Trade representatives from the U.S., Canada, and Mexico began the new round of North American Free Trade Agreement negotiations on Sunday in Mexico City, as the U.S. economy continues to enjoy low unemployment and increased consumer confidence. Major U.S. business interests, however, including the railroad and rail manufacturing companies we represent, are gravely concerned about the negative impact on the economy if efforts to renegotiate the 24-year-old NAFTA agreement fail.
Simply put, a NAFTA-less economy would directly undermine the business gains already realized through pro-growth tax reform, which our customers are using to expand operations, investments, and employment.
Economists found NAFTA has boosted the U.S. economy by $127 billion annually. Since the agreement took effect in January 1994, trade between the U.S., Mexico, and Canada has nearly quadrupled, reaching $1.3 trillion in 2014. U.S. jobs are directly connected to exports; government data indicates that exports of manufactured goods support 6 million jobs alone, while 33 percent of American farming acreage is dedicated to global markets.
Manufacturing and agricultural jobs are the lifeblood of heartland states – including Iowa, Ohio, and Pennsylvania. Abandoning NAFTA likely would reverberate in negative ways in industrial and agricultural heartland states like these, which were crucial to President Trump’s election.
NAFTA is important to the rail industry, its customers, suppliers, and equipment manufacturers. It has resulted in North American economic integration, allowing the three countries to be part of an efficient supply chain, largely tariff-free, and helping U.S. companies compete more effectively in global markets. This is particularly important as countries like China continue to grow and challenge American jobs.
Association of American Railroads research shows 50,000 domestic rail jobs — accounting for $5.5 billion in wages and benefits — depend directly on international trade and more than 40 percent of rail shipments cross America’s borders. America’s freight railroads also invest heavily – $100 billion in the past four years alone – easing the movement of goods throughout North America and constantly improving the safety of their operations.
The railway supply industry plays a vital part in North American commerce and rail operations, providing railroads with the locomotives, railcars, track, technology and other equipment and services to meet their customers’ needs. An analysis by the Railway Supply Institute shows that railroad suppliers of all shapes and sizes – from global multinationals to small businesses – account for $28 billion a year in economic impact, providing 100,000 jobs across America in 44 states and hundreds of congressional districts. These suppliers and manufacturers invest millions of dollars a year developing new products to help railroads find better ways to move goods across North America, leveraging the latest technology.
As one example of the impact rail supply companies have on the U.S. economy, Pennsylvania, and Ohio, two states that played key roles in the 2016 presidential race, rank third and fifth in the U.S. in the total number of railway supply facilities. Railroads and their suppliers provide good jobs at good pay for American workers — these jobs could be jeopardized if NAFTA renegotiation fails and demand for rail shipments drops.
A November 2017 paper by the Congressional Research Service on potential effects of a U.S. NAFTA withdrawal on agricultural markets alone concluded that pulling out of NAFTA could result, among other things, in higher prices for imported products from Canada and Mexico, disruption of integrated supply chains and general market uncertainty. Those negative effects of losing NAFTA would certainly lead to fewer U.S. rail and railway supply jobs – jobs tethered to the manufacturing sector the current administration values so much.
We agree that NAFTA is overdue for modernization; however, an all-out exit is simply bad policy. Let’s consider how to open up more markets for the benefit of U.S. businesses like ours and our customers, not how to shut the door to economic opportunity.
Edward Hamberger is president and CEO of the Association of American Railroads. Mike O’Malley is president of the Railway Supply Institute.
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