Negotiators from the United States, Canada and Mexico continue to negotiate an update to the North American Free Trade Agreement (NAFTA). While there is increased optimism that the nations will reach an agreement, there still is a realistic chance this critical pact could suffer the negative consequences of escalating tensions surrounding global trade.
Given NAFTA’s unparalleled success in expanding economic opportunity for bedrock U.S. economic sectors, Iowans should hope dearly 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, in lockstep with the overwhelming majority of the business community, to make clear that we must not undo recent economic gains by reducing the ability to participate in an integrated North American economy.
The evidence is clear: since enactment in 1993, NAFTA has boosted the U.S. economy by $127 billion annually, with trade between the three countries now exceeding $1.3 trillion each year. 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.
The impact in Iowa is particularly compelling, as nearly half of the state’s exports move to Canada or Mexico, producing more than $5.5 billion in revenues for Iowa businesses. According to the U.S. Chamber, a NAFTA-less economy would jeopardize nearly 140,000 jobs in the Hawkeye state.
This is due in large part to the state’s agricultural sector, which railroads work hand-in-glove with to help feed the continent and the world. A new report from Farmers for Free Trade finds that 35 percent of Iowa’s agricultural exports go to Mexico. This includes grain, corn, beef, chicken and pork from Iowa, all 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 cost the U.S. at least $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 agriculture 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 originated 1.54 million carloads of grain, or 5.6 percent of all carloads. Farm and food products — including grain — are among the three largest rail commodities shipped to Mexico.
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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. Iowa Gov. Kim Reynolds is right when she says exiting NAFTA would be “devastating.”
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 and a weakened U.S. economy.
The railroad industry stands united with Iowa and its agricultural industry to preserve the benefits of NAFTA. We hope policymakers hear our calls.
• Edward Hamberger is president and CEO of the Association of American Railroads.