Despite mixed signals from President Trump on the future of the North American Free Trade Agreement (NAFTA) and the conclusion of another set of negotiations between Canada, Mexico and the United States, there is, unfortunately, a real possibility that the critical pact will be terminated.
Given NAFTA’s unparalleled success in expanding economic opportunity for vital U.S. economic sectors – including agriculture and food production in Nebraska – readers should sincerely hope that the trilateral agreement does not deteriorate in the worthwhile process of modernizing it. Privately owned freight railroads – a primary means for transporting goods throughout the continent – will do their part alongside the overwhelming majority of the business community to ensure we do not lose NAFTA.
The evidence is clear: The U.S. Chamber of Commerce estimates that nearly 14 million jobs depend on trade with Canada and Mexico, while trade between the three countries exceeds $1.3 trillion annually. That is more than $3.3 billion per day.
A 2016 report from the U.S. International Trade Commission found that bilateral and regional trade deals such as 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 at least $650 per year in increased prices and lower wages.
The impact in Nebraska, which ships 93 percent of its grain and oilseed production to Canada and Mexico, is particularly compelling. The agricultural and food sector produced $3.5 billion in exports alone, with $1.5 billion – 43 percent – of these going to Canada and Mexico. New data suggest this economic activity supports 527,800 Nebraska jobs earning $32 billion in combined wages. According to the U.S. Chamber, a NAFTA-less economy would put 87,000 jobs at risk in the state.
Nationally, the agriculture sector exported nearly $43 billion worth of goods to NAFTA partners in 2016 – a 450 percent increase since NAFTA’s formation in 1993. Exiting could cause a drop of $13 billion in GDP from farming alone.
Due to railroad’s scale of operations – one railcar can haul enough wheat for 258,000 loaves of bread or enough barley for 94,000 gallons of beer – our industry plays a major role in getting Nebraska farm products to market. In 2016, railroads delivered 15.3 million tons of fertilizers and related agricultural chemicals alone, and grain remains the single largest cross-border movement for the industry.
Railroads, including Omaha-based Union Pacific, have invested massive sums of private capital – including $100 billion in the past four years alone – 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. 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.
Nebraska Gov. Pete Rickets deems NAFTA “incredibly successful” and says he “will continue to work to encourage the administration to open up access for our markets.” Gov. Rickets is spot on, just as Union Pacific CEO Lance Fritz is when he says that “the conversation we need to be having is how do we enhance the NAFTA trading bloc’s capability of competing globally and specifically America’s ability to compete globally.”
The railroad industry stands united with Nebraska and its trade-dependent, agricultural economy to preserve the benefits of NAFTA. We hope policymakers hear our calls.