. This supplementary analysis is presented under
separate cover. The primary analysis for the five intermediates follows in
the order listed above.
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5-6
5.3.1 Analysis for Polypropylene
A. CRITERIA FOR SELECTION
Polypropylene production was 4.433 billion pounds (2.2 million tons) in
1983,$ ranking third after polyethylene and polyvinyl chloride among
thermoplastic resins.
Large quantities of polypropylene are exported, 800 million pounds (0.4 million
tons) in 1983, (i.e., 18% of production).7 Polypropylene is a derivative of
propylene, a CERCLA-taxed feedstock. Domestic production of polypropylene is
shown below.
Year
1980
1981
1982
1983
Polypropylene
Production
(million pounds)
3,648
3,955
3,477
4,433
Capacity
(million pounds)
5,400
5,300
5,100
5,300
Capacity
Utilization
(percent)
68
75
68
84
Source: Chemical and Engineering News, June 11, 1984, p. 39; Chemical and
Engineering News, October 12, 1981, p. 12; Chemical and Engineering News,
May 28, 1984, p. 11.
B. INTERNATIONAL TRADE TRENDS
Large quantities of polypropylene are exported, while imports are very
small.8 Expor'/.s of polypropylene for 1980 to 1984 are shown below.
Year
1980
1981
1982
1983
Imports
(million pounds)
3.3
6.6
5.8
N/A
Exports
(million pounds)
680
620
737
790
N/A: not available.
Sources: Modern Plastics, January, 1982; Modern Plastics, January,
1984.
Thus, exports have increased by about 16 percent from 1980 to 1983, while the
CERCLA tax on propylene has been in effect.
6 Chemical and Engineering News, June 11, 1984, p. 39.
7 Chemical Marketing Reporter, May 2, 1984, p. 27.
* Chemical and Engineering News. August 31, 1981, p. 21,
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5-7
C. PRICE EFFECTS OF THE TAX
The material requirements for the production of 1,000 pounds of
polypropylene are as follows:9
Propylene 1100 pounds
Catalyst small quantity
Exhibit 5-2 shows the effect of the CERCLA feedstock tax on propylene and
polypropylene. The CERCLA tax rate for propylene is $4.87 per ton or 0.2435
cents per pound. The propylene tax amounts to slightly over one percent of
the price of polymer grade propylene. Based on the starting material
requirements and the propylene tax, the tax on the amount of propylene
required for the production of one pound of polypropylene is 0.2679 cents,
assuming full pass-through of the tax.
It can be seen that the tax represents at most 0.7 percent (based on
current prices) to 0.8 percent (based on 1980 prices) of the price of
polypropylene. Therefore, the price effect on the intermediate in this case
is of the same order of magnitude as on the feedstock (around one percent of
the price), on the assumption that the propylene tax is completely passed on
to the production of polypropylene and is fully reflected in the price of
polypropylene.
In order to evaluate the price effect of the CERCLA tax on propylene from
the time it has been in force (1980), it is instructive to look at the price
history of polypropylene since that time.
Business Price Business Price
Year Quarter C/lb. Year Quarter C/lb.
1980 1 35.0 1982 1 39.0
2 35.0 2 39.0
3 31.0 3 38.0
4 33.0 4 37.0
1981 1 35.0 1983 1 35.0
2 37.5 2 34.0
3 40.5 3 36.0
4 40.0 4 38.0
Source: Modern Plastics, January 1982, 1984.
The prices varied in the last 16 quarters from a low of 31.0 C/lb. to a
high of 40.5 C/lb., a variation of 8.5 C/lb. Between successive quarters the
price variation has ranged from 0 C/lb. to 4 C/lb. The CERCLA tax incidence
on polypropylene is 0.27 C/lb. This is an order of magnitude less than the
9"Superfund Financing, An Analysis of CERCLA Taxes and Alternative
Revenue Approaches," Los Angeles: Management Analysis Center, Inc., March 6,
1984, p. 57.
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5-8
EXHIBIT 5-2
EFFECT OF CERCLA TAX INCIDENCE ON
PROPYLENE ON POLYPROPYLENE PRICE
PROPYLENE (POLYMER GRADE)
POLYPROPYLENE
Year
1980
1981
1982
1983
Price*
(C/lb.)
19
23
23
19
Tax
(C/lb.)
0.2435
0.2435
0.2435
0.2435
Tax
(% of Price)
1.2815
1.0587
1.0587
1.2815
Price
(C/lb.)
34
38
38
36
Tax**
(C/lb.)
0.2679
0.2679
0.2679
0.2679
Tax
(% of Price)
0.7879
0.7050
0.7050
0.7442
*The price of polymer-grade propylene differs from the price of propylene
cited in analyses for acrylonitrile and cumene.
**Propylene tax:
1100 Ibs. propylene x 0.2435 C/lb. propylene
1000 Ibs. polypropylene
= 0.2679 C/lb.
polypropylene
Sources: Modern Plastics, January, 1982, p. 77; Modern Plastics,
January, 1984, p. 57.
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5-9
year to year variation. Therefore, price variations are likely to have been
on account of other market factors which were apparently far more significant
than the CERCLA tax. These will be assessed in greater detail in the next
section.
D. RELATIVE IMPORTANCE OF TAX IN DETERMINING TRADE TRENDS
The largest end use for polypropylene is for extrusion products, with the
major share going to fibers and filaments. Injection molding products,
including packaging, battery cases, housewares, and appliances, also are major
markets. The end-use pattern for polypropylene for the U.S. is as follows:
End Use Percent
Extrusion Products:
Fibers and Filaments 27
Film 8
Other 3
Total Extrusion Products 38
Injection Molding Products:
Packaging 8
Battery Cases and Other
Transportation Uses 6
Housewares and Appliances 5
Other 8
Total Injection Molding Products 27
Other 16
Exports 18
Source: Modern Plastics, January, 1984, p. 61.
Exhibit 5-3 shows the production of polypropylene for the years 1980
through 1983 compared to several other thermoplastic resins (high-density
polyethylene, polystyrene, and polyvinyl chloride) used in similar
applications, and to total thermoplastic resin production. This exhibit shows
that polypropylene production, while dropping more than production of most
thermoplastic resins in 1981-1982 (12 percent compared to 6 percent for total
thermoplastics), increased substantially more than most thermoplastic resin
production in 1982-1983 (28 percent compared to 15 percent for total
thermoplastics). These fluctuations reflect trends in the economy in general
and in the housing, automotive, and other markets where polypropylene products
are used. Further, it is instructive to note that though the CERCLA tax
incidence on all the thermoplastics mentioned is approximately 1 percent of
the price, the growth patterns differ, suggesting that other market factors
are far more significant in determining demand and supply.
Exhibit 5-4 shows quantities of polypropylene sold in three major use
areas, fibers and filaments, film, and packaging. It can be seen that the
largest market, fibers and filaments, showed the greatest fluctuations,
dropping by 17 percent in 1981-1982, and growing by 33 percent in 1982-1983.
Polypropylene fibers are widely used in carpet backing and indoor-outdoor
carpeting; this market is closely tied to the performance of the housing
-------
5-10
EXHIBIT 5-3
PRODUCTION OF POLYPROPYLENE AND OTHER THERMOPLASTIC RESINS
Production, million pounds Growth, percent
Thermoplastic Resin 1980 1981 1982 1983 1980-81 1981-82 1982-83
Polypropylene 3,648 3,955 3,477 4,433 8.4 -12.1 27.5
High-density Polyethylene 4,405 4,695 4,928 5,689 6.6 5.0 15.4
Polystyrene 3,521 3,621 3,191 3,570 2.8 -11.9 11.9
Polyvinyl chloride 5,470 5,707 5,326 6,067 4.3 - 6.7 13.9
Total Thermoplastic
resins (includes types
not listed above) 26,621 28,043 26,301 30,289 5.3 - 6.2 15.1
Source: Chemical and Engineering News, June 11, 1984, p. 39.
EXHIBIT 5-4
MAJOR USES OF POLYPROPYLENE
Sales, million pounds . Growth, percent
Use 1980 1981 1982 ' 1983 1980-81 1981-82 1982-83
964
297
224
1040
319
266
867
290
290
1151
345
359
7.9
7.4
18.8
-16.6
- 9.1
9.0
32.8
19.0
23.8
Fibers and Filaments
Film
Packaging
Source: Modern Plastics, January, 1984, p. 61; Modern Plastics, January, 1982.
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5-11
industry; the fluctuations in production are probably due to fluctuations in
the housing industry. The sales of polypropylene for packaging actually
increased in 1981-1982, when plastics sales in most areas dropped. Food
packaging is a growing area for polypropylene use;10 this market may be
responsible for polypropylene's good performance in this area.
There have been a number of recent improvements in polypropylene
production processes and resins produced. It has been suggested that change
of "revolutionary proportions" has been prevented only by the lack of new
capacity; however, new capacity building is expected to begin soon.11,12
The polypropylene industry is currently operating near capacity. It is,
therefore, difficult to increase output very much in the near term. A
(presumed) increase in demand resulting from (presumably) lower-priced
polypropylene (if the CERCLA tax were not in effect), could not, for this
reason, result in substantially higher polypropylene production.
E. TRADE OUTLOOK
Exports of polypropylene have been substantial (800 million pounds, or
about 18 percent of U.S. production, in 1983) during the years 1980 to 1983.
No large changes in international trade patterns for polypropylene are
predicted. While new petrochemical plants in Canada and Saudi Arabia may have
a great effect on trade in other plastics, particularly polyethylene,
polypropylene will probably not be much affected because most of the new
plants are based on natural gas and will not produce much propylene.13 The
CERCLA tax has not appeared to have had a readily observable effect on
exports, which have increased while the tax has been in effect, or imports,
which have remained small.
Several recent advances in polypropylene production technology may affect
the polypropylene market. Union Carbide and Shell Chemical claim that their
new manufacturing process, called Unipol PP, uses 75 percent less energy than
conventional processes, and that plants using this process are much less
expensive to build than conventional plantsll( A "high-yield bulk process,"
developed by Montedison in Italy, will be used by Himont in Louisiana.15
Himont, a joint venture of Hercules and Montedison, will be converting all its
plants (U.S. and European) to use the new Montedison technology. These plants
10 Miller, R.C., "Polypropylene," Modern Plastics Encyclopedia.
11 Modern Plastics, January, 1984, p. 48.
12 Modern Plastics, April, 1984, p. 16.
13 Chemical and Engineering News, September 7, 1981, p. 24.
1
-------
5-12
account for about 20 percent of world polypropylene capacity.16 Thus,
Himont is likely to be an important force in the world propylene industry.
These advances in production technology are likely to result in cost-savings
that would overshadow the CERCLA tax.
F. CONCLUDING COMMENT
Production, price, and world trade data suggest that the CERCLA tax on
propylene has had little observable effect on polypropylene production and
trade. Production has increased during the years 1980 to 1983, while the
CERCLA tax has been in effect. Production is currently close to capacity, and
additions to capacity are planned, indicating that the industry is doing
well. The state of the economy in general has probably had a much greater
effect on polypropylene production than the CERCLA tax.
5.3.2 Analysis for Styrene
A. CRITERIA FOR SELECTION
Styrene production in the U.S. was 6.99 billion pounds (3.50 million tons)
in 1983; it was ranked #20 in the top 50 chemicals in production volume.
Domestic production of styrene was as follows.
Year
1980
1981
1982
1983
Production
(millions of pounds)
6856
6679
5942
6990
Source: Chemical Products Synopsis, 1983; Chemical and
Engineering News t May 7, 1984.
U.S. trade in styrene is significant. In terms of net exports (i.e.,
exports less imports) of chemical intermediates, it ranked #2 behind low and
medium density polyethylene.17 Styrene, therefore is one of the largest
volume chemical intermediates traded. Estimated exports for 1983 were between
1.0 and 1.2 billion pounds (0.5 to 0.6 million tons) i.e., 14%-17% of the 1983
production. In contrast, ethyl benzene, the first order derivative of
ethylene and benzene which is almost entirely used for styrene production, is
traded insignificantly with only 1.4% of production exported. For the
purposes of this analysis. Therefore, it was rejected in favor of styrene.
B. INTERNATIONAL TRADE TRENDS
The import/export data for styrene over the past five years show that
styrene exports have remained steady at around 1 billion pounds (0.5 million
tons) a year.
14 Modern Plastics. March, 1984, p. 14.
171.187 billion Ibs. of net exports of LDPE; 1.003 billion Ibs. of net
exports of styrene.
-------
5-13
Imports Exports
Year Cmilllons of Ibs.) (million of Ibs.)
1980 51 1205
1981 28 1148
1982 21 1025
1983 N/A 1100 (estimate)
N/A = not available
Sources: Chemical Products Synopsis, 1983. FT 246 Annuals 1980,
'81, '82, '83.
The data also shows that the styrene export market is a low to no growth
market. With capacity increasing in Canada and other feedstock-rich
countries, the export market is likely to decline. Further, the major styrene
derivatives face mature markets with increasing competition from other
commodities both in the U.S. and abroad. This is likely to further dampen the
growth of styrene exports. In the short term, however, (i.e., in 1984),
prospects for styrene exports are bright because the overseas plants are not
expected to come on stream until the latter half of 1984. The CERCLA tax does
not appear to be a major factor affecting the exports of styrene.
C. PRICE EFFECTS OF THE TAX
The material requirements for the production of 1,000 pounds of styrene
are as follows:18
Benzene 865 Ibs.
Ethylene 320 Ibs.
Aluminium Chloride 10 Ibs.
Ethyl chloride small
The CERCLA tax rate for both benzene and ethylene is $4.87 per ton or
0.2435 cents per pound. Historically, tax incidence as a percent of price for
each of the feedstocks is shown in Exhibit 5-5.
The tax incidence on both ethylene and benzene is on the order of one
percent of the price. Because 1000 Ibs. of styrene need 865 Ibs. of benzene
and 320 Ibs. of ethylene, the price of styrene, assuming full pass through of
tax, increases by the amount shown in Exhibit 5-5.
Styrene tax incidence as a percentage of styrene price is of the same
order of magnitude as on the feedstock (1 percent of the price). This result,
it must be emphasized, is under the assumption that the CERCLA taxes are
completely reflected in the price of styrene. The effect of this one percent
price increase has to be compared with other market effects during the same
period to gauge the relative importance of the CERCLA tax.
18Lowenheim, F.A., and Moran, M.K., Faith Keyes and Clark's Industrial
Chemicals, New York: Wiley Interscience, 1975.
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EXHIBIT 5-5
EFFECT OF CERCLA TAX ON ETHYLENE AND BENZENE ON STYRENE
ETHYLENE
BENZENE
STYRENE
Year
1980
1981
1982
1983
Prire
0/Jb.
22
25
18
26
Tax
0/lb.
.2135
.8435
.2435
.2135
Tax
% or Price
1.
0.
1.
0.
09
96
33
92
Price
0/lb.
22
21
21
21
Tax
0/lb.
.2U35
.2135
.2U35
.21*35
Tax
% of Price
1 .
1.
1.
1 .
106
015
160
160
Price
0/lb.
30
33
28
33
Tax*
0/lb.
0.2885
0.2885
0.2885
0.2885
Tax
% of Price
0.96
0.88
1.01
0.88
Ul
I
its.
*Tax on styrene = 0.865 Ibs. of benzene x 0.2135 0/lb. + 0.320 Ibs. of ethylene x 0.2135 0/lb.
= 0.2885 0/lb. of styrene
Sources: Chemical Products Synopsis. "Styrene," Mannsville Chemical Products, Cortland New
York, 1983; Modern Plastics. January 1981.
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5-15
D. RELATIVE IMPORTANCE OF TAX IN DETERMINING TRADE TRENDS
The major end use for styrene is in the production of polystyrene.
Styrene is also used in the production of ABS and SAN resins. The end use
pattern for styrene in the United States is as follows:
End Use Percent
Polystyrene 60
ABS & SAN Resins 12
SBR elastomer 8
Unsaturated Polyster 8
Miscellaneous 6
Source: Chemical Products Synopsis, 1983.
Polystyrene: Sales of polystyrene (PS) are closely linked to the
production of durable and non-durable consumer goods and to the state of the
housing and transportation industries. As the sales of durable and
non-durable consumer goods increase, the volume of polystyrene used to package
them increases. With 30% of polystyrene produced going into packaging
applications, consumer goods sales are a major factor in the performance of
the polystyrene industry. In addition to packaging, polystyrene resins are
used in furniture, appliances, housewares and in construction. Therefore an
increase in housing starts clearly indicates an increase polystyrene
consumption. Polystyrene resins are also used for toys, drinking cups,
packaging lids, food trays, egg cartons and disposable plates and cups,19
items closely linked to the quantity of consumer spending. A rise in consumer
spending directly translates into increased sales of these polystyrene
products.
After a peak year in 1979, when production reached 4.0 billion pounds,20
the polystyrene industry has been in a slump on account of the recession which
affected the housing and automobile markets and consumer spending. With the
growth in the economy in 1983, polystyrene markets have improved, leading to
an increase in both sales and production. Sales increased from 2.91 billion
pounds in 1982 to 3.20 billion pounds in 1983.21 The production of
polystyrene for the past 5 years is shown below:
19 Chemical Products Synopsis, "Styrene," Mannsville Chemical Products
Company, Cortland, New York, November 1983.
20 Chemical and Engineering News, "Key Polymers - Styrene", June 25,
1984, p. 18.
21
Modern Plastics. January 1984, p. 62.
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5-16
Year
1978
1979
1980
1981
1982
1983
Production
(millions of pounds)
3823
4005
3521
3621
3191
3570
Source: Chemical and Engineering News, "Facts and Figures
at a Glance," June 11, 1984, p. 39.
Apart from the recession, the other factor which affects polystyrene
demand is the substitution for PS by other materials. Lower cost, more
versatile polyolefins have replaced polystyrene in a wide variety of packaging
applications. A relatively new commercial product, para-methylstyrene (PMS),
is a potential replacement for vinyl toluene and styrene monomer. PMS is
expected to be used as a replacement for styrene in the manufacture of acrylic
resins, unsaturated polyesters, polystyrene, ABS resins, and SAN resins.22
There has been however, a concerted effort by polystyrene manufacturers like
American Hoechst, Amoco, Dow, Georgia-Pacific, Goodson, Gulf, Mobil, Monsanto
Polysar, Texstyrene to modernize old resins or develop entirely new ones during
1983.23 It is possible, therefore, that the effects of the substitution for
polystyrene resins by other materials may be more than compensated for by the
expansion of polystyrene markets with the development of these new resins.
In order to evaluate the effect of CERCLA tax on polystyrene from the time
it has been in force (1980), it is instructive to look at the price history of
polystyrene since that time.
Year
Business
Quarter
Price
C/lb.
Year
Business
Quarter
1980
1981
1
2
3
4
1
2
3
4
46.0
46.0
39.0
41.0
1982
43.
45,
44.0
40.0
.5
.5
1982
1
2
3
4
1
2
3
4
Source: Modern Plastics, January 1982; January 1984.
40.0
38.0
38.0
39.0
36.0
37.0
38.0
42.0
22 Chemical Products Synopsis, "Styrene," Mannsville Chemical Products
Company, Cortland, NY, 1983.
23 Modern Plastics, "Big Doings in Polystyrene: More Resins, More
Suppliers," January 1984, p. 45.
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5-17
The prices have varied in the last 16 quarters from a low of 36. t) C/lb. to
a high of 46.0 c/lb. Between successive quarters the variation has ranged
from 0 c/lb, to 7 c/lb, If it is assumed that the increase in styrene price
on account of the CERCLA tax is passed on completely, the maximum increase in
price of polystyrene, assuming 110 Ibs. of styrene is required to make 100
Ibs. of polystyrene, will be as follows:
(110 Ibs. of styrene x 0,29 C/lb. of styrene)
100 Ibs. polstyrene
= 0.32 C/lb. of
polystyrene
This fractional increase in price, assuming that it was passed on to the
consumer, is nearly one order of magnitude less than the actual changes in
quarterly prices shown. Given that the price varied from a low of 36 c/lb.
to a high of 46.0 C/lb. and that the variations between each quarter were from
0 C/lb. to 7 c/lb., the CERCLA tax accounts for only a small fraction of these
variations under the most extreme assumption of tax pass through made above.
Therefore, the price variations were on account of other market factors (e.g.,
oil prices on the supply side, and the general state of the economy on the
demand side) which were apparently far more significant than the CERCLA tax.
ABS and SAN. Acrylonitrile-butadiene-styrene (ABS) is a plastic material
widely used in appliances, building and construction, transportation, and a
variety of other applications. It is used for its toughness, impact
resistance, and ease of molding and extruding. The other major plastic made
from styrene is styrene-acrylonitrile (SAN), which is used primarily in
housewares and appliances and some other applications. SAN is tougher and
more impact-resistant than styrene alone and in addition, it is transparent.
As shown below, consumption of ABS resins increased by 40 percent from 1982 to
1983; at the same time total plastics consumption increased by 12.5 percent.
ABS Sales
Year (million Ibs.)
ABS Price, SAN Sales, SAN Price,
(C/lb.) (million Ibs.) (C/lb.)
Reason for
Fluctuation
in Sales
1980
1981
1982
1983
957.8
921.9
723.1
1,014.1
64
74
79
93*
103.4
112.2
86.0
90.4
N/A
N/A
66
79*
Recession
Recession
Economic Recovery
Sources: U.S. International Trade Commission, Synthetic Organic Chemicals
(Washington: GPO, 1981 and 1982), Modern Plastics. January, 1983.
Thus, ABS resins have performed better than plastics in general, even with
the CERCLA tax in place. SAN, used in much smaller volumes than ABS, showed
less growth in consumption from 1982 to 1983; growth was about 5.1 percent.
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5-18
Factors which may affect ABS resin production include competition in some
areas from other plastics, particularly polyvinyl chloride, and demand for
molding resins. Demand for molding resins dropped 10 to 15 percent per year
from 1980 to 1982;2" ABS sales decreased by 3.7 percent from 1980 to 1981
and 21.6 percent from 1981 to 1982. This decline could have been entirely due
to the drop in demand for molding resins.
The CERCLA tax has had a minimal effect on capacity utilization rates for
styrene. Styrene capacity utilization was 108% of effective capacity (92% of
nameplate capacity) in the first quarter of 1984. In terms of effective and
nameplate capacity utilization for basic chemicals, in the 1st quarter of
1984, styrene was second only to toluene diisocyanate.2S In the first
quarter of 1983, however, the capacity utilization was only 75% of effective
capacity. These large variations in capacity utilization percentages have
occurred in the period when CERCLA taxes have remained uniform. Clearly, the
tax would not seem to be a significant factor in determining these rates. At
present, given this high capacity utilization figure, it seems unlikely that
styrene production can be increased significantly to cater to an increase in
demand resulting from, say, a decrease in price if the CERCLA tax were not in
place.
E. TRADE OUTLOOK
In 1983 an estimated 17% of styrene made in the United States was
exported.26 This is expected to decline substantially as styrene capacity
comes on stream in Canada and Mexico. An increase in imports from feedstock
rich Canada is inevitable as Shell adds 650 million pounds of Canadian
capacity in June/July 198427 and Dow adds an additional 220 million pounds
in 1985, bringing Canadian capacity to almost 2 billion pounds per year with
demand only expected to be 50% of capacity.28 The other source of imports,
Mexico, is likely to commission a plant of 300 million pounds in 1984. This
plant will reduce U.S. styrene sales to Mexico, an important U.S.
customer.29 Although the market picture for styrene exports is not bright,
the reduction in export volume is likely to be offset to some extent in the
2fc Chemical Week, December 1, 1982, p. 20.
25 Chemical and Engineering News, "Chemical Plant Capacity Use
Continues Comeback," May 2, 1984, p. 9.
26 Chemical Products Synopsis. "Styrene," Mannsville Chemical Products
Company, Cortland, New York, November 1983.
27 Chemical Marketing Reporter, "Styrene Producers Brace for Import
Surge," March 12, 1984, p. 4.
28 Chemical Products Synopsis, 1983.
29 Chemical Marketing Reporter, March 12, 1984, p. 13.
-------
5-19
near term by increased demand for specialty styrene resins.30 This
increased demand is linked to the performance of the housing and auto
industries, the biggest users of styrenic resins. According to one source,
these two industries may not do well in 1985 and 1986 if the large deficits
persist and interest rates go up.3i This has started to happen and growth
in these markets is slowing.32 If this persists, then U.S. producers of
styrene are unlikely to be in a position to clear acceptable returns on their
products in the coming years.
F. CONCLUDING COMMENT
On the supply side, evidence suggests that CERCLA tax is not a major
factor in determining prices of styrene and its derivatives, accounting for at
most 1% of price while quarterly prices fluctuate much more significantly. On
the demand side, demand for styrene is heavily influenced by the general state
of the world economy. Beyond the short run, domestic producers of styrene
will be competing with new capacity in Canada and Mexico which will dampen the
prospects for the domestic industry. At present, the reaction of the domestic
industry seems to be the development of new styrene resins. All of this
suggests that the CERCLA tax at current levels is at best only a minor actor
in determining the market for styrene.
5.3.3 Analysis for Cumene
A. CRITERIA FOR SELECTION
Cumene production in the U.S. was 3.30 billion pounds (1.65 million tons)
in 1983. It ranked 31 in production volume among chemicals produced in the
U.S.33 Two CERCLA-taxed feedstocks, propylene and benzene, are used in the
production of curaene. Virtually the only use of cumene is for the production
of phenol; 2.61 billion pounds of phenol were produced in 1983, giving phenol
a rank of 34 in production volume in the U.S.3" Phenol is used primarily in
the production of phenolic resins and bisphenol A (an intermediate in epoxy
and polycarbonate resin production). Domestic production of cumene for 1980
to 1983 is shown below.
30 Modern Plastics, "Big doings in polystyrene: more resins, more
suppliers," January, 1984, p. 45.
31 Chemical Marketing Reporter, March 12, 1984, p. 4.
32 The Wall Street Journal. "Heard on the Street," June 25, 1984.
33 Chemical and Engineering News, May 7, 1984, p. 9.
3" Ibid.
-------
5-20
Cumene Production Capacity
Production Capacity Utilization
Year (millions of pounds) (millions of pounds) (percent)
1980 3459 5350 65
1981 3309 5400 61
1982 2678 4600 58
1983 3304 4705 70
Sources: Chemical Products Synopsis, "Cumene," Mannsville Chemical
Products, Cortland, NY, April, 1983.
International trade in cumene is significant; U.S. exports were 21 million
pounds in 1982 (0.011 million tons), while imports were 171 million pounds
(0.086 million tons).3*
B. INTERNATIONAL TRADE TRENDS
The following table shows U.S. import/export data for cumene for 1979 to
1982. It can be seen that both imports and exports have declined during this
period. Reasons for this decline are discussed in Section D below.
IMPORTS AND EXPORTS OF CUMENE
Imports Exports
Year (millions of pounds) (millions of pounds)
1979 435 113
1980 305 63
1981 290 63
1982 171 21
Source: "Cumene," Chemical Products Synopsis, Mannsville Chemical
Products, Cortland, NY, April 1983.
C. PRICE EFFECTS OF THE TAX
The following materials are required for the production of 1000 pounds
of cumene:38
Benzene 800 pounds
Propylene 430 pounds
• Solid phosphoric acid (catalyst) small quantity
38 Chemical Products Synopsis. "Cumene," Mannsville Chemical
Products, Cortland, NY, April, 1983.
J* Lowenheim, F.A., and Moran, M.K., Faith, Keyes and Clark's
Industrial Chemicals. New York: Wiley Interscience, 1975.
-------
5-21
Propylene and benzene are both taxed under CERCLA; Exhibit 5-6 show the
tax rate, the price of the chemical, and the tax as a percent of the price
over the years 1980 to 1983 for propylene and benzene.
Based on the starting material requirements presented earlier and the tax
on propylene and benzene shown in Exhibit 5-6, the tax on the amount of
propylene needed for the production of one pound of cumene is 0.1047 cents and
the tax on benzene per pound of cumene produced is 0.1948 cents, assuming full
pass-through of the tax. Exhibit 5-6 also shows the tax on propylene and
benzene and the total tax amount as percentages of the price of cumene. It
can be seen that the total tax represents at most 1.2 percent (based on 1980
prices) to 1,4 percent (based on current prices) of the price of cumene.
Thus, the price effect on the intermediate is of the same order of magnitude
in this case as on the feedstocks, amounting to between 1.0 and 1.5 percent of
the price. This is the case assuming that the propylene and benzene taxes are
completely passed through and are fully reflected in the price of cumene. It
is instructive to look at the variations in price of cumene over the period
1980-83 and compare the variations in price to the CERCLA tax incidence.
Cumene prices have varied between 22 C/lb. and 26 C/lb. (on a yearly average
basis) over the four years under consideration; a variation of 4 C/lb.
Further, the year to year variation has been between 1 C/lb. and 3 C/lb. The
CERCLA tax incidence is on the order of 0.3 C/lb. This is one order of
magnitude less than the year to year variation. Apparently, therefore, CERCLA
tax incidence is not a significant factor in cumene pricing - there are more
important market factors which affect the price and explain the price
variation more successfully, as will be explained below.
D. RELATIVE IMPORTANCE OF TAX IN DETERMINING TRADE TRENDS
Virtually all (98 percent) of cumene produced goes into the production of
phenol.37 One U.S. producer (Kalama Chemical) produces phenol from toluene
rather than phenol; all other producers use cumene as the starting
material.38 In 1980 to 1982, 93 to 96 percent of the phenol produced in the
U.S. came from cumene.39 Production of phenol from cumene from 1980 to 1983
is shown below.
37 Acetone is also produced in the phenol production process, but since
it is a by-product of phenol production, acetone will not be considered in
analyzing the factors determining trade trends for cumene. It could become a
factor if acetone, currently consumed primarily by methyl methacrylate
manufacturers, became difficult to dispose of; this is not a problem at
present.
38 Chemical Products Synopsis, "Cumene," Mannsville Chemical Products,
Cortland, NY, April 1983.
39 U.S. International Trade Commission, Synthetic Organic Chemicals
(Washington, B.C.: GPO, 1981, 1982, and 1983).
-------
EXHIBIT 5-6
EFFECT OF CERCLA TAX INCIDENCE ON
PROPYLENE AND BENZENE ON CUMENE
Price
Yea r O/ 1 b .
1980
1981
1982
1983
17
19
19
20
PROPYLENE
Tax
0/lb. %
.2435
.2435
.2435
.2135
"Propylene tax: 0.430
D.C.
Benzene
Sources:
: 1980,
tax : 0.800
Tax
of Price
1.4323
1.2816
1.2816
Price
C/lb.
22
24
21
1.2175 21
Ibs. propylene x
Ibs. benzene
x 0.
BENZENE
Tax
0/lb.
.2435
.2435
.2U35
.2435
0.2435 0/lb
2435 0/lb.
Tax
% of Price
1.1068
1.0146
1.1595
1.1595
. propylene
benzene = 0
Price
0/lb.
25
26
23
CUMENE
Tax*
C/lb. %
0.
0.
0.
22 0.
= 0.1047 O/
cumene
.1948 0/lb
cumene
•
U.S. International Trade Commission, Synthetic Organic Chemical
1981, 1982, and 1983); Chemical Marketing Reporter. November 7,
2995
2995
2995
2995
Ib.
s (Wash
1983.
Tax
of Price
1.1980
1.1519
1.3022
1.3614
ington,
l/l
I
to
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5-23
Phenol Produced
from Cumene Phenol Price
Year (millions of pounds) (cents per pound)
1980 2433 30
1981 2486 30
1982 2023 26
1983 2481 35.5*
1983 phenol production from cumene is estimated from total phenol
production data, assuming 95 percent is from cumene.
*list price; all other prices unit sales value.
Sources: U.S. International Trade Commission, Synthetic
Organic Chemicals (Washington, D.C.: GPO, 1981, 1982,
1983); Chemical and Engineering News, May 7, 1984, p. 9;
Chemical Marketing Reporter, December 5, 1983.
Because phenol is the only significant product in terms of volume made
from cumene, and is produced almost exclusively from cumene, the end-products
of phenol may be considered the end-products of cumene. The largest end-use
of phenol is in phenolic resins, made by the condensation of phenol and
formaldehyde; the major use of phenol-formaldehyde resin is as an adhesive in
the production of plywood. Another important product of phenol is bisphenol A,
an intermediate for polycarbonate resins and epoxy resins. Phenol is also
used in the production of caprolactam, which is used for nylon. The end use
pattern for phenol is as follows:
End Use Percent
Phenolic Resins 37
Bisphenol A 21
Caprolactam 17
Other 25
Source: Chemical Week, September 22,
1982, p. 28.
Since the demand for cumene is clearly a derived demand, variations in demand
for phenol-based products would explain variations in demand for cumene.
These product demand patterns are discussed below.
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5-24
Phenolic Resins. At least 75 percent of phenolic resins are used in
construction, with the largest share going into adhesives for plywood
manufacture. Additional amounts are used for fiberboard, particleboard, and
insulation adhesives .<|C Phenol-formaldehyde is the most widely-used
adhesive for making plywood; there are few, if any, satisfactory substitutes.
Demand for phenolic resin depends largely on the housing industry, since
plywood is used primarily in construction. Production of phenolic resins (and
other tar acid resins) for 1981 to 1983 (years when CERCLA tax was levied) is
shown below.
Year
1981
1982
1983
Phenolic Resin
Production*
(million pounds)
2333
2006
2477
Reason for
Fluctuation in Production
Housing industry depressed
Improvement in housing
indus t ry, economy
""Gross weight basis
Sources: Production - Chemical and Engineering News, June 11, 1984;
Price - U.S. International Trade Commission, Synthetic Organic
Chemicals (Washington, D.C.: GPO, 1981, 1982, 1983).
It can be seen that from 1981 to 1982, phenolic resin production dropped by 14
percent; production increased by 23 percent from 1982 to 1983. Phenol
production from cumene showed similar variations during these years: from
1981 to 1982, production dropped by 18 percent; from 1982 to 1983, production
increased by 23 percent. The variations corresponded closely with the
performance of the housing industry. Clearly the state of the housing
industry is far more important in determining production trends for phenolic
resins (and also for phenol and cumene) than the CERCLA tax on feedstocks.
Bisphenol A. Bisphenol A, derived from phenol, is an intermediate in the
production of epoxy resins and polycarbonate resins.
The largest use of epoxy resins is in coatings. Coatings for containers,
particularly cans for beer, soft drinks, and some foods, take the largest
share; in this use, the basic market penetration is over, and growth is
expected to be a small fraction above overall growth in can use. Another
large use area is in automobile primers, where epoxy use is growing as demand
for corrosion resistance increases.ki
fc0 Chemical and Engineering News, November 21, 1983, p. 8.
ltl Chemical and Engineering News, November 21, 1983, p. 10.
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5-25
Polycarbonate resins are high-performance engineering resins used in
glazing, communications and electronics, and appliances.
The production of epoxy and polycarbonate resins for 1981 to 1983 is shown
below.
Epoxy Production Polycarbonate Production Reason
Year (million pounds) (million pounds) for Fluctuation
1981 336 250
1982 286 203 Recessionary
conditions in economy
1983 334 242 Economic recovery
Sources: Chemical and Engineering News, May 21, 1984, p. 21; Chemical and
Engineering News, February 22, 1982; Modern Plastics, January,
1984; Modern Plastics, January 1982.
It can be seen that production of both epoxy and polycarbonates dropped
sharply (by 15 percent for epoxy, 19 percent for polycarbonates) in 1981 to
1982, then recovered by about the same amount in 1982 to 1983 (by 17 percent
for epoxy, 19 percent for polycarbonates). It seems likely that the general
state of the economy characterized by reduced consumer spending and, in the
case of epoxy resins, state of the automobile industry, was a more important
factor in determining the performance of these resins than the CERCLA taxes on
benzene and propylene.
The CERCLA tax has had little or no demonstrable effect on capacity
utilization rates for cumene. Capacity utilization has varied over the years
the tax has been in effect. The variations are largely due to variations in
demand for phenol and availability of raw materials, particularly
propylene.*2 Cumene plants are currently (in 1984) operating near capacity
because of strong phenol demand by the housing and automotive industry.'*3
Phenol effective plant capacity utilization in the fiscal quarter of 1984 was
94%. Even if the CERCLA tax was withdrawn, there is little possibility of an
increase in supply because capacity is being fully utilized.'*'*
E. TRADE OUTLOOK
Cumene import quantities have been greater than export quantities for the
years the CERCLA tax has been in effect. Both imports and exports decreased
in 1980 to 1982. This decrease was probably largely the result of decreased
"2 Chemical Marketing Reporter. May 21, 1984, p. 13.
"3 Chemical and Engineering News, "Chemical Plant Capacity Use
Continues Comeback", May 28, 1984.
"" Chemical Marketing Reporter. May 21, 1984, p. 13.
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5-26
demand for phenol because of the depressed housing and automobile markets,
rather than an effect of the CERCLA tax. Because cumene plants are currently
operating near capacity,hs and phenol demand is projected to grow in
1984,l>6 it is unlikely that cumene will be available for increased exports.
Phenol plants are also operating near capacity. It is therefore possible that
imports of phenol, rather than cumene, will increase in response to increased
demand for phenol. Western Europe has excess phenol capacity, and a new plant
has opened in Japan."7 It is unlikely that the CERCLA tax will be an
important factor in determining international trade trends for cumene and
phenol.
F. CONCLUDING COMMENT
Production, price, and import/export data suggest that the CERCLA taxes on
benzene and propylene have had little observable effect on the production of
cumene, phenol, and phenol derivatives. Production of all these materials
have followed trends in the economy, particularly the housing industry;
currently, production of cumene and phenol is near capacity. Imports continue
to be greater than exports, and may increase. The most important factors in
determining market trends in cumene and phenol are the state of the housing
industry, the major market for phenol products, and the automotive industry,
another large market.
5.3.4 Analysis for Ethylene Glycol
A. CRITERIA FOR SELECTION
1. Trade Trends: Ethylene glycol is one of the original large volume
petrochemicals. U.S. production in 1983 came to more than 4.5 billion pounds
(2.25 million tons) worth about $1.1 billion.kt This is significant, given
that domestic consumption of ethylene, the largest volume petrochemical was
29.1 billion pounds (or 14.55 million tons).1*9 Domestic production of
ethylene glycol was as follows:
"s Ibid.
"* Chemical Marketing Reporter, December 12, 1983, p. 4
*' Ibid.
48 Chemical Products Synopsis "Ethylene Glycol," Mannsville Chemical
Products Corporation, (New York: November 1983).
A9 Chemical and Engineering News, "Natural Gas Liquids Remain Strong
Petrochemical Feedstock," March 12, 1984, p. 23.
-------
5-27
Year Production
(million of Ibs)
1980 4,387
1981 4,143
1982 4,309
1983 (est.) 4,500
Source: Chemical Products Synopsis, November 1983.
International trade in ethylene glycol is significant, with the U.S.
exporting 650 million pounds (0.325 million tons) in 1983 and importing 55
(0.028 tons) million pounds.50 In contrast, ethylene oxide, the first level
intermediate from ethylene used for the manufacture of ethylene glycol, was
traded insignificantly even though the production level was 5.2 billion
pounds.51 It was, therefore, rejected in favor of ethylene glycol for the
purposes of this CERCLA feedstock tax analysis.
The analysis which follows discusses qualitatively, with some empirical
support, the effect of the ethylene tax on ethylene glycol since it was
imposed in 1980.
2. Price Effects of the Tax: Material requirements to make 1,000 Ibs.
of ethylene glycol are as follows:52
Ethylene: 900 Ibs.
Air: 9,500 Ibs.
Silver (catalyst replacement): Small
The tax rate on ethylene is $4.87 per ton or $0.002435 per Ib.
Historically, ethylene tax incidence as a percent of price is shown in
Exhibit 5-7. On average, the price of ethylene increased by 1 percent on
account of CERCLA tax. Because 1000 pounds of ethylene glycol requires 900
pounds of ethylene, the price of ethylene glycol in turn increased by 0.219
C/lb.
Assuming all of the tax on ethylene is passed through to the price of
ethylene glycol, ethylene glycol tax incidence as a percent of price since the
year the tax was imposed is shown in exhibit 5-7.
50 Chemical Products Synopsis, 1983.
51 Chemical and Engineering News, "Key Chemicals: Ethylene Oxide,"
August 22, 1983, p. 12.
52 Lowenheim, F.A. and Moran, M.K., Faith Keyes and Clark's Industrial
Chemicals, Wiley Interscience, New York: 1975.
-------
5-28
EXHIBIT 5-7
EFFECT OF CERCLA TAX INCIDENCE ON
ETHYLENE ON ETHYLENE GLYCOL PRICE
ETHYLENE
Year
1980
1981
1982
1983
Price
C/lb.
22
25
18
26
*Ethylene
Tax
c/lb.
.2435
.2435
.2435
.2435
Glycol tax:
Tax
% of Price
1.09
.096
1.33
0.92
900 Ibs, of
ETHYLENE GLYCOL
Price
C/lb.
27
28
24
N/A
ethylene x 0.
Tax
C/lb. %
0.2190
0.2190
0.2190
0.2190
2435 C/lb.
Tax
of Price
0.81
0.78
0.91
N/A
- n 91Q
1,000 Ibs. of EG
of EG
N/A = not available.
Sources: Chemical Products Synopsis. "Ethylene Glycol," Mannsville
Chemical Products, Cortland, NY, November, 1983.
-------
5-29
The price effect, therefore, on the intermediate in this case is of the
same order of magnitude as on the feedstock (around 1 percent of the price).
This is the result under the assumption that the increase in the ethylene
glycol price fully reflects the CERCLA tax on ethylene. The effect of this
one percent price increase has to be compared with other market effects during
the same period to gauge the relative importance of the CERCLA tax.
B. INTERNATIONAL TRADE TRENDS
The import/export data for EG over the past 5 years show that EG exports
have nearly tripled since 1979.
Imports Exports
Year (Millions of Ibs.) (Millions of Ibs.)
1979 16 222
1980 24 246
1981 68 235
1982 37 579
1983(est.) 55 650
Source: Chemical Products Synopsis, 1983.
Section C addresses the importance of the CERCLA tax on ethylene in
determining these trends.
C. ANALYSIS OF RELATIVE IMPORTANCE OF THE TAX IN DETERMINING TRADE TRENDS
The major markets for ethylene glycol worldwide are automotive antifreeze
and polyethylene terephthalate (PET) resins used in polyester fibers and
plastics.53 The end use pattern in the U.S. is as follows:
End Use Percent
Antifreeze 38
Polyester Fibers 34
Polyester Plastics, Films, Bottles 18
Miscellaneous 10
Source: Chemical Products Synopsis, 1983.
53 Chemical Week, "Ethylene Glycol -- Massive Restructuring in a Crummy
Business," March 7, 1984, pp. 32-35.
-------
5-30
Antifreeze: The automotive antifreeze market is mature and relatively
static. Products based almost exclusively on ethylene glycol are now used
throughout the world, thus suggesting there are no close substitutes.
Further, the increase in price from around 7C/lb in the period before the
first oil shock in 1973/7A to 21C/lb in 1975 did not lead to any substitution
of ethylene glycol in its antifreeze use. Therefore, it is unlikely that a
small change in the price of ethylene glycol would drive antifreeze producers
to other chemicals. Antifreeze is formulated with many specialty chemicals
such as corrosion inhibitors, defoaming agents, antileak formulations and
water pump lubricants. A less than 1 percent change in ethylene glycol price
is likely to be reflected to an even lesser extent in the antifreeze price
because these specialty chemicals would likely dominate the cost. In
addition, antifreeze represents a small fraction of consumers' budgets and is
an item with few real substitutes. Therefore, cost increases due to the
CERCLA tax could be passed on to consumers. Any fluctuations in antifreeze
sales over the past three years can be explained by the recession, trends in
engine/ radiator sizes, and severity of winters. The CERCLA tax has caused
little change in ethylene glycol use.
Polyethylene Terephthalate: PET resin is used to make polyester fiber,
polyester plastics, fibers and bottles. The polyester fiber market over the
past ten years has grown only modestly. The growth area for PET has been its
use as a resin for manufacturing bottles. It has been extensively used for 2
liter soft drink bottles. 5il The growth pattern for PET bottle resin has
been as follows:55
PET Bottle Resin All Bottle Resin
(millions of Ibs) (millions of Ibs)
1977 31 1,484
1982 439 2,153
1987 (projected) 750-1,300 3,000-4,000
The advantages of PET over glass and PVC (its substitutes) are its much
lighter weight vis-a-vis glass, its glass-like transparency and lack of
negative health effects.56 (Residual monomer fears in PVC bottles led to
its approval order as a liquor packaging material being rescinded in the
1970s.) PET has always been substantially more expensive than glass. Given
that the present resin price ranges from $1.31-$2.05/pound57 and assuming it
was the same over the last three years and given the growth pattern above, a :
*" Chemical Week. "A Booming Market for PET Bottles," August 31, 1983,
p. 40.
ss Ibid., p. 40.
" Ibid.. p. 40.
17 Chemical Week. "Moving PET Resin into Engineered Products," October
12, 1983, p. 26.
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5-31
percent change in price does not seem to have affected its demand. Further,
PET also offers the great advantage of being recyclable. With the spread in
legislation mandating deposits on beverage containers, retailers find PET
bottles more attractive because they save the cost of handling glass
refillables. With PET being the only recyclable, glass-like material
available, the price elasticity of demand can be assumed to be low and likely
to remain so in the future.
The CERCLA tax has had a minimal effect on capacity utilization rates for
ethylene glycol. Union Carbide is operating its ethylene glycol facilities at
90 percent of capacity currently and the industry operated at 80 percent of
capacity in 1983.58 This is projected to increase in the short term.
D. TRADE OUTLOOK
In 1983, 12.9 percent of ethylene glycol made in the United States was
exported. This is expected to drop to near zero by 1987-8859 on account of
the EG capacity coming on line in Canada, Saudi Arabia and South East Asia.
This capacity is based on cheap natural gas feedstock available in these
regions. The ethylene glycol manufactured using this natural gas feedstock is
certain to make EG manufactured in traditional production areas (Europe and
United States) uncompetitive. The feedstock price advantage effect far
outweighs the likely CERCLA feedstock tax effect. The price differential in
feedstock prices is substantial: the Saudi"s have set a price of $0.50 per
million BTU60 for their feedstock, which is less than one fifth the average
natural gas price on the U.S. ($2.75 per million BTU).61 With feedstock
costs accounting for 80 to 90 percent of the EG cost of production, this
difference in costs is substantial. A one percent difference in the price of
feedstock in the U.S. therefore is not really of significance in the overall
context of the economics of the industry. The restructuring of the industry
and the rationalization of capacity is likely to shift the EG business to
areas where feedstocks are cheap and lead to a closure of perhaps 2.5 billion
pounds of ethylene oxide capacity worldwide.62
58 Chemical and Engineering News, "Carbide's Kennedy Sees Further
Petrochemical Shakeout, January 2, 1984, p. 17.
59 Chemical Week, March 7, 1984, p. 34.
60 Middle East Economic Digest, "Saudi Petrochemicals -- Dow's
Withdrawal Underlines Risks," December 24, 1982, p. 21.
61 Newberger, J., Poole, P., and Smith, B., "impacts of Natural Gas
Deregulation on the Nitrogenous Fertilizer Industry," Report prepared through
the Technology and Policy Program and Center for Policy Alternatives at MIT,
Cambridge, MA, March 1983, p. 7.
62 Chemical Week. March 7, 1984, p. 32.
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5-32
E. CONCLUDING COMMENT
The CERCLA tax on ethylene has likely had a negligible effect on EG
production and trade in the past few years. Other considerations have
outweighed the importance of this tax at current levels. Furthermore, future
prospects would likely not be significantly altered by the tax at current
levels. Problems of domestic overcapacity and competition with low-cost
feedstock plants in Canada and Saudi Arabia are likely to diminish the export
prospects of EG considerably in the future as well as lead to a major
restructuring of the industry. CERCLA taxes at current levels would likely be
a very minor factor affecting the U.S. balance of trade in ethylene glycol.
5.3.5 Analysis for Acrylonitrile
A. CRITERIA FOR SELECTION
Acrylonitrile production in the U.S. was 2.146 billion pounds (1.073
million tons) in 1983;*3 it was ranked number 38 among the top 50 chemicals
in production volume.6* The major uses of acrylonitrile are for acrylic and
modacrylic fibers (32 percent of the total in 1983) and
acrylonitrile-butadiene-styrene and styrene-acrylonitrile resins (15
percent).65 In addition, large quantities of acrylonitrile are exported; 35
percent of the acrylonitrile produced in 1983, or 751 million pounds, was
exported.6e Two CERCLA-taxed feedstocks, propylene and ammonia, are used in
the production of acrylonitrile. Domestic production of acrylonitrile is
shown below.
Acrylonitrile Production Capacity
Production Capacity Utilization
Year (millions of pounds) (millions of pounds) (percent)
1980 1,830 2,190 83.6
1981 1,996 2,190 91.1
1982 2,041 2,590 78.8
1983 2,146 2,275 94.3
Sources: 1980-1982 data -- Mannsville Chemical Products Corp.,
"Acrylonitrile," Chemical Products Synopsis, April,
1983; 1983 -- Chemical Marketing Reporter, April 16,
1984, p. 58.
63 Chemical Marketing Reporter, April 16, 1984, p. 58.
64 Chemical and Engineering News, May 7, 1984, p. 9.
65 Chemical Marketing Reporter, April 16, 1984, p. 58.
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5-33
B. INTERNATIONAL TRADE TRENDS
Acrylonitrile import and export data over the last five years show that
acrylonitrile exports have almost doubled in that period. Imports and exports
are as follows:
Year
1980
1981
1982
1983
Imports
(millions of pounds)
8.8
0.074
0.002
N/A
Exports
(millions of pounds)
390
642
803
751
N/A = not available.
Sources: Mannsville Chemical Products, "Acryloni-
trile," Chemical Products Synopsis, April,
1983; Chemical Marketing Reporter, April
16, 1984, p. 58; U.S. Imports for Consump-
tion and General Imports, 1980, 1981, 1982.
The fact that exports increased substantially during the period when the
CERCLA tax has been in effect suggests that the tax has not discouraged
exports. Acrylonitrile production was close to capacity in 1983; it is
therefore unlikely that production could have been increased substantially to
cater to a (presumed) increase in demand resulting from (presumably) lower-
priced acrylonitrile, had the CERCLA taxes not been in place. Without
increased production, it is unlikely that exports could have increased beyond
the rate they already have.
C. PRICE EFFECTS OF THE TAX
The material requirements for the production of 1,000 pounds of
acrylonitrile are as follows:67
Propylene
Ammonia
Air
Catalyst
1,175 pounds
475 pounds
97,554 cubic feet
Small
The CERCLA tax rate for propylene is $4.87 per ton or 0.2435 cents per
pound, while the rate for ammonia is $2.64 per ton or 0.1320 cents per pound.
As Exhibit 5-8 shows, the propylene tax amounts to 1.2 to 1.4 percent of the
price of propylene; the ammonia tax represents about 1.8 to 2.1 percent of the
price of ammonia.
6 6
Ibid, p. 58.
67 Lowenheim, F.A., and Moran, M.K., Faith Keyes and Clark's Industrial
Chemicals, New York: Wiley Interscience, 1975.
-------
5-34
Based on the starting material requirements and the tax on propylene and
ammonia, the tax on the amounts of propylene and ammonia required for the
production of one pound of acrylonitrile produced can be calculated to be
0.286C and 0.0627C, respectively, assuming full pass-through of the tax. It
can be seen from the Exhibit 5-8 that the tax represents at most 0.8 percent
(based on current prices) to 1.5 percent (based on 1980 prices) of the price
of acrylonitrile. Therefore, the price effect on the intermediate in this
case is of the same order of magnitude as on the feedstock (roughly 1 percent
of the price). This is the case under the assumption that the propylene and
ammonia taxes are completely passed on to the production of acrylonitrile and
are fully reflected in the price of acrylonitrile.
It is instinctive to look at the variations in price of acrylonitrile over
the period 1980-82 and compare the variations in price to the CERCLA tax
incidence. Acrylonitrile prices varied between 23 C/lb. and 34 C/lb. (in
terms of unit sales value) over the first three years of the CERCLA tax; a
variation of 11 C/lb. Further, the year-to-year variation has been between 2
C/lb. and 11 C/lb. The CERCLA tax incidence is 0.35 C/lb. (max). This is one
order of magnitude less than the year to year variation. Apparently therefore
CERCLA tax incidence is not a significant factor in acrylonitrile pricing -
there are other more important market factors which affect the price and
explain the price variation more successfully. These are discussed in the
next section.
D. RELATIVE IMPORTANCE OF TAX IN DETERMINING TRADE TRENDS
The largest end use for acrylonitrile is the production of acrylic and
modacrylic fibers. Acrylonitrile is also used in the manufacture of two types
of high-impact resins, acrylonitrile-butadiene-styrene (ABS) and
styrene-acrylonitrile (SAN). The end-use pattern for acrylonitrile in the
United States is as follows:
End-Use Percent
Acrylic and Modacrylic Fibers 32
ABS and SAN Resins 15
Adiponitrile 9
Acrylamide 4
Miscellaneous, including
nitrile rubbers and barrier
resins 7
Exports 35
Source: Chemical Marketing Reporter,
April 16, 1984, p. 58.
Acrylic Fibers. Acrylic fibers are used primarily in the manufacture of
wearing apparel, sometimes in blends with wool or nylon. Acrylic fibers are
also used in blankets, and there is some use of acrylics in carpeting.
-------
EXHIBIT 5-8
EFFECT OF CERCLA TAX INCIDENCE ON
AMMONIA AND PROPYLENE ON ACRYLONI1RILE PRICE
AMMONIA PROPYLENE ACRYLON 1 TRI LE
Price Tax
Year C/lb. 0/lb.
1980 6.50 0.1320
1981 1.140 0.1320
1982 6.75 0.1320
1983 6.25 0.1320
*Ammonia tax: 47
Propylene tax: 1
**List price.
Tax Price Tax
% or Price C/lb. C/lb.
2.0308 17 0.21135
1.7838 19 0.2U35
1.9556 19 0.21(35
Tax Price lax* Tax
% of Price C/lb. C/lb. % of Price
1.1068 23 0.3U88 1.5165
1.2816 3't 0.3H88 1.0259
1.2816 32 0.3H88 1.0900
2.1120 20 0.2U35 1.2175 U3»* 0.3'f88 1.8112
5 Ibs. ammonia * 0.132 C/lb ammonia
= 0.0627 0/lb.
1000 Ibs. aery loni tri le
175 Ibs. propylene x .2435 C/lb
1000 Ibs, aery loni tri le
Sources: Chemical Products Synopsis, "Ammonia,"
1983; U.S. International Trade Commission, Synthet i c
1981. 1982, and 1983); Chemical Marketing Reporter,
aery Ion i tri le
propy lene
= 0.286 C/lb.
aery Ion i tri le
Mannsville Chemical Products Corp., May,
Organic Chemicals (Washington, O.C.: GPO,
November 7, 1983.
I
u>
-------
5-36
Exhibit 5-9 shows the production of various types of synthetic fibers,
including acrylic, from 1973 to 1983. The drop in production of synthetic
fibers in 1981 and 1982 was generally considered to be a result of the
recession and imports of textiles and apparel.68 Acrylic fiber is
considered a low-growth, cyclical commodity.69 There was a downward trend
in acrylic fiber production before the CERCLA tax was imposed; from 1973 to
1978, production decreased from 742 to 726 million pounds, a 2.2 percent
decrease. During the same period, nylon and polyester production increased by
17.2 percent and 31.0 percent, respectively. It seems likely, then, that the
relatively poor performance of acrylic fibers during the time the CERCLA tax
has been in effect is not due to the effect of the tax, but is part of a
general trend. It might also be noted that the cellulosic fibers, rayon and
acetate, which are not subject to CERCLA feedstock taxes, show a-greater drop
in production in 1981-1982 than nylon and acrylic fibers, both of which are
derived from CERCLA-taxed feedstocks. Rayon production continued to drop in
1982-1983, when production of other synthetic fibers increased. The fact that
synthetic fibers not subject to feedstock taxes did not perform better,
relatively, than fibers derived from taxed feedstocks is one indication that
the feedstock tax has little effect on production of acrylic fibers. Factors
which are likely to be of more importance to the acrylic fiber industry are
rapidly increasing imports of textiles and apparel from China and other "low
wage" countries,70 and a recent drop in cotton prices.71
ABS and SAN. Acrylonitrile-butadiene-styrene (ABS) is a plastic material
widely used in appliances, building and construction, transportation, and a
variety of other applications. It is used for its toughness, impact
resistance, and ease of molding and extruding. The other major plastic made
from acrylonitrile is styrene-acrylonitrile (SAN), which is used primarily in
housewares and appliances and some other applications. SAN is tougher and
more impact-resistant than styrene alone and in addition, it is transparent.
As shown below, consumption of ABS resins increased by 40 percent from 1982 to
1983; at the same time total plastics consumption increased by 12.5 percent.
(The prices shown are average sales prices for 1980 to 1982, list prices for
1983.)
68 Chemical Week. August 11, 1982, pp. 10-11.
69 Chemical Marketing Reporter, April 16, 1984, p. 58.
70 Chemical Week, December 21, 1983, p. 10.
71 U.S. Industrial Outlook, 1984.
-------
EXHIBIT 5-9
U.S. SYNTHETIC FIBER PRODUCTION
Type of Fiber
Ce 1 1 ulos ic
Rayon
Acetate
Other Synthetics
Polyester
Nylon
Acryl ic
Source: Chemical
1223-
895
'162
2,901
2,175
7'l2
& Enq i
Product ion
1978 12
597
308
3,800 3,
2,550 2,
726
neerinq News.
[mil
'80
U90
316
989
358
779
May
1 ions of pounds)
1981
509
262
U,173
2,333
691
21, 198U,
1282
388
196
3, 168
1.927
62U
P- 21:
1983
375
228
3,5'I3
2.H18
671
Chemii
Growt h ( pe re enit J „ __
19_7_3r_L9_78 .1228JLL98Q i9_8_U_-_!9_8i 1981-1982 1982-1983
•33.3
-33.3
31.0
17.2
-2.2
•17.9
2.6
5.0
-7.5
7.3
3.9
-17.1
'1.5
-1. 1
•11,33
-23.8
-25.2
-2'4. 1
- 1 7 . '«
-9.7
11 and Engineering News, June 11, 1984, p. 38.
-3.U
16.3
11.8
25.5
7.5
t
OJ
-------
5-38
ABS Sales
Year (million Ibs.)
ABS Price, SAN Sales, SAN Price,
(C/lb.) (million Ibs.) (C/lb.)
Reason for
Fluctuation
in Sales
1980
1981
1982
1983
957.8
921.9
723.1
1,014.1
64
74
79
93*
103.4
112.2
86.0
90.4
N/A
N/A
66
79*
Recession
Recession
Economic Recovery
Sources: U.S. International Trade Commission, Synthetic Organic Chemicals
(Washington: GPO, 1981 and 1982); Modern Plastics, January, 1984;
Chemical Marketing Reporter, December 5, 1983; Modern Plastics,
January, 1982.
*List prices.
Thus, ABS resins have performed better than plastics in general. The
CERCLA feedstock tax does not seem to have had a significant effect on ABS
resin production. SAN, used in much smaller volumes than ABS, showed less
growth in consumption from 1982 to 1983; growth was about 5.1 percent.
Factors which may affect ABS resin production include competition in some
areas from other plastics, particularly polyvinyl chloride, and demand for
molding resins. Demand for molding resins dropped 10 to 15 percent per year
in 1980 to 1982;72 ABS sales decreased by 3.7 percent from 1980 to 1981 and
21.6 percent in 1981 to 1982. This decline could have been entirely due to
the drop in demand for molding resins.
The CERCLA tax had a minimal effect on capacity utilization rates for
acrylonitrile. Capacity utilization has varied over the years the tax has
been in effect. Acrylonitrile production was close to capacity in 1983 and
could not have been increased significantly. Because there does not appear to
be a problem of overcapacity in the industry, the supply would .tend to be
inelastic in the short term.
E. TRADE OUTLOOK
About 35 percent of the acrylonitrile produced in this country was
exported in 1983.73 One producer expects increasing domestic consumption of
acrylonitrile to lead to a 50 to 100 million pound decrease in exports in
19847* (or a 7 to 13 pecent decrease compared to 1983), i.e. fall from 850
million pounds to 800 million pounds in 1984.7B In addition, exports of
acrylonitrile and its derivatives are expected to decline with the improvement
72 Chemical Week, December 1, 1982, p. 20.
73 Chemical Marketing Reporter, January 2, 1984, p. 16.
7* Chemical Marketing Reporter. April 16, 1984, p. 58.
78 Chemical Marketing Reporter. March 17, 1984, p. 7, 16.
-------
5-39
of the economies of the major industrial countries.76 In the short term,
however, the worldwide capacity is not likely to change enough to affect U.S.
exports significantly.77 The CERCLA feedstock tax probably has little
effect on world trade in acrylonitrile.
F. CONCLUDING COMMENT
Production, price, and export data demonstrate that the CERCLA tax on
propylene and ammonia has had little observable effect on the production of
acrylonitrile and acrylonitrile products. Acrylonitrile production has
increased in the years from 1980 to 1983, and current production is close to
capacity; exports increased from 1980 to 1982, dropping slightly in 1983.
This performance suggests that domestic acrylonitrile producers have fared
reasonably well during the period the tax has been in effect. Other factors
such as textile and apparel imports from low-wage countries competing with
domestic acrylic fiber products, demand for molding resins, and the overall
state of the economy probably have had a much larger effect than the CERCLA
tax.
5.4 CONCLUSION
Exhibit 5-10 summarizes the effect of CERCLA tax incidence on each of the
intermediates discussed, assuming that the tax is fully reflected in the price
of the intermediates. In all cases, the tax is approximately one-third of one
cent per pound and represents approximately one percent of the price of these
intermediates. The CERCLA tax on feedstocks as a percentage of feedstock
price is also around one percent. Thus, for the intermediates profiled here,
no disproportionate effect of the feedstock tax on intermediates was
observed. The reason why this is so becomes apparent when one considers the
following factors:
• feedstock costs, as a general rule in the
petrochemical industry, account for 50 to 90 percent
of the cost of production of the intermediate chemical;
• process yields are around 90 percent; and
• there is near perfect competition in the
petrochemical industry worldwide78 (the prices which
the manufacturers obtain for their product are
therefore not very different from costs of production;
the value added in the production of intermediates is
therefore minimal).
76 Chemical Products Synopsis, "Acrylonitrile," Mannsville Chemical
Products, Cortland, New York, April 1983.
7 7
Chemical Marketing Reporter, April 18, 1983, p. 5, 15.
78 A.G. Kridl, "Petrochemicals Marketing: Market Share vs.
Profitability," Chemical Engineering Progress, March, 1984, p. 19.
-------
5-40
The higher the process yields, the less the amount of feedstock required
to produce each unit of intermediate and therefore the lower the potential for
the feedstock tax to affect intermediate prices. On the other hand, the
higher the feedstock costs as a percentage of intermediate production costs
the greater the likelihood that the feedstock tax will affect intermediate
prices. For the case of the intermediates studied here, the yields and
feedstock costs result in maximum affects on intermediate prices of the same
order of magnitude as the CERCLA tax on feedstocks (i.e., approximately one
percent of price).
In addition, the price variations over the years for each of these
intermediates have been orders of magnitude larger than the tax incidence.
Typically, the prices have varied from 1 c to 11 c per pound from year to year
while the tax incidence has been 0.3 C per pound. Thus, the CERCLA tax
represents at best only a small fraction of the price changes in
intermediates. Other economic factors, such as the relatively strong dollar,
and the state of the world economy appear to have been far more important in
determining the market for these intermediates.
The long-term outlook for trade in most intermediates does not look bright
on account of competition from plants in low cost feedstock countries. The
one exception is "propylene derivatives" where the United States will remain a
major international supplier in the 1982-90 period.79 This is due to the
fact that petrochemical plants in feedstock-rich countries are based primarily
on ethane feedstocks where the yield of propylene is minimal.80
The trend of a decline in chemicals exports is likely to be exacerbated in
the United States with the deregulation of natural gas prices. Natural gas
users would no longer have the cheap feedstock advantage they have had in the
past.
In the short term (in 1984-85), the industry is likely to suffer decline
in exports on account of the strong dollar and the developing country debt
burden which is forcing these countries to curtail their imports. The CERCLA
tax is a minor factor relative to these other factors which have major effects
on the U.S. balance of trade.
79 John S. Doerr, "Future Pattern of Propylene Business," Chemical
Engineering Progress, April, 1984, p. 23.
"> Ibid.
-------
EXHIBIT 5-10
EFFECT OF CERCLA TAX INCIDENCE ON INTERMEDIATE CHEMICALS ANALYZED
(ASSUMING FULL PASS THROUGH)
POLYPROPYLENE
Year
1980
1981
1982
1983
Tax
0/lb.
0.2679
0.2679
0.2679
0,2679
Tax
% of Price
0.78
0.71
0.71
0.7U
STYRENE
Tax
0/lb.
0.2885
0.2885
0.2885
0.2885
Tax
% of Price
0.96
0.88
1.04
0.88
CUMENE
Tax
C/lb.
0.2995
0.2995
0.2995
0.2995
Tax
% of Price
1.19
1.16
1.30
1.36
ETHYLENE GLYCOL
Tax
0/lb.
0.219
0.219
0.219
N/A
Tax
% of Price
0.81
0.78
0.91
N/A
ACRYLONITRILE
Tax
C/lb.
0.3U88
0.3*488
0.3U88
0.3U88
Tax
% of Price
1.52
1.03
1.09
0.81
Ul
1
£>.
\~*
N/A = not ava ilable.
-------
PART II
COMPARISON OF CERCLA TAX WITH
HAZARDOUS WASTE MANAGEMENT POLICIES
OF OTHER COUNTRIES
-------
6. OVERVIEW
6.1 INTRODUCTION
Part II of the CERCLA Section 301(a)(l)(F) study involves a comparison of
the CERCLA tax with foreign hazardous waste management policies. Its purpose
is to determine whether U.S. producers are potentially at a disadvantage
because they are being required to internalize costs associated with releases
of hazardous substances that their foreign competitors are not.
As part of the task to determine whether the CERCLA tax has affected the
U.S. balance of trade, a review was conducted of legislation and other policy
initiatives for all other countries belonging to the Organization of Economic
Cooperation and Development (OECD).1 The focus of the study is on OECD
countries because approximately 80 percent of overall world trade in chemicals
is concentrated among them.2 Most of the U.S.'s major chemical trading
partners belong to the OECD.
The OECD was created under a convention in 1960. Its purpose is to help
member countries with economic development and expansion on a multilateral
basis. It provides assistance through research, publications, and policy
recommendations. Members are not bound by actions taken by the OECD, but have
generally used OECD policy recommendations or "guiding principles" in
developing or reviewing legislation on specific issues. Foremost among the
principles concerning environmental issues is the "polluter pays" concept.
This principle is one of 14 guiding principles on the international economic
aspects of environmental policies passed in 1972. As its name implies, this
principle suggests that the burden of pollution control should be borne by the
polluter. However, the principle does not prohibit companies from passing on
environmental costs in the form of higher prices.3 Although the OECD
countries have adopted this principle, most countries have found it hard to
implement, because often the responsible party is unknown, or it is difficult
to determine the level of responsibility if more than one party is
responsible. Often, if the responsible party is known, it is financially
xThere are 24 member countries: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Federal Republic of Germany, Greece, Ireland,
Iceland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the
United States.
211
Clashing on the Environment," Europe, May-June 1983.
3 The Polluter Pays Principle: Definition, Analysis, Implementation,
Paris: OECD, 1975.
-------
6-2
unable to pay the costs of cleanup or remedy. As a result, governments often
end up shouldering much of the burden.*
In 1980, the European Community Commission, an arm of the European Econo-
mic Community (EEC),5 indicated that it would propose "pollution charges."
Such charges have not yet been enacted although the issue is still under
debate.
6.2 CURRENT STATUS IN OECD COUNTRIES
There are laws in some OECD countries that address problems similar to
those CERCLA is supposed to remedy. Furthermore, there appears to be some
preliminary movement in the direction of CERCLA-like legislation. Although
there is nothing now identical to the CERCLA tax, there are various cost
burdens for disposal or control of pollution. Four examples are presented
below:
Netherlands: The Dutch Parliament started debate in mid 1983 on who
should finance its national cleanup and testing of hazardous wastes. The idea
of establishing a 'Superfund' similar to the U.S. CERCLA fund has been
suggested, but to date no legislation proposing a tax on the chemical industry
has been introduced.6
To develop a temporary resource, the Dutch Parliament has passed an
interim land cleanup bill which gives the government the power to initiate
civil court action to recover its costs.7 This type of action follows the
OECD's "polluter pays" principle described previously. This interim measure
was done partly to take some action after discovery that Lekkerkerks, a
village near Rotterdam, was once a chemical dumping site. Public furor over
Lekkerkerks set off a national hunt for illicit waste-handling practices in
the Netherlands (1979). The national inventory that resulted revealed 4,000
illicit sites, of which 350 are thought to be dangerous. The Dutch government
has so far paid $50 million for the cleanup and has $60 million more budgeted
for national cleanup and testing for 1983. The Netherlands has embarked on a
five-year national cleanup and testing campaign estimated to cost $800
million. Because of the high costs of cleaning up Lekkerkerks and conducting
the national inventory, the question has arisen whether the government or
* The State of the Environment in OECD Member Countries, Paris: OECD,
1979, and The Polluter Pays. Paris: OECD, 1975.
"Member countries are: Belgium, France, Italy, Netherlands, the United
Kingdom, West Germany, Switzerland, Japan, Luxembourg, and Greece.
6"Europe's Plan for Coping with Toxic Waste," Chemical Week, March 2,
1983, p. 76-79.
7 Ibid.
-------
6-3
private industry should pay for the national cleanup.8 One option being
considered is a tax on chemical manufacturers similar to that imposed by
CERCLA.
Japan: In 1973, Japan passed the Pollution-Related Health Damage
Compensation Law which established a special agency, the Pollution-Related
Health Damage Compensation Association, to distribute funds to victims of
ambient air pollution (Class I) and toxic substances (Class II) as specified
by the legislation. Eighty percent of the funding for Class I illnesses comes
from a pollution tax on the volume of sulphur emissions from stationery
sources; the other 20 percent from a pre-existing motor vehicle tax. For
Class II illnesses, a "special levy" is imposed on individual polluting
sources that discharge cadmium, mercury, and arsenic.9
Germany: In Germany, a system of taxing virgin oils has been in place
since 1969. The tax is paid by manufacturers or importers of mineral
lubricating oils and reprocessed oil. The funds collected are paid into a
"Reserve Fund for Ensuring the Safe Disposal of Waste Oil." These funds are
later redistributed in the form of subsidies to firms which agree to the
collection and non-polluting disposal of such oil.10
The Federal Republic of Germany is considered to have the EEC's most
effective toxic waste control and disposal system. Germany's principal
environmental law, the Waste Disposal Law of 1972, is credited with closing
down 50,000 unregulated dumping sites and opening 5,000 new, regulated ones.
This law was updated in 1976 to institute special controls over toxic wastes.
At present, a further tightening in the toxic waste regulations is being
considered with the aim of making it more difficult for companies to escape
the waste control system by defining waste products as commercial goods or by
calling waste products materials destined for "recycling."11
Denmark: In Scandinavia, the tendency is toward centralized treatment
or storage of toxic wastes in special government plants. Denmark was the
first country to introduce a centralized waste disposal system; The system is
based on a plant, the Kommunekemi, that takes dangerous by-products from
collection points all over the country for destruction, recycling, or
storage. The Danish state railway provides the special tank cars for
shipment.12
"Paying the Piper for Lekkerkerks," Chemical Week, March 2, 1983.
9 Compensation for Pollution Damage, OECD, 1981.
10 Pollution Charges in Practices. OECD, 1980.
ll"Following U.S., Europe Awakens to the Dangers of Toxic Wastes," The
New York Tim.es. February 20, 2983.
12 Ibid.
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6-4
Prior to the enactment of environmental laws in Denmark, disposal of
chemical wastes was often in the form of dumping or discharge into the sewer
system. This accounts for why only a few incidences of buried chemical wastes
have been discovered in Denmark. Wastes which were poured into trash
containers for incineration were regarded as household wastes, not chemical
wastes. Manufacturers depended on scavenging companies for disposal and
generally did not know how wastes were disposed.13 Denmark's experience
with what is now known as hazardous waste mirrors that of other countries
attempting to establish effective environmental policy on chemical wastes.
The examples above are the closest to CERCLA in intent. Additionally,
most of the countries studied have laws that may be comparable to the Resource
Conservation and Recovery Act (RCRA). Generally these laws establish policy
on the control and management of hazardous waste including transportation,
treatment, storage and disposal.
In general, OECD countries seems to lag behind the United States in
recognizing the problems of hazardous wastes and instituting effective
remedies. One reason is that few countries admit to having numerous
"abandoned" hazardous waste sites. This is partly because the classification
of similar chemicals, and thus wastes, differs within the various countries,
thereby resulting in various definitions of "hazardous" and "waste." Also,
only recently have the environmental and health hazards of some chemical
wastes become evident. Often, wastes which now may pose problems were in fact
legally disposed of in the past. Records of the location of the waste were
not required and seldom were kept. Denmark's experience illustrates this
predicament.
Those countries that do acknowledge having abandoned hazardous waste sites
may have had only one or two incidents to date and therefore do not regard the
problem as being widespread. To date, only France, Denmark, and the
Netherlands have conducted a systematic national inventory of abandoned sites,
prior hazardous waste sites, or cases of illegal dumps. Typically, the
national inventory occurred after an accident or discovery of a large
abandoned site or particularly dangerous hazardous waste site. In the
Netherlands, Britain, France, and other countries which have had major
incidents involving hazardous wastes (either accidents or discovery of
abandoned sites), the government conducted and financed emergency cleanup
efforts. If the responsible party was known and determined to have adequate
financial resources, the government either recovered its costs for the cleanup
or has pursued court actions. Sometimes criminal charges are filed seeking
costs and damages or compensation.
Denmark and France are the only other countries besides the Netherlands
which have attempted formally to identify abandoned sites. In Denmark, 600
dumps have been recorded so far where chemical wastes are deposited or
l3First International Symposium on Operating European Centralized
Hazardous (Chemical) Waste Management Facilities, September 1982.
-------
6-5
buried,14 In France, 30 abandoned hazardous waste sites (called "points
noirs") which present grave risks to the environment have been identified.11
Additionally, several other countries have had major incidents involving
hazardous wastes. Britain, in late 1982, admitted to keeping a secret list of
497 industrial sites that constitute major hazards. The list is kept secret
for fear of terrorist action if it were published. The public has no way of
determining whether it is in danger from these sites. Further, there is no
indication whether these sites are abandoned or are still active.1'
The publicity about dioxin contamination following the 1976 explosion at
the Icmesa Chemical Factory in Seveso, Italy heightened the concern of London
residents regarding the dumping of dioxin-contaminated debris following an
explosion at a London industrial plant. The dioxin was removed and buried,
but the exact location was never disclosed. Residents are concerned that the
dioxin contaminated debris poses a danger to their water supplies.17
Cleanup operations of the Seveso explosion itself spawned an international
drama revolving around the disappearance of 41 containers of dioxin-
comtamin'ated waste. Although the Seveso cleanup began several years ago, the
most highly toxic waste was not removed from the remains of the factory boiler
until the summer of 1982 and until May 1983 all traces of the shipment were
lost. After an intense search, the 41 containers were finally located in a
barn in a village in northeastern France.18
6.3 EMERGING REMEDIES
As a result of media attention on incidents such as those previously
mentioned and increasing public awareness and concern over environmental
issues, most OECD countries now prohibit the abandonment of hazardous waste
and cooperate on those issues that require multilateral policy agreement. In
spite of these efforts, OECD countries still lag behind the U.S. in terms of
recognition and implementation of effective remedies, although there are signs
1<1First International Symposium on Operating European Centralized
Hazardous (Chemical) Waste Management Facilities; September 1982.
1SOECD Waste Management Policy Group, Environment Committee October 12,
1981.
16 International Environment Reporter. Bureau of National Affairs,
August 11, 1983.
17 International Environment Reporter, Bureau of National Affairs,
September 9, 1981; "A Mystery in Europe: Where is the Toxic Material?,"
Boston Globe, April 14, 1983.
18 International Environment Reporter, Bureau of National Affairs, June
8, 1983.
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of change. OECD has established common testing and classification of
chemicals, implemented notification systems concerning import and export of
hazardous wastes, and shared technical expertise on disposal methods.
The most politically sensitive of these issues has been the importing and
exporting of hazardous wastes and the transfrentier crossing of wastes.
Transfrontier crossing is where wastes generated in one country cause
environmental and/or health problems in another (e.g., acid rain). Companies
in countries which have very strict hazardous waste disposal laws, such as the
Netherlands, have sometimes employed questionable methods to dispose of their
wastes, including exporting to countries which have less stringent
environmental laws and/or to developing countries which tend to be less aware
of the dangers involved.19
East Germany, in an apparent attempt to obtain hard currency, has opened
several landfill facilities near the West German border to accept waste from
other countries.20 Whether these landfills are adequate for hazardous waste
is unclear.
In an attempt to address problems such as these, the OECD at its meeting
in May 1983 adopted nine guiding principles for member countries for developing
specific policies on exporting and importing of hazardous wastes:
• Importing countries have the primary responsibility
for protection of health and the environment against
risks from hazardous chemicals, but exporting countries
should assist them in making "timely and informed
decisions;"
• Exporting countries should inform importing countries
whenever they have banned or severely restricted the use
of a substance likely to endanger human health or the
environment;
• Exporting countries should inform importing countries
whenever the export of chemicals subject to such
restrictions has occurred or is about to occur;
• Minimum information to importing countries should
include the fact that the export has been or will be
made, chemical identification/specification, summary of
control action taken in exporting country, what
information is available, and where;
19 International Environment Reporter. SNA, May 12, 1982; "Hunt for
Foreign Dumping States for Toxic Waste Raises Concern" New York Times, June
28, 1981.
2""Europe's Plan for Coping with Toxic Waste" Chemical Week. March 2,
1983.
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• Exporting countries should agree to importing
countries' requests for an assessment of chemicals,
taking into account the protection of confidential data
in the importing country;
• Additional information needed in the importing country
would include a rationale for the control action taken
and circumstances of the export-import transaction;
• Common elements of information procedure (including
notification timing);
• Minimum procedures for handling information in
importing countries; and
• Information received in the importing country "should
not be used in any manner which would be inconsistent
with the provisions of the General Agreement on Tariffs
and Trade."21
The EEC has proposed a regulation that, if adopted, would be immediately
binding on transfrentier waste shipments.22 (Shipments differ from
"crossings;" shipments involve accepted means of transportation.) This action
occurred after the EEC environment ministers issued a statement saying that
"urgent action" is needed to "strengthen existing control over the
transfrentier movement of hazardous waste" and that a "legally binding
Community instrument" is needed to complete the existing directives in this
area.23 The issues involved include advance notification of transfrontier
shipments and approval by authorities in a given country to ship to or through
that country. EEC countries are divided on the approval issue but
environmentalists have been adamant that receiving countries must have the
authority to restrict or even forbid the import of hazardous waste. At
present, the issue remains unresolved.2'4
Another multinational organization which is addressing the problems
associated with control and management of hazardous waste across national
borders is the United Nations Environment Program (UNEP) which plans to issue
international guidelines to help control hazardous wastes and potentially
21 International Environment Reporter, Bureau of National Affairs, June
8, 1983.
22 International Environment Reporter, Bureau of National Affairs, July
13, 1983.
23 Ibid.
2" Ibid.
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harmful chemicals. UNEP has enlisted the support of both private industry and
the major environmentalist groups in this effort, and sponsored the first
global conference on industry and environment in September 1983.2I
The North Atlantic Treaty Organization's (NATO) Committee on the
Challenges of Modern Society (CCMS) commissioned a study of existing
legislation on the control and management of hazardous waste. Not
surprisingly, the study found that among countries there is "a vast gradient
in types of controls and the ways they are applied."26 The UNEP was more
blunt in its assessment of international environmental progress. In "The
Environment in 1982: Retrospect and Prospect," UNEP concluded that "the
technology and the framework for solving environmental problems such as these
are available, but the political will to deal with them is not. The prospects
for progress in advancing international environmental law will remain poor
unless governments reaffirm their commitments to cooperate in this effort.
The Report concluded that "more and better legislation is needed for
international cooperation in environmental emergencies, coastal zone
management, transboundary air pollution, trade in hazardous chemicals,
protection of rivers and inland waterways, mechanisms for preventing and
redressing pollution damage and environmental impact assessment."27
6.4 CONCLUSION
The European experience with hazardous wastes seems to be following the
American experience in that early environmental legislation covers primarily
oil spills, water, and air pollution. As more information is made available
on the dangers of hazardous wastes and pollution in general, attention focuses
on developing comprehensive legislation with strong preventive measures. Any
legislative gaps which might exist between the United States and its trading
partners seem to be narrowing.
25"U.N. Eyes Rules on Chemicals and Hazardous Waste," Christian
Science Monitor, June 7, 1983.
a*"Europe's Plan for Coping with Toxic Waste," Chemical Week. March 2,
1983.
27 International Environment Reporter, Bureau of National Affairs, May
12, 1982.
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7. COUNTRY-BY-COUNTRY REVIEW
7.1 INTRODUCTION
This chapter presents a survey of relevant environmental legislation and
policies of members of the OECD (except for the U.S.)- It includes a
discussion of background issues, including a brief description of the
country's chemical industry and experience with hazardous waste generation and
management issues, existing legislation and authorities germane to hazardous
waste, and emerging legislative trends for each OECD country.
The focus is on problems associated with funding clean-up actions,
response authorities, and liability in order to specifically determine whether
any foreign legislative authorities paralleled CERCLA. However, other
legislative authorities related to hazardous waste are also discussed.
The countries are organized alphabetically. Data sources are listed in
the bibliography following the country-by-country review. In some cases,
where indicated, sufficient information was not available to completely
characterize a country's hazardous waste management policies.
7.2 AUSTRALIA
Background
Hazardous waste disposal is an emerging problem in Australia. A shortage
of landfill capacity is beginning to develop, particularly for highly toxic
substances. In a number of cases, these wastes have been stored for long
periods while awaiting appropriate disposal facilities. Approval for landfill
disposal is being given for hazardous wastes, provided the quantities involved
are small and/or sufficient precautions have been taken. The main problem
Australia faces is the disposal of waste solvent--currently 2,000 to 3,000
liters are generated annually. A range of options are being considered,
including incineration and recycling.
Responsibility for hazardous waste regulation is divided between the
Commonwealth and the States. The Commonwealth coordinates procedures for
identification, notification and assessment of toxic chemicals and regulates
transportation of hazardous materials. Federal authorities also evaluate the
environmental impact of planned development. Imports and exports of toxic
materials as well as ocean dumping procedures are controlled by federal
authorities. The States are primarily responsible for control of emissions
and waste disposal operations. The emphasis of environmental legislation
varies from state to state.
Some state environmental protection authorities monitor and license
pollution emissions and waste disposal facilities, while agencies in other
states play a mostly advisory role. In general, polluters must manage their
own wastes and pay any clean up costs.
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The Australian Environment Council, which is comprised of environment
Ministers of the various governments, and its committees provide a framework
for considering issues of common concern, and coordinating action.
Legislation and Authorities
Commonwealth Law Environmental Protection (Impact of Proposals) Act
(December 13, 1974): Establishes Environmental Protection Agency (EPA) in the
Ministry for Conservation. The law grants no statutory authority to monitor
pollution and punish offenders. Rather, the act enables the EPA to assess the
environmental impact of planning decisions.
State Laws
Victoria. Environmental Protection Act 1970: Generally prohibits
pollution which poisons soil, groundwater or the air. Directs the state
Environmental Protection Authority to monitor and license effluents (Section
45(1). The state may regulate the quantity and type of emissions and require
industry to keep records of pollution discharges. A scale of fees which tends
to provide inducements to reduce discharge may be implemented. Authorities
may prosecute violation of any of these provisions.
New South Wales. Waste Disposal Act (April 1, 1975): The Metropolitan
Waste Disposal Authority (MWDA) is authorized to require waste disposal and
treatment facilities, transporters, and generators to obtain registration
certificates. The MWDA may charge for the certificates and impose stringent
conditions on the permit. In addition, the authority may establish regional
depots for toxic waste collection, treatment, and disposal.
Western Australia. Health Act and Health Regulations (March 1983): The
Commissioner of Public Health the authorized to order special treatment of
waste where required. This has been done for wastes such as cyanide and
chlorinated hydrocarbons. In such cases, the waste generator must pay for
treatment. In addition, the regulations provide for which sites may be used
to dispose liquid waste.
Tasmania. Environment Protection Act (1973) and Waste Disposal
Regualations (1974): The Act provides controls on the emission of
pollutants. Two schedules are designated in the regulations, listing
environmentally dangerous wastes, and hazardous wastes. The disposal of these
wastes requires prior approval.
Trends
The system of divided control over toxic chemicals and wastes has come
under increasing criticism from the Australian Environmental Council in the
last few years. In 1980, a Parliamentary committee recommended uniform
notification and labelling procedures for chemicals and demanded that
information on toxic chemicals be released to the public. A draft Model Code
on Road and Rail Transport of Dangerous Goods would tighten manifest and
register reporting requirements. An extra two percent sales tax on tires has
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been suggested as a means of encouraging recycling and internalizing disposal
costs.
In New South Wales, new legislation to control the introduction, use, and
disposal of environmentally hazardous chemicals will soon be introduced to the
state parliament. The proposed legislation, the Environmentally Hazardous
Chemicals Act, will permit the State Pollution Control Commission to impose
conditions for the cleanup of abandoned sites and for the effective management
of existing and future sites. This will be the first statute specifically
addressing the cleanup of wastes from abandoned waste sites.
The Northern Territory is currently developing legislation to control the
hazardous waste situation, although it is not yet considered a problem because
of the low level of industrial activity.
7.3 AUSTRIA
Background
Most of Austria's hazardous wastes are disposed of at the single Austria
toxic waste facility, located in Vienna. This incinerator treats about
1,600,000 tons of wastes each year, most of which is sewage sludge. It is
co-owned by the City of Vienna and a private waste disposal firm. Small
quantities of solvents, emulsions and oily liquids are imported from Denmark
and Hungary for disposal in Vienna. Some chlorinated hydrocarbons are
exported for incineration at sea or treatment in Germany.
Legislation and Authorities
Austrian Constitution: The Federal Government is responsible for the
following:
• wastes produced in trade and industry (excluding
those that are similar in composition and volume to
household wastes);
• waste produced in hospitals;
• carcasses;
• slaughter house wastes; and
• explosive wastes.
The provinces each, have their own hazardous waste management laws.
Federal Act of March 7, 1979: The Federal Government has special
responsibility for waste oil treatment. Waste oil is defined as used and
soiled liquid products , and includes other mineral oils, synthetic oil, oil
refuse, water oil compounds, and emulsions.1 Federal collection centers
receive waste oil for treatment and disposal.
Trends - No information currently available.
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7.4 BELGIUM
Background - No information currently available.
Legislation and Authorities
July 22, 1974 Law. Article 1 general definition of toxic waste.
Article 2 prohibits abandonment of waste. The law authorizes the state to
participate in the creation of a company called the "Fund to Guarantee the
Destruction of Toxic Waste." The purpose of the company is twofold:
1) Commercial and Industrial Duties:
Facilitates the destruction, neutralization, or elimination
of toxic waste by either:
Providing seed money to assist in the capital
formation of a new company; or
-- Forming the company itself and performing the waste
management function.
2) Emergency Response Duties:
Gives the fund the authority usually entrusted to public
institutions or the state whsn the mission is beyond private
initiatives.
In the case of bankruptcy or insolvency of those
persons responsible for the destruction of toxic
waste, the fund may finance and complete site
clean-up operations.
February 9, 1976 Royal Decree: Applies to the following transactions
concerning hazardous waste:
• Acquisition (Articles 11-15); • Transfer;
• Holding; • Storage;
• Export; • Transit;
• Transformation; • Destruction;
• Neutralization; • Elimination.
The Royal Decree creates an Accreditation Commission. The Commission
accredits off-site centers for the destruction and neutralization of toxic
waste. Requests for accreditation must contain a formal engagement to take
out an insurance policy containing no restrictive clauses on civil liability.
lSection 1(2) of the Mineral Oil Act of 1959.
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Decree of July 2, 1981: Establishes a waste company responsible for
eliminating, collecting, treating, and recuperating household and industrial
wastes (i.e., used oils, agricultural, dangerous, and special wastes). The
legislation does not apply to toxic waste.
Law of December 28, 1964; The governor of a Province may take measures
regarding unlicensed waste sites. Fines may be levied or the site may be
cleaned up at the expense of the responsible party.
Trends - No information currently available.
7.5 CANADA
Background
Canada generates about one million tons of hazardous waste each year.
Existing treatment and disposal facilities cannot accommodate all of these
wastes, and excess wastes are stored temporarily or exported to the United
States for disposal. The shortage of treatment facilities is particularly
severe in Ontario, Quebec, and the Maritime Provinces, where waste generating
industries are concentrated.
Regulatory authorities are defined by several national and provincial
statutes and divided between federal and local agencies. National authorities
regulate toxic waste transport and off-shore disposal. Of Canada's annual
total of about 3,000 environmental emergencies, about 400 require federal
involvement in the cleanup. The federal government maintains a monitorir-/
system and may investigate suspected illegal disposal of hazardous wastes.
Some provinces authorize localities to regulate waste flows, disposal
practices, and site selection. In some cases, provincial authorities may
force responsible parties to clean up toxic waste discharges and correct
resulting environmental damage.1
Legislation and Authorities
The Federal Department of Environment is mandated to act on hazardous
waste management under the following authorities:
1) Transportation of Dangerous Good Act 1980 (TDGA): For
international and interprovincial movement of hazardous
waste. New regulations being developed under TDGA to
control the international and interprovincial movement of
hazardous wastes include:
• A listing of hazardous wastes and;
xFor instance, in 1981, Saskatchewan promulgated Environ- mental Spill
Cont ro1 Regu1at ions.
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• A "cradle-to-grave" tracking system for movement of
hazardous wastes. This is to ensure that hazardous
wastes crossing interprovincial or international
boundaries are delivered to authorized storage,
treatment, and/or disposal facilities.
2) Fisheries Act (1867) and TDGA: Controls leakage from
landfills on a site-specific basis with spills of certain
types specified by the Act.
3) Authority to ensure proper management of hazardous wastes
generated by federal activities.
4) Ocean Dumping Control Act (ODCA 1975): Applies to dumping
of materials at sea or their destruction at sea, including
incineration.
5) Management of federal crown lands and the use of crown lands
for siting of hazardous waste treatment and disposal
facilities.
6) Environmental Contaminants Act of 1976: Aimed at
protecting human health and the environment from the release
of substances that contaminate. Included in the Act are
provisions on emissions and toxic waste disposal.
Authorities may investigate industries suspected of treating
hazardous waste incorrectly.
Each province has separate waste management legislative authorities. For
example: Saskatchewan's Public Health Act (Regulations 198/72) directs
localities to provide a waste collection system and sufficient landfill
disposal facilities to accommodate demand. Environmental Spill Control
Regulations (March 17, 1981, ammended April 1, 1983) require that those
responsible for an accidental release of toxic waste report the spill to the
Department of the Environment (Saskatchewan), the owners of land affected by
the spill, and the owner of the waste. The controller and owner of the waste
must clean up the spilled contaminants or fate fines or imprisonment.
Trends
Several waste storage and treatment facilities are now being planned in
Canada. The Ontario Waste Management Corporation, a crown agency, is
responsible for the development and operation of an integrated waste
management facility. A review of existing treatment and disposal technologies
is now being conducted. Quebec is establishing an incineration plant in
Blainville and is considering the development of other incineration facilities
in the province. Alberta and British Columbia have requested private sector
proposals for comprehensive waste management systems.
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7.6 DENMARK
Background
About 150,000 metric tons of hazardous waste are produced each year in
Denmark. Municipalities and the federal Ministry of the Environment share
responsibility for toxic waste management and monitoring. The Danish system
of waste management is the most advanced in Europe. Hazardous wastes may be
treated on-site if the producer uses government approved treatment methods,
but the majority of dangerous wastes are taken to central collection stations,
which are scattered throughout the country and operated by localities. From
these stations wastes are transported to Nyborg for treatment at Kommunekemi,
AG, a cooperative federal treatment and disposal facility. About 56,000 tons
of toxic waste are treated at this facility each year. Most of the waste is
incinerated or buried in landfills, and a duty is charged which corresponds to
the treatment cost.
The duty is an amount corresponding to the expenses for transportation and
treatment, and to the nature of the waste. For some types of waste, an
allowance is paid to the generator of the waste (i.e., oil waste with a high
percentage of recoverable oil). Other wastes have a basic rate with an
additional rate relating to the content (i.e., basic rate for treatment of
organic compounds containing halogen is 1,500 Danish Kroner per ton, about
$250) plus an additional charge that depends on the concentration of halogen
in the waste.l
Legislation and Authorities
Order #212, March 17, 1976 for Chemical Waste:2 Any person storing
conveying, or disposing of chemical wastes is responsible for ensuring that
such activities do not pollute the air, soil, groundwater, or surface waters
(i.e., the sea). The Communes are empowered to regulate in all these areas.
(Section 2)
The polluter or any person who detects such pollution in property must
inform the local authorities. Persons polluting groundwater or the soil must
follow Commune's instructions with respect to eliminating pollution. If
prescribed time limit is not met, the Commune may institute clean up measures
at polluter's expense. (Section 4)
Accumulation of chemical waste must be reported to the local council. The
report must include information about the nature, packaging, and quantity of
wastes involved. (Section 5)
1The additional rate may be 25 Danish Kroner per ton (about $4) for each
percent of halogen in the waste load.
2Conforms with two prior laws: #178, May 1972, Oil and Chemical Waste
Disposal; and #372, June 1973, Environmental Protection Agency.
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Wastes must be transported to a site designated by the Council unless it
is demonstrated that they are otherwise being conveyed and disposed of
safely. (Section 6)
Trends
In 1977, the Minister of the Environment ordered a survey of abandoned
waste disposal sites, which was completed in 1982. Of 600 dumps discovered by
the survey, 15 required immediate remedial action, 85 required quick attention
to determine appropriate responses, and about 300 required some on-going
testing and monitoring. Several of the most dangerous sites have already been
cleaned. The National Agency for Environmental Protection is developing a
draft law related to abandoned waste sites on the basis of the survey
results. This proposal is slated for Parliamentary consideration this year.
The success of Denmark's tough hazardous waste regulations and centralized
treatment and disposal network has encouraged Kommunekemi, AG to sell it
system abroad. Chemcontrol A/S, a consortium of consulting engineers and
government agencies that developed the Danish waste management program, offers
a complete waste management package to foreign nations and industries. This
package may include:
• Background studies of waste flows and problems;
• Detailed legislative proposals that define toxic
wastes and regulate storage, transport, and treatment
methods;
• Designs for collection and treatment facilities; and
• Supervision and operation of the entire waste
management system while technicians are trained.
Chemcontrol A/S is building new treatment facilities in Finland and
Belgium, and is bidding on a proposed facility in Ontario, Canada.
7.7 FINLAND
Background
About 90,000 tons of toxic wastes (primarily oil wastes) are generated
each year in Finland of which a substantial amount is recycled. The Finns
lack sufficient treatment and disposal capacity, therefore, most hazardous
wastes are exported to the Netherlands, the United Kingdom, Sweden, and the
Federal Republic of Germany for processing.
Legislation and Authorities
Waste Management Act and Decree, April 1. 1979: Transport, treatment,
and disposal of problem waste is the responsibility of the generator.
("Problem waste" is defined as waste that is difficult to treat or dispose or
in other ways may be harmful to the environment.) An exception is waste oil,
which municipalities are obligated to receive. The generator is responsible
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for the proper labelling, manifestation, packaging, and storage of hazardous
waste and all costs are paid by the producer. Special permits (issued by the
local county government) are required for treatment and disposal of hazardous
wastes. Generators of hazardous waste are allowed to treat or dispose waste
without a permit, however, they need to present a treatment plan to local or
regional authorities. The property owner must also notify the authorities of
all unidentified hazardous waste generated or stored on the property. Exports
and imports of toxic waste require permission from the Minister of the
Interior.
Trends
In June 1979, Finland's Problem Waste Management Company was founded.
Ownership of the company was divided into thirds, with the state,
municipalities, and waste generating industries holding equal shares. The
company's responsibilities include organizing a state plant, collection
stations and landfill areas, treating problem wastes to make them harmless,
and handling the collection and transport of problem waste. The chemical
waste treatment plant is being constructed in Riihimaki, a town near
Helsinki. The plant is expected to be completed by the beginning of 1985 and
will include an incinerator plant, a physical-chemical treatment plant, a
storage tank, a landfill and a waste water treatment plant. The plant will be
financed by state guaranteed loans. The building costs will be recovered by
charging a fee for treating problem wastes, and the loans will be repaid.
7.8 FRANCE
Background
French industry produces about 2,000,000 tons of hazardous waste each
year. Treatment, recovery, and disposal facilities handle about 1,145,000
tons and the remaining 855,000 tons of waste are processed on site or
exported. Between 11,000 and 15,000 tons of toxic waste are imported each
year, most of which is incinerated. Thirty abandoned disposal sites ("points
noirs") have been identified that present serious risks to the environment.
The French Federal government has assumed the clean up costs and six site
reclamations have been completed.
The Federal government is primarily responsible for hazardous waste
regulation. Waste disposal facilities require prefectural authorization. A
public agency (ANRED) may facilitate the development of waste processing
facilities, operate such facilities if necessary, and provide subsidies to
defray waste treatment expenses at regional facilities.
Legislation and Authorities
Decree #73-218, February 23, 1973: Water protection, deposit of wastes
on or in the soil, except for wastes of negligible toxicity, are subject to
prefectural authorization. Dumping and incineration at sea are also subject
to prior authorization (case of July 7, 1976). Penalties for criminal
infractions range from two months to two years imprisonment and/or a fine from
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FF 2,000 to 100,000 (?250-$12,500). In the case of condemnation for certain
infractions, offenders may be required to restore damaged sites to their
original state or their operations may be closed.
Law of July 15, 1975: Concerns elimination of waste and the recycling of
materials. A generator or holder of dangerous waste "is obliged to eliminate
waste." Abandoned waste sites may be cleaned up by authorities at the expense
of the responsible party. (Title 1).
Generators of waste must be able to prove to authorities that their waste
is safety treated. Authorities may investigate suspected violations and
prosecute where appropriate. Hazardous waste must be taken to approved
disposal facilities, and its owner may be compelled by commune authorities to
share in disposal costs. (Title 2).
A group of special toxic wastes are regulated by authority of this law and
defined in the Decree of August 19, 1977 on the basis of their flammability,
toxicity, and bioaccumulation. Special waste producers, transporters, and
disposal firms must notify authorities of procedures used in handling these
wastes, which may only be disposed of in specially licensed facilities.
(Title 3).
The federal government is responsible for abandoned waste site cleanups
for five years, although this responsibility has continued beyond this period.
The government assumes responsibility for cleanup expenses. (Title 4).
Useable materials must be recovered where technically feasible and
environmentally sound. Communes may determine the acceptability of
recovery/recycling technologies. (Title 5).
Special wastes may only be treated in installation, accredited by the
Agence Nationals pour la Recuperation et 1'elimination Dechets (National
Agency for the Recuperation and Elimination of Waste, ANRED). ANRED was
established to accredit disposal facilities, encourage development of
treatment facilities, and undertake such operations where public or private
means are lacking. (Title 6).
For example, in 1978 ANRED paid subsidies ranging from FF 91-183 ($11-28)
per ton of hazardous waste to encourage use of its regional facilities.
Subsidies were higher for substances identified as "dangerous."
Law of July 1976: Regulates the construction and operation of industrial
plants according to the pollution they generate. Hazardous waste facilities
require prefectural authorization. Reusable elements must be recovered where
feasible, and anyone turning over special wastes to non-accredited handlers is
jointly responsible for damages. Wastes that are abandoned or processed
illegally may be treated by the authorities at the expense of the offender.
Decree of November 21, 1979: Regulates collection, recycling and
disposal of used oil. A tax of FF 40 (about $5) per ton of virgin oil was
imposed for a 30 month trial period beginning July 1, 1979. The tax revenues
subsidized waste oil recycling and disposal expenses, and were managed by
ANRED.
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Circular Notice of January 1980: Establishes criteria for selection of
toxic waste disposal sites and conditions for accepting wastes at such sites.
France has passed legislation which conforms to the September 18, 1979, EEC
Directive on Hazardous Waste.
Trends - No information currently available.
7.9 GERMANY
Background
Germany generates over two million tons of hazardous waste each year. At
least 35,000 tons of toxic waste are imported each year, principally from the
Netherlands. Most of this waste is buried in landfills. Germany exports
about 40,000 tons of sludges and metal processing liquids, most of which are
buried in Swiss and French landfills. Incinerator ships dispose of about
90,000 tons of chlorinated waste in the ocean.
The federal government has full legislative powers in the field of waste
management and the states (Lander) exercise enforcement powers. Waste
transport and imports are strictly regulated and carefully documented. The
Lander operate 22 central landfills, 23 chemical treatment facilities, 17
incineration plants, and one underground facility. Some of these facilities
are owned by public authorities, while others are jointly owned by localities
and private disposal companies. For example, the state of Hesse owns 26
percent, and private companies 74 percent, of the Biebesheim facility near
Frankfurt. Since 1972 over 50,000 unregulated dumps have been closed.
Legislation and Authorities
Waste Disposal Law of June 7, 1972: This law is the Principal legal
instrument at the Federal level.1 The law applies to wastes in general,
excludes nuclear waste and sewage, and allows for requirements for waste which
"constitutes & particular danger to health or to the quality of the air or
water or which is particularly explosive or inflammable, or which contains or
produces pathogens of transmissible diseases." (Art. 2).
Waste may only be treated, stored and deposited in licensed facilities.
In the case of special wastes, operators of treatment plants must certify
their willingness to receive the waste before it can be collected and
transported. Special wastes are defined as "poisonous, inflammable, and
explosive wastes, wastes giving off an intensive smell, water pollutants, and
radioactive wastes" (Article 2).
Record books containing information on special wastes must be maintained
by generators, transporters and operators of disposal plants for such special
wastes. (Article 11).
*As amended June 1973 and entered in force January 1, 1977.
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Criminal penalties for violation of special waste regulation include
imprisonment of five years (ten years for particularly serious cases) or fines
for those who treat, store, or deposit wastes containing or capable of
producing toxins or viruses of serious diseases transmissible to man.
(Article 16).
Administrative Order on Waste Transportation, July 29, 1974: Stipulates
that collection and transportation of waste requires a special permit. In
addition, hazardous goods transport regulations apply.
Administrative Order on Import of Waste, July 29, 1974: Requires
licenses and prior permission from the treatment facility. Waste oils are
covered under a separate law.
Law Concerning Measures to Assure Disposal of Used Oil (1.1.69): Virgin
and imported reprocessed oils have been taxed since 1969. The collected tax
revenues form a "Reserve Fund of Ensuring the Safe Disposal of Waste Oil"
which subsidizes firms that agree to collect, reprocess, and/or dispose of
such oil. In 1976, the tax was D.M. 9 per 100 Kg (about $3), and taxed firms
have usually passed on the additional cost to their customers.
In order to qualify for a'subsidy from the Fund, waste oil management
firms must collect more than 2000 liters each year, assume responsibility for
all waste oils in a specified area, and recycle or dispose of at least 2,000
metric tons per year. In addition, oils containing less than ten percent
contaminants must be accepted for treatment without charging an acceptance fee.
The method of treatment determines the rate of subsidy. Reprocessors
receive DM 9 (about S3) per 100 kg. and incinerating companies receive about
DM 10 (about §4) per 100 Kg in 1975.
Trends
Foreign waste generators are seeking to dispose more and more of their
waste in Germany as toxic material production increases and local disposal
regulation tightens. As a result, Germany may soon develop a shortage of
landfill capacity suitable for disposal of highly toxic materials. Waste
dumping in the North Sea was scheduled to end in 1982. The deep salt mine
disposal facility at Herfa Neuvode will be full in about 30 years.
The Federal Ministry of Regional Planning, Building and Urban Development
has proposed a measure to reduce groundwater contamination by toxic
chemicals. Industries would trade groundwater usage rights for surface water
rights held by municipalities. In addition, a special tax would be levied on
pesticides to encourage conservative application on fields.
7.10 GREECE
Background
Municipalities and communes assume primary responsibility for waste
disposal site selection and operation. Other than the permits issued by
district prefects, there are no specific handling requirements for special
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wastes such as used oil, tires, or toxic materials (this may soon change - see
Trend section). Transport and on-site treatment and disposal of hazardous
wastes are essentially unregulated.
Legislation and Authorities
Sanitary Regulation on the Disposal of Sewage and Industrial Waste
(Elb/221, January 22, 1965): Localities select disposal sites and submit them
to district prefects for review and permission. Permit requests are reviewed
by a committee composed of the Director of the Prefecture, the Chief of the
Sanitary Authority, the Chief of Technical Service of Municipalities and
Communes, the Chief of Police, the President of the Medical Association, and a
sanitary engineer. The local sanitary authority charges a fee for waste
disposal. In a few cases, industrial waste disposal procedures must receive
prior approval. For example, a prospective mining operation must submit a
technical study of its waste disposal plans to the local prefecture before
permission to mine may be granted.
Anyone who pollutes the land or operates an unauthorized dump may be fined
up to 10,000 Drachmas (about §100), or imprisoned up to two months.
Greece has issued regulations implementing EEC directives which limit or
regulate dangerous waste, PCB, and waste oil disposal.
Trends
The Ministry of Interior has prepared a legislative proposal that would
regulate collection, transport, and disposal of waste on land. The proposed
bill would apply to hazardous wastes, and is based on the 1978 EEC Hazardous
Waste Directive.
A central facility for treatment of toxic and dangerous waste is now being
planned. Further information was not available.
7.11 IRELAND
Background
The problem of proper disposal of hazardous waste has only recently
emerged in Ireland with the growth of industry. Because there is a shortage
of suitable disposal facilities in the country, most toxic and dangerous waste
produced is currently being exported to disposal facilities abroad.
Legislation and Authorities
European Communities (Toxic and Dangerous Wastes) Regulations (1982):
This order of Parliament adopts regulations proposed in the EEC Directive on
Toxic and Dangerous Wastes (March 20, 1978). County and local authorities are
responsible for actual monitoring of waste transport and disposal as well as
planning and supervising of facility development. The Ministry of the
Environment and the Institute of Industrial Research and Standards provide
technical expertise to the local authorities.
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The order applies to chemical wastes listed in the Annex to the EEC
directive. Localities require a permit for storage, treatment, or depositing
of these waste. Transporters must maintain a manifest system which describes
the nature of the waste and appropriate handling precautions. Storage
facilities must compile a register of wastes on the site. Fines up to £
1000 and prison terms up to six months are authorized for violations.
Rivers Pollution Prevention Acts of 1976 and 1893: These broadly
conceived acts prohibit discharges of all "noxious" and "poisonous" solids,
trade wastes and mining effluents into water ways. Local Sanitary Authorities
are authorized to administer the law, but it has rarely been enforced. The
wastes covered by the law are not defined, and the law prohibits punishments
or sanctions that would harm the polluting industry.
Derelict Sites Act 1961: A derelict site is defined as a property
littered with insanitary rubbish. The Act may apply to abandoned toxic waste,
particularly in the case of abandoned industrial facilities. Localities are
authorized to compel the property owner to clean up the problem or to pay the
cost of the cleanup. The local authority may acquire the land through
condemnation if the owner does not cooperate.
Trends
The Irish government is planning to build a National Center in Baldonnel
to receive and store toxic wastes. The center will also make export
arrangements with countries that are willing to treat and dispose of hazardous
wastes. No provision is being made for treatment or disposal at the Baldonnel
Center at this time. Industries with on-site treatment or disposal facilities
will be expected to continue using them in the future.
7.12 ITALY
Background
Italy has experienced the most publicized hazardous waste scandal than any
other European country in recent years. A 1976 explosion at a Seveso chemical
plant contaminated the surrounding area with dioxin. The Swiss owners of the
factory agreed to pay compensation to the Lombardy regional authority for the
clean up and to dispose of the contaminated material. The whereabouts of the
waste are not unknown, and the promised negligence trial of the company has
not begun.
Regional authorities exercise primary control over toxic wastes. Heavy
industry is concentrated in Italy's northern provinces around Milan. These
northern provinces are making some effort to control the transport and
disposal of hazardous materials, but elsewhere in the country there is little
regulation.
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Legislation and Authorities
Collection, Transport, and Disposal of Solid and Urban Waste
Law #366 (1941)
This wartime measure holds municipalities responsible for urban waste
collection and disposal, and also applies to hazardous wastes. No specific
regulations govern toxic waste disposal. Municipalities are ordered to
recycle wastes whenever possible. In some larger cities, the local government
collects and transports wastes while private companies operate the landfills
and incinerators that receive them.
The Protocol for the Protection of the Mediterrannean Sea against
Pollution from Land-based Sources (May 16, 1980)
This law implements Articles 4, 8, and 15 of the Convention for the
Protection of the Mediterranean Sea against Pollution (February 16, 1980).
Italy is a co-signer in this agreement to eliminate land based pollution
from toxic substances listed in Annex I of the Protocol. These substances are
selected on the basis of their toxicity, persistence, and bioaccumulation. The
protocol also limits pollution from less toxic substances listed in Annex II.
Trends
Italy may comply with the EEC Directive on toxic and dangerous wastes
(March 20, 1978), but specific legislation has not been considered in
Parliament. Evidence that there may be some legislative action taken is
apparent in the formation of the Ministry on the Environment (August 1983).
7.13 JAPAN
Background
By the late 1960's, Japan was becoming one of the most polluted countries
in the world. The pressure from economic growth on the country's environment
was greater in Japan than in the majority of other countries. This was due to
(1) growth rates being quite high, especially in polluting industries such as
steel, power, cement, pulp and paper, food stuffs and chemicals, and (2)
production and consumption activities being very concentrated in areas
resulting in the amount of polluting activities per square kilometer of
inhabitants area to be quite high. In 1969, studies were performed indicating
water quality to be quite low, and the levels of sulphur dioxide (S02) and
particulate pollution present in the air to be very high.
Between 1960 and 1970 the Japanese public gradually became pollution
conscious and the number of pollution-related complaints made to regional and
public bodies rose from virtually zero in 1960 to over 60,000 -in 1970. In
response to this new area of concern, in 1967 the Basic Law for Environmental
Pollution Control was passed, and 1971, the Environmental Agency was formed.
Additionally, in 1973, the Compensation Law was passed. This law was enacted
in response to four major law suits brought by victims in Minamata disease,
itai-itai disease and pollution-related asthma in 1967.
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Minamata disease was first detected in 1959 in residents of Minamata.
Several hundred victims contacted the disease from fish contaminated by
mercury from a local chemical plant. More than 150 persons died, and by 1975,
the number of officially designated victims of Minamata disease rose to
greater than 1,400.
Itai-itai disease was also first detected in 1959 when residents of the
Jintsu River basin were poisoned by cadmium originating in a local mining and
smelting company. This disease became known as itai-itai (ouch-ouch) because
of its extremely painful nature. Of the 133 officially identified victims, 32
died.
The four major lawsuits in which the victims of these pollution-related
diseases sued the companies they held responsible for their diseases, were
decided in favor of the plaintiffs.
Japan's pollution-related legislation concentrates on the types of
pollution which were responsible for the worst cases of pollution experienced
(mercury, cadmium, PCBs, sulphur dioxide and nitrogen oxides). The discharge
of these pollutants has been strictly controlled. Factories which were major
sources of mercury containing effluents have either been forced to cease
production, change processes, or close off their effluents to the outside.
The manufacture and importation of PCBs have been banned (although exceptions
can be made) and wastes containing PCBs have been recalled, stored and
disposed. In addition, strict ambient standards and emission standards have
been imposed.
Legislation and Authorities
The Waste Disposal and Public Cleansing Law 1970, Amended June 1976;
Article 2 states that the law applies to solid and liquid wastes, but not
radioactive waste. Articles 3 and 10 hold generators responsible for
disposing their waste, and encourage them (this clause is not enforceable) to
try to reduce their waste volume by re-generation and recycling (Article 3).
Persons involved in the collection, transportation, treatment or disposal of
waste (unless it is the generator of the waste himself) must obtain permission
from the Prefectural Governors.
This law also sets maintenance and control standards for landfills.
Although landfill is the primary lawful final disposal option, pretreatment
(e.g., concrete solidification, incineration, decomposition) is mandatory for
specific types of hazardous wastes. Ocean dumping is the second lawful final
disposal option and may be permitted in special circumstances for wastes
designated under the law.
Although the Waste Disposal and Public Cleaning Law classifies industrial
wastes into 18 different categories. The categories are based first on 8
different substances, (i.e., mercury, cadmium, lead), which are further
divided according to the source of hazardous waste. The law also requires
firms to keep records of solid waste disposal and to appoint someone to be
responsible for industrial waste management.
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The "public cleansing" part of the law deals with household waste. The
law gives local governments the responsibility to establish plans for
household waste disposal.
Law for Prevention of Marine Pollution and Maritime Disasters: Provides
standards for dumping and includes provisions stating the maritime areas where
dumping of particular wastes may take place.
The 1973 Pollution-Related Health Damage Compensation Law (The
Compensation Law): The Compensation law distinguishes between two types of
illnesses: those caused by ambient air pollution (Class I areas) and those
due to specific toxic substances (Class II areas). For Class I areas,
compensation is funded 80 percent by a pollution tax on the volume of sulfur
emissions from stationery sources, and 20 percent by a pre-existing
motor-vehicle tax. For Class II areas, a "special levy" is imposed on
individual polluting sources that discharge cadmium mercury and arsenic.
Person who are eligible to receive compensation are those who contact
designated diseases and reside in, or commute to, designated "polluted" areas
for a certain period of time. The most important type of benefit is full
reimbursement of medical expenses and in addition, a disability allowance of a
maximum of 80 percent of the average national wage classified by age and sex.
Class I areas are areas designated by cabinet order as areas where
significant air pollution has arisen and where diseases caused by such air
pollution are prevalent. The four major diseases which fall under this
category are, chronic bronchitis, bronchial asthma, asthmatic bronchitis,
pulmonary emphysema, and their complications. Victims are compensated by the
local government which receives the money from a special Agency, the Pollution
Related Health Damage Compensation Association. The Agency's fund for
compensating Class I victims is financed 20 percent by the auto tonnage tax
levied by the central government, and 80 percent by a tax paid by facilities
emitting sulfur oxides. The sulfur oxide emission tax rate is determined each
year based on the dollar amount needed for victim compensation as well as on
the facility's volume of sulfur oxides released during the previous year. The
tax rate also varies with the location of the polluting facility: industries
located in the areas designated for the compensation of the victims will pay
greater than 9 times higher than other sulfur oxide emitting facilities in
Class I areas.
Class II areas are areas where specific diseases are prevalent. These
diseases include Minamata disease caused by mercury, itai-itai disease caused
by cadmium, and chronic arsenic poisoning. Designation of these areas is
ased on epidemiological studies and waster or air pollution surveys. Class
II diseases are generally caused by water pollution. The Pollution Related
Health Damage Compensation Association extends relief to the victim first, and
then, in theory, collects the money for the responsible polluter, in theory,
collects the money for the responsible polluter. In actuality, however, it is
often difficult to determine the responsible party or parties and therefore,
the central government often pays a portion of the compensation.
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Trends
There are currently two main views concerning the future of the air
pollution compensation system. Industry feels that because of the large
decrease in air pollution over the past few years, the levy on industry should
be reduced and eventually ceased. The environmental groups and victims would
like to see the levy expanded by designating new diseases and pollutants. At
the present time, the Environmental Agency is not contemplating the latter
action, although the Act does permit the designation of new pollution-related
diseases. It is more likely that the government will begin declassifying
areas where sulphur dioxide pollution has significantly declined. The Class
II area system has not come under an attack.
7.14 LUXEMBOURG
Background - No information currently available.
Legislation and Authorities
Law Concerning Disposal of Wastes June 26. 1980:
Article 2: Persons who generate or hold wastes which may be harmful to
the public or environment are required to ensure that such waste is disposed
of in accordance with the provisions of the law, in conditions which will
avoid harmful effects.
Article 4; The Communes are responsible for waste disposal but do not
have to accept wastes which cannot be eliminated with household wastes due to
their nature or volume. In such instances, the responsibility of eliminating
the wastes lies with the holder.
Article 5: The commercial collection, treatment, disposal, storage, and
transportation of wastes requires authorization from the Minister
responsible. Authorization is given only when operations can be carried out
without potential hazard to public health or the environment.
Articles 6 and 7; Stocking, treatment and elimination of waste need to
be authorized and conditions may be included with the authorization.
Article 8: The importation of waste requires authorization by the
responsible Minister.
Article 9: Those responsible for the collection, transportation,
importation and exportation of wastes, and the operation of treatment or
storage facilities must keep records containing detailed information about the
waste. The same applies to holders of toxic wastes under Article 13.
Article 12: Authorizes the regulation of specific harmful wastes
(regulations were issued separately for used oils, TiCL and PCBs on the same
day).
Article 14: State officials are authorized to enforce this law and have
wide powers of inquiry including the right to take samples.
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Article 19: Certain storage centers must close within 2 years of this
law's entry into force.
Prison sentences of from one day to six months, and fines of between Frs.
250 and Frs. 200,000 are imposed for certain offences.
Grand Ducal Regulation of June 26, 1980:
1. Ti02
Article 2: Holders of TiCL wastes must eliminate these wastes
themselves, or hire a third party to do so.
Article 3: Pouring, immersion, stocking and injection in the soil are
prohibited without prior authorization. Collection, sorting, transportation
and treatment do not require authorization.
Article 4: Authorities may give authorization for disposal of waste in
the soil, if:
• the elimination of the waste can not be done more
appropriately;
• there is no known predictable negative effect on the
aquatic environment, the soil or atmosphere; or
• navigation, fishing, recreation and other activities
are not affected.
Article 5: Disposal of wastes (however treated) must be severely
controlled.
2. PCBs
Article 2: Elimination of PCBs contained in unused objects must be done
by regeneration or destruction. This elimination must be done by an
installation especially accredited to eliminate PCBs.
Articles 3 and 4: Holders of used PCBs must turn them over to persons
accredited to eliminate them. Accreditation goes to those who can correctly
undertake all aspects of their elimination.
Article 7: Installations must keep a document with information about the
PCBs and give a copy to the person who turned over the PCBs, to be kept for
three years.
Article 8: Accredited eliminators, importers and exporters must keep
records on file for 3 years indicating the amounts of PCBs obtained, what was
done with them, and how much they themselves regenerated or destroyed.
Trends - No information currently available.
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7.15 NETHERLANDS
Background
The Netherlands is heavily industrialized, densely populated, short of
waste treatment facilities and has soil unsuitable for land disposal. In
1980, of the 238,070 tons of chemical waste generated and reported to the
government, 25 percent was exported. Netherlands hazardous waste management
capacity in 1980 was 30,000 tons per year of solvent regeneration, 370,000
tons for at-sea incineration, 3,000 tons for recovery of precious metals,
24,000 tons for physical-chemical treatment, and 60,000 tons for incineration.
In 1982, the Dutch spent $336,5 million on controlling hazardous wastes.
They currently face cleanup of 4,000 abandoned dump sites, of which about 350
are considered imminent threats to public health. The original list of 3,000
abandoned dump sites (which recently grew to 4,000) was estimated to cost
approximately $500 million.
Legislation and Authority
The Chemical Waste Materials Act, 1976 (implemented in 1979): The
substances which this Act covers are listed in the Schedules to the Substances
and Process Decree of May 26, 1977. The list was based on toxicity,
persistence and potential effects of the substance on man, animals, plants or
the biosphere. The provisions of this act do not apply to private households,
and only apply to waste which is treated or disposed of off-site. However,
under Article 31, it is prohibited to dispose of chemical waste by depositing
it in or on the soil, either on-site or off-site. Exemptions from this
provision can be made.
Article 3 prohibits transferring waste to another party for disposal,
unless that party (1) is licensed to store, treat, process or destroy it; (2)
is authorized to deposit the waste on or in the ground or dump it at sea by
virtue of an exemption; or (3) resides abroad. Articles 4, 5 and 6 require
that both parties involved in the transfer of waste report to the responsible
Minister.
Article 8 states that only licensed persons may deal with wastes which
others have disposed, and then only when a description of the waste has been
provided. Articles 9-15 provide the general rules for licensing. Article 16
provides that only licensed persons can import chemical waste unless the waste
is in transit to another party. Exports are subject to a notification system.
Under Article 33, a generator of chemical waste may be required to treat,
process or destroy chemical wastes on-site, using prescribed methods. Article
36 authorizes the ordering of a licensee to treat a particular waste. If
treatment costs are excessive, the licensee may be partially reimbursed.
The chemical waste system's operating costs are funded by a levy imposed
on the waste industry and on waste disposal facilities. Monies in this fund
may also be used for removal of chemical waste materials and spent oil and for
restricting the creation of chemical waste materials. The waste oil system's
operating costs are funded by a levy imposed on lubricating oil producers.
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Under articles 41, 42, and 45, enforcement powers are delegated to
national, provincial and municipal officers, who have the right to inspect and
take samples.
Noncompliance with the regulations of the Chemical Waste Act can be
punished with imprisonment and fines up to Fl. 100,000 ($35,000) under the
Economic Offences Act. Under Article 49, in the case of an emergency, the
Minister may order waste which has been deposited on or in the ground to be
removed at the offender's expense.
There is currently a debate in the Netherlands over whether the cleanup of
sites should be paid for by the taxpayers or industry.
The Dutch Air Pollution Fund, September 18, 1972: This fund was set up
to compensate victims of air pollution under the Law on Air Pollution. The
Fund is administered by the Ministry for Public Health and Environmental
Hygiene. Compensation is paid when no other course of redress exists or if
enforcement of any existing claims fails. The fund is financed by a tax
imposed on various materials and products such as fuel oil, heating oil,
petrol, coal and natural gas, to encompass all potential polluters. The basis
for the tax is the quantity, quality, or both, of the polluting substances
discharged to the air, and where necessary the way in which they are
discharged. Because the fund has received more revenues than it has paid out
in compensation (one reason the Fund is seldom used is because Netherlands has
a comprehensive health insurance system), the monies have also been used to
help finance public and private pollution prevention measures.
Trends - No information currently available.
7.16 NEW ZEALAND
Background
New Zealand is one of the least polluted environments of the 24 OECD
member countries. The economic growth in New Zealand has been accomplished
with less drastic environmental changes than those experienced in other OECD
countries. From 1968 to 1978, industrial production grew approximately 66
percent, and energy consumption during that time period increased about 52.7
percent (or 4.3 percent per year). In the 1980s, New Zealand plans to launch
a range of energy and industrial projects such as 1) refinery expansion; 2)
methanol, synthetic gasoline, and ammonia/urea manufacture; and 3) energy-
intensive industries such as steelworks, aluminum smelters, and pulp and paper
mills. If these projects are implemented, the industrial base will increase
greatly.
In 1972, a separate Ministerial portfolio for the environment was
established. An advisory commission to serve the Minister was also
established at that time, in addition to the Environmental Council and Nature
Conservation Council already in existence.
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Legislation and Authorities
Environmental Protection and Enhancement Procedures (1973, and extended
1978): Under the revised Environmental Protection and Enhancement Procedures
(EP&EP), environmental impact reports and audit procedures are required for
all public or private proposals which require official consent and which may
have an effect on the human, physical, or biological environment.
Toxic Substances Act (1979) and Pesticides Act (1979): These acts'
require regulations of all toxic substances and pesticides used in New Zealand.
Town and Country Planning Act (1977): This act gives regional and united
(representatives of local authorities within each region) councils the
responsibility of drawing up regional plans regarding land use. The purpose
of these plans is to set down procedures and pursue wise management practices
and use of resources.
Water and Soil Conservation Act (1967): This act regulates the
withdrawal of water from, and discharge of water into, water courses. The act
attempts to tackle the problems of waste disposal into water and requires
permits to do so.
Trends
New Zealand has recently established task forces to study specific
environmental issues. This approach was chosen in the hope that it would
enable the Council to respond quickly to all arising issues. In 1982, 5
groups were established to investigate the environmental implications of
energy policy; wetland use and management; mining; environmental monitoring;
and environmental ethics.
7.17 NORWAY
Background
Toxic wastes are not considered a major problem in Norway because the
country's industries do not generate dangerou's by-products in significant
quantities. Total waste generated in 1980 was 119,000 tons, a slight increase
from the 118,800 tons generated in 1979. Imports from other Nordic countries
are expected to increase as new treatment plants are built in Norway.
Legislation and Authorities
Act of March 13, 1981, No. 6: (This Act has not yet taken force). The
Act covers, waste disposal and authorizes the Pollution Control Authority to
supervise pollution and waste problems, including the regulation of "special
wastes." Special wastes are defined in Article 28 as wastes which cannot "be
appropriately" treated with other waste because of its size, or because it can
lead to serious pollution, danger, or threat of damage to human beings or
animals. The Authority may also provide regulations listing these wastes.
Article 2 provides that pollution or waste problems caused by activities on
Norwegian territory will be dealt with in the same manner whether the damage
occurs inside or outside Norway.
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Article 29 prohibits employing, abandoning, storing or transporting waste
which is unsightly or harmful to the environment. Article 30 requires waste
treatment installation permits. Articles 31 and 32 require municipalities to
treat consumer waste, and may require them to have industrial and special
wastes facilities. Municipalities may also be required to collect special
waste and generators may be required to deliver special waste to the
municipality or to another receptor facility.
Also under Article 32, the competent Authority (the King decides which
national, county and municipal pollution control Authorities are competent)
may also issue regulations pertaining to the storage, collection,
transportation and treatment of special waste. Articles 33 and 34 may require
recycling, but unless recycled, special waste must be brought to a lawful
waste installation. Article 35 authorizes municipalities to charge fees for
waste disposal.
Articles 46 to 48 include provisions regarding acute pollution and
large-scale accidents and include notification and cooperation requirements.
Trends - No information currently available.
7.18 SWEDEN
Background
Hazardous waste first became recognized as a major problem in Sweden in
1977 when a chemical company was found to have dumped approximately 70
dangerous substances around a plant in the South of Sweden. It cost the
government more than $6.8 million to clean this up.
In 1980, approximately 520,000 tons of hazardous waste were generated.
About 46 percent of the waste produced was treated by the companies which
produced it, 34 percent by one of the 20 private licensed waste disposal
companies or exported, 11 percent by local authority disposal facilities and
about 7 percent by SAKAB, a state owned company. Swedish companies claim they
are producing less toxic waste to avoid the expensive technology needed to
treat hazardous waste or the high prices charged by the government or private
companies to dispose of it.
Sweden is relying increasingly on foreign facilities to handle its
wastes. From 1976 to 1980, exports rose 128 percent, and increased further in
1981 totalling 16,020 tons.
Legislation and Authorities
Ordinance on Environmentally Hazardous Waste, January 1, 1976:
"Environmentally hazardous waste" includes solid or liquid waste products
(i.e., oil waste, waste containing mercury and PCBs) as listed by the National
Environment Protection Board. Generators of hazardous waste must submit
annual reports including information on the type of waste generated, its
composition, its quantity, and its management to the municipal authorities.
The municipalities have the responsibility of collecting and transporting
waste or hiring contractors to do so for them. Commercial firms which
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transport waste products by road, must obtain permits from the county
administration. The Royal Ordinance on the international road transport of
dangerous goods (1974) provides that the ADR convention applies in Sweden.
SAKAB, a company owned jointly by the State, the municipalities and
private enterprises, ensures that environmentally hazardous waste is properly
managed. Existing waste treatment firms which are not part of this jointly
owned company can receive permission to continue their activities until
further notice. An exception is made for firms which use their own facilities
for treatment of other firms' wastes.
Environmental Protection Act and the Environment Protection Ordinance of
1969; This Act was implemented to protect the environment from nuisance such
as water pollution, air pollution and noise. Treatment activities of waste
must comply with this law which states that anyone involved in pollution
activities must take all precautions that "might reasonably be required for
the prevention or vectification of a nuisance."
Act and Ordinance on Products Hazardous to Health and to the Environment
(1973): This act sets standards for the handling, transportation and use of
PCBs and other products.
The Dumping Act and Ordianance of 1971: All dumping of waste into
Swedish waters from ships or other types of transports is prohibited. Also
prohibited is the dumping of wastes into international waters from Swedish
ships, and wastes may not be taken out of the country with the intention of
doing so. The National Swedish Environment Protection Board may grant
exemptions from these restrictions if dumping will not produce any adverse
effects to the environment. Permission must be received from the Board for
the exportation of environmentally hazardous waste. This requirement does not
apply to the SAKAB Company, a state-owned company which handles wastes (there
are 20 private licensed waste disposal firms to which the requirement does
apply).
Trends - No information currently available.
7.19 SWITZERLAND
Background - No information currently available.
Legislation and Authorities
The dumping of all wastes in water is prohibited in Switzerland under a
1971 Water Pollution Law.
In the current draft federal law, the three articles specifically
addressing wastes are as follows:
Article 27; Generators must recycle, neutralize or eliminate wastes.
Dumps require authorization.
Article 28: The Cantons (member states) have the responsibility of
managing waste treatment.
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Article 29: The federal authorities may require that toxic wastes be
transported separately, neutralized, recycled and labelled. They may also
require federal authorization for toxic waste imports.
An ordinance addressing definitions, and collection and disposal
requirements is expected to be ready when the draft law takes effect. Some of
the changes which are being considered are prohibiting subcontracting to third
parties, and giving the Federal government, rather than the Cantons, the
responsibility of authorizing companies to transport toxic materials in the
country.
Transport of Dangerous Goods Ordinance, 1972: Regulates transportation
of wastes.
Trends
A draft federal law was submitted to the Parliament on October 31, 1979 on
environmental protection which includes provisions regarding hazardous waste.
In June 1983, the lower House of Parliament voted in favor of it, and the
upper House had been expected to do the same later this summer. However,
after an explosion in Switzerland occurred involving dioxin, many changes are
being contemplated.
7.20 TURKEY
Background
A number of large petro-chemical industrial complexes ring the Izmir and
Izmit Bays. Discharges of toxic chemicals from these complexes have virtually
destroyed marine and plant life in the bays. In addition, several hundred
illegal waste dumps have been discovered over the past ten years.
Legislation and Authorities
The Turkish Council of Ministers established an Underscretariat for
Environmental Protection, whose enforcement authority was endorsed by
Parliament. The Underscretariat is authorized to monitor pollution discharges
and examine waste storage and disposal sites. Industries may be forced to
stop or moderate toxic discharges and clean up past discharges. The affected
industries are obligated pay for these cleanups. Failure to comply with
orders from the Underscretariat may be punished by fines or plant closings.
Turkey is a signitary of the Protocol for Protection of the Mediterranean
Sea against Pollution from Land-based Sources of May 16, 1980. Turkey agress
to eliminate land-based pollution from substances listed in Annex I to the
Protocol and to limit pollution from substance listed in Annex II. The listed
substances were selected on the basis of their toxicity, persistence and
bioaccumulation.
Trends - No information currently available.
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7.21 UNITED KINGDOM
Background
In I960, an estimated 11 million metric tons of hazardous wastes were
produced in Britain. About one-half of the waste generated was estimated as
having been managed on-site. Of the 5.5 million tons treated off-site, 81.5
percent was generated in England, 13 percent in Scotland and Northern Ireland,
and 5.5 percent in Wales. Seventy-five percent of the waste disposed off-site
was disposed of in landfills. As of August 1982, there were 102 licensed
waste disposal sites in London alone, and approximately 500 unofficial dumping
grounds there. Many of the landfill sites in the country, however have only 4
to 5 years of useful life remaining and by the late 1980"s there may be a
country wide shortage of landfill (there is currently a shortage of sites in
Wales).
Legislation and Authorities
Hazardous waste management is controlled by national legislation and
administered at the local authority level (County Councils in England, and
District Councils in Wales and Scotland).
The Control of Pollution Act 1974:
Section 1 (not yet implemented): Waste disposal authorities (WDAs) will
be required to ensure that there are adequate arrangements in their areas for
the disposal of all controlled waste which may require disposal there.
Section 2 (implemented in 1978): WDAs are required to survey waste
raisings and disposal facilities in their areas and to construct, and keep
updated, a waste disposal plan (by 1981, only 12 of the 165 local authorities
had drawn up plans).
Sections 3-11 (implemented in 1976): All waste sites and disposal
facilities must be licensed by WDAs. The license establishes conditions for
operating the waste site including the duration of the license, the types of
wastes that may be accepted, the treatment methods, record-keeping and any
requirements that must be met before the site can begin accepting waste. The
WDA must consult the Health and Safety Executive before issuing a license (to
ensure safe working conditions for employees and nearby residents), with the
Regional water authority which ensures the protection of water supplies, and
with the Local District Council. The site must also receive planning
permission which addresses such issues at the facility's impact on the amenity
of the community.
Sections 12-14 (not yet implemented): These sections will provide a
classification of waste for collection purposes.
Section 17 (implemented in 1981): This section provides for regulations
of special wastes. Special wastes are wastes which are listed in a. schedule
to the regulations and are dangerous to life because they are corrosive,
readily flammable or toxic (i.e., arsenic compounds, inorganic cyanides,
organic halogen compounds). Also included are prescription medicines. Waste
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7-27
producers must notify WDAs of their intention to dispose of a consignment of
special waste. The regulations set up a consignment note system which
provides for signatures at each stage of the transfer of a consignment of
waste until it is disposed of. Producers, transporters and disposers must
maintain records of consignment notes and of the site location of deposits of
special wastes.
Disposal into the ocean must be licensed by the Ministry of Agriculture.
Liability for damage caused by waste disposed on land (except when it
conforms with the site licensing system) lies with the person who deposited it
or caused or knowingly permitted it to be deposited.
Grants are available to help.with the reclamation of hazardous waste
sites. The maximum aid can range from 50 to 100 percent of the cost
involved. Grants may cover land acquisition and reclamation cost but do not
cover preventative actions such as prohibiting further pollution by materials
seeping from site.
Trends - No information currently available.
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&U.S. GOVERNMENT PRINTING OFFICE: 1985 "»61 221 21*026
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