Political leaders from Canada, Mexico and the U.S. just concluded the latest round of negotiations regarding the North American Free Trade Agreement, and there is unfortunately a distinct possibility that the critical pact will be terminated.
Given NAFTA’s unparalleled success in expanding economic opportunity for vital U.S. economic sectors, Missourians should sincerely hope that the 23-year-old trilateral agreement does not deteriorate in the worthwhile process of modernizing it. Privately owned freight railroads — a primary means for bringing goods to and from Canada and Mexico — will do its part alongside the overwhelming majority of the business community to maintain today’s integrated North American economy.
The evidence is clear: The U.S. Chamber of Commerce estimates that nearly 14 million jobs depend on trade with Canada and Mexico, and at least 5 million of these are the direct result of NAFTA. A 2016 report from the U.S. International Trade Commission found that bilateral and regional trade deals like NAFTA save at least $13 billion in tariffs annually, massive savings enjoyed by American consumers. According to a January report by Trade Partnership Worldwide, a NAFTA withdrawal would cost the average American household roughly $650 per year due to increased prices and lower wages.
The impact in Missouri is particularly compelling, as more than half of the state’s exports move to Canada or Mexico, producing $7.8 billion in revenues for businesses in the state. According to the U.S. Chamber, a NAFTA-less economy would jeopardize nearly 250,000 jobs in the Show-Me State.
This is due in large part to the state’s manufacturing and agricultural sectors, which railroads assist in a major way in moving products for production and sale. More than 90 percent of the state’s motor vehicle manufacturing products go to Canada and Mexico, while a new report from Farmers for Free Trade finds that a whopping 51 percent of Missouri’s agricultural exports go to Mexico — tops in the nation. This includes chiefly grain and soybeans, both of which would be subject to steep tariffs in a world without NAFTA.
Nationally, the agriculture sector exported nearly $43 billion worth of goods to NAFTA partners in 2016 — a 450 percent increase since NAFTA’s formation. Exiting could cause the U.S. a drop of $13 billion in GDP from farming alone.
Due to railroad’s scale of operations — one railcar can haul soybeans for 415,000 pounds of tofu, while one set of trains can move 750 automobiles — our industry plays a major role in getting key Missouri products to market. In 2016, railroads delivered 15.3 million tons of fertilizers and related agricultural chemicals. In the same year, major U.S. railroads transported roughly 13 million autos and 41.5 million tons of basic steel products to auto parts suppliers and other customers.
We have invested massive sums of private capital — including $26 billion annually in recent years — to facilitate much of this activity. Today, trade accounts for at least 42 percent of rail carloads and intermodal units, and roughly 50,000 U.S. rail jobs are directly associated with international trade.
We believe strongly that today’s sophisticated supply chains cannot be uprooted overnight, which is why we are vocally supporting our customers so dependent on trade. Missouri U.S. Sens. Roy Blunt and Claire McCaskill are spot on when they deem the trade deal a success, particularly for U.S. farmers.
Controversial changes, such as the possibility for mandated renegotiation every five years, will only cause market uncertainties to the detriment of the U.S. economy. Put simply, less trade means less jobs and less revenues for a host of industries, which means less investment to serve customers.
The railroad industry stands united with Missouri and its trade-dependent economy to preserve the benefits of NAFTA. We hope policymakers hear our calls.
Hamberger is President and CEO of the Association of American Railroads