A pivotal round of talks on the North American Free Trade Agreement looms later this month, and Minnesota companies are justifiably anxious.
After more than 20 years, NAFTA has resulted in an integration of the U.S., Canadian and Mexican economies that could not be pulled apart without great damage to all three. Yet the Trump administration continues to threaten withdrawal unless its demands are met. Among the recent sticking points: an insistence that the agreement be renegotiated in its entirety every five years — or expire. That is anathema to businesses that require the stability of long-term agreements to properly plan investments. The U.S. also wants more of certain products to be made in North America and, specifically, within U.S. borders. American businesses have objected to that provision as well, saying it would put them at a competitive disadvantage.
Both demands are wrongheaded, and the U.S. would be well-advised to find a way to walk them back before the three countries meet in Montreal later this month. Tough negotiations are to be expected from an administration that has made clear that its priority is to protect American interests. But continued productive trade relationships with northern and southern neighbors should rank highly among those interests. There are other gains to be made, including provisions for digital trade, essential to updating NAFTA.
Minnesotans may not be aware of how thoroughly NAFTA is embedded in the state's economy. But Gabrielle Gerbaud, head of the Minnesota Trade Office, is well aware. Canada and Mexico alone accounted for $6.4 billion of Minnesota's exports in 2016 — about a third of total exports. "NAFTA is key for us," she said, directly responsible for an estimated 40,000 jobs in the state. Examples of NAFTA's effects in Minnesota abound. Winnipeg-based New Flyer Industries is a top private employer in St. Cloud, where 750 workers churn out about 50 buses a week. Minnesota-based Cargill operates grain elevators and facilities across Canada, sending supplies in a seamless stream across the borders. Suckling pigs and calves are fattened in Canada, butchered in Minnesota and sold around the world. General Mills now gets half its oat production from western Canada. Mexico is the second top market in the world for Minnesota goods, up from seventh in the pre-NAFTA days.
"I don't think any of the three countries want to blow up the relationship we have," Gerbaud said, but the uncertainty "is causing a lot of anxiety among small and medium businesses."
Big businesses, too. Pulling out of NAFTA "would be devastating to Minnesota companies, all up and down the line," said Charlie Weaver, head of the Minnesota Business Partnership, which represents the state's largest corporations. "There is no doubt it would cost Minnesota jobs."
Paul Connors, Canadian consul general in Minneapolis, said some progress has been made on the nuts and bolts that make up the complex trade agreement. But the high-profile sticking points that remain are not to be underrated. U.S. trade representative Robert Lighthizer struck an ominous note after December's talks, saying, "We have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result."
Here is where Americans will see what kind of negotiator Trump really is. Pulling out of NAFTA would deal a hurtful blow to agriculture and manufacturing. Modernizing the agreement could net the U.S. the trade benefits of a free zone while limiting the outsourcing that has hurt some American labor sectors. It's a fine line to walk, but we urge the administration not to lose sight of the greater good that would come from preserving and improving strong free trade across North America.
