For Border States Michigan and Arizona, NAFTA Is Essential
As the presidents of two border-state chambers of commerce, we know firsthand of the power of the North American Free Trade Agreement. NAFTA is an indispensable component of our states’ economic prosperity.
Not surprisingly, our states’ international neighbors represent our largest trading partners. And for each of us, the other NAFTA partner country is our second-largest export market.
For Arizona and Michigan, and for so many states, NAFTA means jobs. Nationally, 14 million jobs are tied to trade with Mexico and Canada. In Arizona, the total is more than 200,000; in Michigan, it’s nearly 400,000.
Which is why President Trump’s rhetoric over trade and his threats to exit NAFTA are both troubling and perplexing.
Troubling because throughout its nearly 25-year history, NAFTA has fueled economic growth in our states, growing jobs here while preventing entire supply chains from migrating overseas to regions like Asia.
Perplexing because cutting off U.S. manufacturers’ access to foreign markets and increasing the costs of everyday products here at home runs completely counter to the administration’s stated goal of achieving 3 percent economic growth. While we share the president’s position on the need to reform our tax code and reduce job creators’ regulatory burden, making trade more cumbersome and expensive is a recipe for economic malaise, an opinion shared by over 80 percent of economists in a recent Wall Street Journal survey, who believe a NAFTA exit would result in an economic slowdown.
The anti-NAFTA position is also strange for a president who not only won our states in the 2016 election, but whose victory hinged on winning Michigan. Pursuing a policy that harms the very voters who tipped the scales in your favor is hardly the foundation for re-election.
The connections of our states’ economies with Canada and Mexico run deep, making us more competitive against foreign competition and proving the difference between adding jobs and shedding them.
For example, electric car manufacturer Lucid Motors cited its forthcoming Arizona factory’s proximity to Mexico and the highly integrated cross-border automotive supply chain as a reason for the company’s $700 million investment in the state.
In Michigan, the Detroit metro area alone is an international export powerhouse, sending $15 billion worth of exports marked “Made in the USA” to Canada and $17 billion worth to Mexico in 2015. That’s two-thirds of the state’s exports.
In fact, an analysis by the credit ratings agency Fitch finds that Michigan has the most to lose if NAFTA is dismantled. Michigan’s exports account for 7.4 percent of its gross state product, which Fitch says leaves the state “uniquely exposed” if the agreement were unwound.
It's easy to see why the potential for dramatic job losses looms large. Cross-border trade has now reached $1.2 trillion a year for the U.S., Mexico and Canada, an astonishing $3.3 billion a day, making NAFTA the world’s largest – and most consequential – trade bloc.
While we are staunch advocates for NAFTA, we are not satisfied with the status quo. We believe strongly that an agreement that came into force in 1994 ought to be updated to reflect the realities of today’s economy. A NAFTA that was negotiated in the dial-up age should be modernized for a broadband world.
The renegotiations underway between the three NAFTA parties present an opportunity to streamline overly complicated customs regulations, guard intellectual property, protect investors’ interests in dispute proceedings, and recognize electronic commerce.
The administration should not, however, approach a renegotiation as a chance to exact some sort of punitive trade agenda against our partners. Rather, we should be guided first and foremost by the goal to do no harm to an agreement that is a cornerstone of all three nations’ continued prosperity.
The stakes are high for our border states as we craft a new NAFTA with our friends and neighbors. If the administration embraces the opportunity to modernize the agreement, Michigan and Arizona will emerge even stronger. But if the U.S. walks away from NAFTA, the effects will be devastating.
We choose to stand with the millions of jobs that depend on trade.