The Trump administration’s on-again, off-again approach to taking punitive action against America’s trading partners has occasioned its fair share of confusion and vitriol, leading many to wonder what the ultimate endgame is.
Known as a shrewd negotiator, the president is playing a dangerous game of chicken — with the lives and livelihoods of millions of Americans hanging in the balance. Despite his methods, however, he has forced all of us to reconsider how trade impacts our day-to-day lives, and to consider seriously where our collective interests lie.
Here in Missouri, it’s a pretty easy question to answer. Over half of our state’s exports head to our North American Free Trade Agreement trading partners of Canada and Mexico. This contributes to over $14 billion per year in two-way commerce. Furthermore, Canada and Mexico respectively rank first and second among Missouri’s foreign trading partners, and accounted for a 2017 trade surplus of approximately $1.5 billion.
To put that in perspective: Overall, the U.S. currently runs an $800 billion yearly trade deficit worldwide, the size and persistence of which has been Exhibit A in the president’s case for reconfiguring our trading relationships across the globe. As Missouri’s NAFTA trading relationships make clear, however, the problem with the president’s approach is that not all trade partners are cut from the same cloth, and they should not be treated the same way.
In many respects, the president is right to open the conversation on our current trade arrangements. While the overall balance need not be zero, he is probably right that an $800 billion annual deficit is neither sustainable nor healthy. Equally problematic is the serial theft of U.S. intellectual property by foreign states, corporations and individuals. Efforts heretofore to rein in that stealing have been ineffective. The status quo on trade falls far short of ideal, but the president’s one-size-fits-all solution would be a classic case of throwing out the baby with the bathwater.
Our NAFTA trading partners simply are not to blame for the size of that trade deficit or the theft of intellectual property. Canada and Mexico account for a small fraction of the trade deficit, and some states — like Missouri — actually contribute to a surplus. Likewise, the impact of our NAFTA trading relationship in Missouri is broad-based, with transportation equipment, metal manufacturing, pulp and paper, chemicals and machinery leading the way.
Furthermore, because of our state’s unique geography — situated not only in the middle of the country, but also close to the continent’s center of population — companies based in Missouri have done an effective job of using that location, the infrastructure we have built over the years and the NAFTA framework to build durable business models based on trade, transportation, logistics and distribution. Kansas City Southern, for instance, has long capitalized on being the continent’s main north-south rail carrier of goods.
Likewise, Missourians have made huge investments in building and maintaining the infrastructure needed to attract international businesses, becoming a major cog in the international supply chain. Many of those investments are premised on the advantages we share thanks to NAFTA.
While we should all welcome a rigorous and intellectually honest debate about international trade, Missourians should make it plain that our interests could not be clearer: NAFTA is an unambiguous plus to our state’s economy. Our spokespeople and elected officials need to make sure the current administration in Washington understands this.
Our state will not accept being a bargaining chip in a larger game of brinkmanship, particularly when the administration seems unable to distinguish friend from foe.
Jeff Simon is a managing partner at Husch Blackwell and a member of The Star’s Missouri Influencers panel.