For use by Dow advocacy leaders with key trade stakeholders

Dow U.S. Trade Position- Background
Good trade and investment policies help to raise standards of living and increase consumer choice, provide market access and reduce the Company's operational costs. Trade liberalization supports the global chemical industry by opening up access to feedstocks, manufacturing environments and access to rapidly-growing consumer markets around the world.

Dow has been headquartered in Midland, Michigan for 110 years, with global operations for more than a half century. While 34% of Dow's sales occurred in the US (2007), Dow exported more than $14.2B worth of US-manufactured products – 75% of those exports were to Dow facilities and assets in other parts of the world. Trade and market access will allow Dow to export more goods to Dow facilities and customers while broadening its costumer base.

Positive impact from good trade policy can range from reduction of tariffs, improvement to country legal/investment structure which enables better market access, to reputational support through increased visibility for Dow's global contributions to developing countries.

Key Messages:
Dow advocates for U.S. trade policy that promotes:

• Creating a "level playing field" – the US economy is one of the most open in the world – with limited and low tariffs or barriers to entry. Trade agreements ensure that same treatment with key foreign partners – reciprocal market access that enables free and fair American participation.
• Reducing trade barriers – Trade barriers include tariffs and none tariff barriers such as regulatory discrimination, lack of intellectual property protection etc
• Raising standards – promoting high quality, high standard practices of rule of law, intellectual property protection etc to give American investors fair treatment in foreign trade partner countries.
• Increasing competitiveness- American companies are the most competitive in the world – when market access for export and investors is open and fair. Trade agreements create opportunities for American companies to lead in global economic growth.
• Benefiting the U.S. economy and the American people – Trade can help sustain jobs by providing access to customers, feedstock and creating new opportunities fro services. Trade also gives US consumers access to high quality, competitively priced goods.

Dows US Advocacy Efforts and Specific Positions

1. US Trade Policy – domestic issues

Miscellaneous Tariff Bills (MTBs) is a long-standing Congressional process by which companies can work with Members offices to submit bills that would eliminate tariffs on manufacturing inputs that are not made/available in the US. Eliminating the tariff supports companies' ability to competitively manufacture in the US by ensuring they don't have to pay unnecessary tariffs/taxes. The MTB is designed to be non-controversial and limited to non-US manufactured process in order to pass a new bill each year. However, partisan politics and other issues have held up progress on the 2008 bill.

Dow Position
We have submitted 42 bills represent new and renewal requests to ensure that key inputs are not tariffed at entry. The bills represent over $10MM in duty savings for Dow and Dow Agro Sciences production sites.

Generalized System of Preferences renewal
The GSP program is geared to helping developing countries grow their own domestic economies by providing preferential access (reduced tariffs) to the US market. Over the years, GSP has become an important component of multinationals' global growth prospects by enabling key inputs to be manufactured in lower cost countries and then imported in for US product. The current program is set to expire on December 31, 2008. Although the House of Representatives have passed a year extension, the current bill currently sits in Senate.

Dow Position
GSP renewal for Brazil is of key importance as over half a million dollars of Dow Brazil product is imported to Dow US manufacturing to support company jobs in both geographies, and to reduce the cost for manufacturing in America (already high due to volatile energy prices). Dow is also actively supporting GSP accreditation for Vietnam as a demonstration of our support for domestic economic growth and opportunities for investors in Vietnam.

2. Free Trade Agreements

U.S. – Colombia Free Trade Agreement, Pending
This FTA will "level the playing field" for US producers – namely by matching the duty free access Colombia has to the US market, with reduced tariffs and nearly duty free treatment for American companies into the Colombian market. The agreement also serves as a strategic reminder of one of America's best allies in the region, and demonstrates strong support for the reform efforts (on-going) of Colombian President Uribe

Dow Position
Dow exports over $300MM worth of US-manufactured product into Colombia. Currently, Dow pays from 5-15% tariff, which for over 90% of those exports, will be zero duty on implementation of the agreement. The same zero% duty rate already enjoyed by key competitors in Mexico and South America. Dow will save over $22MM in tariff payments as soon as the agreement is passed by the US Congress. Dow Colombia will also benefit from a transition period of 10 years before duties are reduced on Dow products manufactured in Colombia, giving the geographic business time to adjust to higher competition.

Dow has 2 production sites in Colombia

1. Cartagena site: Polystyrene, Polyols and Polyurethanes System, Herbicides, Insecticides, Fungicides.
2. Barranquilla site: Herbicides, Insecticides, Fungicides

U.S. – South Korea Free Trade Agreement
The Korus (Korea-US) FTA is a strategic move by the US Government to create preferential access for American products into one of South-East Asia's most significant economies. The agreement provides substantial market access including:

Korea eliminated tariffs on 73.4 percent of U.S. fertilizer and agro-chemicals exports immediately upon implementation of the Agreement. Tariffs on 25.8 percent of exports will be eliminated over three years and duties on the remaining 0.8 percent of exports will be eliminated over five years.

Korea eliminated tariffs on 46.9 percent of U.S. plastics exports immediately upon implementation of the Agreement. Tariffs on 36.2 percent of exports will be eliminated over three years and 9.7 percent over five years. Duties on the remaining 7.2 percent of exports will be eliminated over ten years.

However, the agreement faces challenges with the US Congress due to lack of substantial commitments by Korea to open their market to the auto industry (a long-standing complaint by US auto manufacturers on non-tariff barriers to market).

Dow Position
The agreement will immediately reduce tariffs on the over $400MM worth of US manufactured product shipped to Korea. In addition, increased market access is good for our customers in Korea, who will have opportunities to expand their product which will in turn increase their demand for Dow inputs.

Trade Adjustment Assistance Program
The TAA is a federal program designed to support American workers who lose their jobs to trade, by providing consulting, retraining, and assistance in job search for those who have lost manufacturing jobs related to trade. There is an on-going debate to expand the scope of TAA, beyond manufacturing jobs to the services industry and seeking other avenues to provide more direct assistance to displaced workers.

3. Strategic Dialogues/Partnerships

US-EU Transatlantic Economic Council (TEC)
The TEC codifies the highest level political commitment to the world's largest trading relationship. The US-EU economies regularly trade over $1Billion EVERY DAY across the Atlantic. With White House-European Commission leadership, t he TEC covers a variety of issues including regulatory cooperation, intellectual property protection and trade & security measures. The TEC reports to the White House-EU Presidency annual summits.

Dow Position
Given our significant investment in both the US and EU – we support all efforts for better transatlantic cooperation, especially reducing "nuisance" barriers across the Atlantic and establishing coordinated leadership towards improving the investment climate in third countries (i.e., the US-EU joint task force on intellectual property protection in 3rd countries)

US- China Strategic Economic Dialogue (SED)
President Bush and President Hu Jintao launched the SED in 2006 as a means of codifying a working agenda and dialogue across governments. Led by the Treasury Department, the SED looks at key areas for cooperation, including energy and environment (recently launched 10 year framework). The SED provides high level government oversight to more specific dialogues on key issues (such as the Joint Committee on Cooperation and Trade managed by the US Commerce Department).

Dow Position
In addition to key issues such as trade, energy and environment, the SED provides an opportunity for Dow to promote key areas of cooperation and business growth as tangible examples of progress between both countries. Dow's partnership with the State-Environmental Protection Agency (SEPA) for example is one tangible demonstration of American commitment to raising standards of environmental health & safety in China. Dow operates five business centers and ten manufacturing sites and R&D facilities across Greater China with 2,300 employees, and is aggressively recruiting to support its rapid growth. Dow has so far invested over US$500 million in Greater China.

US- India Trade Policy Forum (TPF)
The US-India TPF facilitates trade and investment between the two nations. The forum promotes dialogue regarding tariff and non tariff barriers which inherently hinder trade relations.

Dow Position
The TPF is a key channel for resolving difficulties for business operations such as regulatory approvals. Within India, regulatory approvals at federal level can often be challenged by more protectionist state-governments. This happened in the case of DAS' Nurelle-D, a situation which was rectified by TPF involvement.

US- Russia CEO Forum
CEO-led group representing both business communities to continue to highlight to opportunities for constructive engagement between both countries.

Dow Position
Dow strongly supports Russia's accession to the WTO as an opportunity to bring the Russian economy and business environment into the global rules-based trading system. Russia's inclusion in global institutions creates opportunities for constructive engagement and growth.

4. Customs Issues

Globally standardized customs processes, efficient customs clearance and mutual recognition of customs and security-related standards are of high importance to Dow's global operations, as well as for our customers and suppliers. Implementing these measures will help create a level playing field that will allow Dow and the industry implement appropriate supply chain security measures and minimize the time and resources needed to efficiently import and export chemicals across the borders, thereby contributing to enhanced competitiveness.

Preferential Rules of Origin
Determining the origin of a product is increasingly difficult for both customs administrations and chemical trade operators. The U.S. has adopted differing rules of origin across various free trade agreements – which create potentially conflicting situations for global operations.

Dow Position
Dow supports a harmonized rule of origin approach – based on the definition applied in the US-Australia Free Trade Agreement – that allows for classification based on transformation.

Trade & Security
In response to the terrorist attacks and threats there has been an increasing number of security initiatives that impact international trade, such as the CTPAT (Customs Trade Partnership Against Terrorism) implemented by the US. In the EU, as from 2009, economic operators will be obliged to send summary declarations on goods to EU customs authorities before any departure or arrival. In order to relieve reliable operators from certain safety/security measures the status of Authorized Economic Operator (AEO) has been introduced in a number of jurisdictions (US, EU).

Dow Position
As a company operating globally, the international movement of goods under strict security standards is a guiding principle for our business operations worldwide. Dow welcomes the Authorized Economic Operator (AEO) driven by the EU and as adopted by the World Customs Organization (WCO). We strongly support global standardization and mutual recognition of customs security standards and statuses in the world (i.e. AEO and CTPAT) to ensure a global level playing field and encourage further dialogue under the umbrella of the Transatlantic Economic Council (TEC).

5. Trade and Environment

Trade & Environment Issues within the WTO
Trade and environment are traditionally categorized as two separate topics which are not negotiated within the same agreements. The WTO has attempted to address some concerns – especially NGO pressure – and seeks commitments to higher environmental standards, through parallel agreements called Multilateral Environmental Agreements (MEAs). MEAs in the past have focused on addressing chemical substances or products and contain trade relevant provisions. Commitments however tend to be more voluntary.

Increasingly, trade has become a vehicle to make more specific commitments on environmental standards – and to serve as an opportunity for near-term progress on key issues like climate change. Accordingly, the EU and U.S. jointly proposed a tariff elimination package for environmental goods and services, under the now-stalled Doha Round negotiations.

With the outcome of Doha uncertain, both governments are raising the possibility that such an agreement could be a stand-alone voluntary set of commitments by key governments in order to increase the availability of such technologies in key developing parts of the world. The problem with the proposal has been lack of clear definition of environmental good and services, to better understand the scope of coverage.

Dow Position
The chemical industry supports efforts to encourage countries to elevate environmental standards and practices – recognizing that actual environmental issues (like chemicals management/safety) are already being addressed in other, more appropriate fora (i.e. the UN). Furthermore, Dow shares industry concerns about the lack of a clear definition in the WTO of what 'environmental goods' precisely are and that the current Doha proposal would discriminate and unfairly disadvantage chemically produced goods. Industry therefore suggests that the identification of 'environmental goods' be based on a complete Life-Cycle-Assessment.

6. Trade and Climate Change

There have been a number of proposals for energy and climate change related trade policy measures, such as addressing the issue of carbon leakage via border tax adjustments (import tariffs). Border tax adjustments would be raised by carbon-taxing countries on goods manufactured and imported from countries that do not impose CO2 cost burdens on their industry as a way to compensate for the costs of climate-change measures. In the EU this proposal has repeatedly been pushed by the French and German governments.

Dow Position
Dow shares the industry position that trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade. Environmental measures addressing transboundary or global environmental problems, should, as far as possible, be based on an international consensus and must be WTO compliant. Measures that violate WTO commitments would be counter-productive and likely to result in dispute settlement cases.

Dow, therefore, does not support the French-(German) proposal for border tax adjustments or other border measures (i.e. an extension of the Emissions Trading Scheme costs to imports into the EU). We would support free allocation of emission certificates for industries where competitiveness is threatened. This is an appropriate means to protect domestic manufacturing industries. It maintains a level playing field, supports global free trade, and avoids discriminating against either local or foreign industries.

For More Information:
To learn more about Dow's positions related to US trade policy, please contact:

• Lisa Schroeter, Director – Global Trade Policy