Last week produced good news and some potentially bad news for the local economy.
On the good side, Gov. Abbott will sign a bill into law that will promote plastic recycling in Texas. Hopefully, this will be good for the environment and protect local industry.
The bill allows plastic recycling plants to be classified under manufacturing, not under solid waste disposal. Manufacturing plants will still have to comply with environmental regulations, but not the stricter regulatory regime imposed on waste disposal sites.
Environmental groups are crying foul, arguing that the technology for recycling plastic is unproven and bad for the air.
That may be true, but the recycling industry has to start somewhere. Like past technological innovations, it will start out slowly and get better over time. Industry is not promising a magic solution tomorrow, but it needs a predictable and stable regulatory environment to get the ball rolling.
This is important for Baytown. Industry has made absolutely massive investments in plastics, and it has to be ready to manage the political headwinds.
Across the nation, state and local governments are either banning or considering bans on plastic containers, straws, and grocery bags, and the movement is gaining momentum every day.
Do not dismiss this trend. It is not a fringe movement of California granolas and Austin hippies. Plastic bans could upend the entire industry, so plastic recycling technology is absolutely critical for the sustainability of the Baytown economy.
On the tariff front, there is good and bad news.
The Trump administration has lifted tariffs on steel and aluminum from Mexico and Canada. This will lower production costs for local manufacturing firms.
Unfortunately, trade talks with China have fallen apart. Trump subsequently bumped up tariffs on Chinese imports from 10% to 25%.
The impact on American consumers will probably not be too severe. The Chinese currency has fallen in value against the American dollar, which has offset the impact of the price increases, and corporations like Wal-Mart have not yet passed along the full price of tariffs to consumers.
However, the Chinese have retaliated with tariffs on American exports like liquefied natural gas (LNG) and farm products. Plastics could be next.
Both Texas and Baytown have hitched their wagons to future demand from China. Drilling in west and south Texas produces more natural gas than Americans can consume. This gas surplus has to go somewhere, and China is the biggest market in the world.
If China gets their gas and plastic from somewhere else, this will have a ripple effect. Less drilling in Texas will reduce jobs at the wellhead, and there will be less need to build pipelines and LNG export terminals.
I really do sympathize with the President’s position. China has flouted fair trade rules for decades. They manipulate their currency to make their exports cheaper. They steal American technology and intellectual property, suppress unions, and subject their workers to terrible working conditions.
China deserves a trip to the woodshed, but Trump needs the support of other nations to strengthen his hand. Tariff reductions on Canada and Mexico are helpful, but it needs to go one step further with Europe.
European nations are friends of the United States, and they play by the rules of fair trade. They are not going help us isolate China unless we claw back tariffs on European goods.
Like it or not, the Gulf Coast needs China, but America needs its friends to win the trade war with China.
Steve Showalter is a government professor at Lee College in Baytown.