Montreal meetings on NAFTA could impact thousands of Missouri workers | St. Louis Public Radio

Montreal meetings on NAFTA could impact thousands of Missouri workers

Jan 22, 2018

The fate of tens of thousands of Missouri jobs could hinge on trade talks set to resume this week in Montreal. Negotiators from the United States, Canada and Mexico will gather for another round of North American Free Trade Agreement negotiations. The U.S. wants to rework the deal, or possibly withdraw altogether.

The U.S. Chamber of Commerce says roughly 250,000 jobs in Missouri could be affected if the Trump administration decides to leave NAFTA.

John Horn, Washington University Olin School of Business senior lecturer, spoke recently  with St. Louis Public Radio about the impact possible changes to NAFTA could have on Missouri and the relationship with two of its top trading partners: Canada and Mexico.

How could leaving NAFTA impact Missouri's economy?

Along with the U.S. Chamber's estimate about the number of jobs that would be at risk, leaving NAFTA could reduce the number of international markets where many Missouri businesses already sell goods and services. Horn also pointed to U.S. Census figures showing 4.4 percent of all Missouri employees work at operations owned by foreign companies. A NAFTA pullout could prompt those employers to leave the U.S. or double-down on the American market because international trade options would be more limited. "My guess is they probably would be pulling out," Horn said.

Has NAFTA been a huge drain on American jobs?

Plants have left the U.S. for cheaper options in countries like Mexico. But Horn pointed out that was happening before NAFTA. The original pact that led to the Canada-U.S. Free Trade Agreement — and then NAFTA — focused on the auto industry.

"The three major U.S. auto manufacturers in Detroit wanted to produce stuff in Windsor," Horn said. That Canadian city is right across the river from Detroit. So jobs in that sector were leaving the U.S. well before the tri-lateral agreement. Some of the manufacturing operations that have gone to Mexico might come back without NAFTA, but they would have fewer workers. Improved technology, especially when it comes to automation, would render many jobs from past manufacturing operations obsolete.

Horn graduated from the University of Michigan and holds advanced degrees from Harvard University.
Credit Washington University Olin Business School
Is there a benefit to renegotiating NAFTA?

Several economists agree that free trade "helps grow the overall pie," Horn said. "What free trade does not necessarily do well is spread the benefits of that larger pie among the whole population." He added that those who believed they lost under NAFTA tended to vote for Donald Trump in the 2016 presidential election. Some elements of NAFTA could be working better, and some areas could be tweaked, but Horn doesn't believe the U.S. would benefit from throwing out the entire agreement.

How tough would it be to find partners beyond Canada and Mexico?

"This is where Missouri exports. And this is where St. Louis exports," Horn said. "So the state will have to replace those exports somewhere." That would be complicated because other states would also be scrambling to fill the trade void if NAFTA goes away. The auto industry could be heavily affected by any changes to the agreement. Missouri produces auto parts that are shipped to countries where cars are put together, including Mexico. Some free trade opponents argue vehicles could be produced elsewhere, so Missouri suppliers will still have customers. Horn countered that theory. "The question there is — will the price of cars go up enough that people will stop buying cars? In which case we don't need to produce the parts anymore."

How could the Montreal talks frame future discussions?

One of the key points Horn is monitoring closely is a proposed sunset clause. The Trump administration wants to include language that will make NAFTA go away if it's not renewed every five years. "That just seems like you're always setting up confrontation and always setting up disagreement," Horn said. The big problem with the current renegotiation is uncertainty among businesses. "If businesses don't know where they should be investing, or how they should be investing, they tend to hold back on investments and that is going to slow growth down."

NAFTA talks resume Tuesday in Montreal. This sixth round of negotiations is slated to last through Sunday. There was a minor round of discussions last December in Washington, D.C. A specific timeline to wrap up all rounds of discussions has not been set. Top negotiators for all three countries have vowed to wrap up, "as soon as possible."

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