The Montana World Trade Center joined representatives from Canada and Mexico on Tuesday to discuss stalled trade talks and what happens to manufacturers and producers if the USMCA trade agreement isn’t ratified.
With the 1993 North American Free Trade Agreement in doubt and the USMCA pact stuck in the mud, uncertainty now threatens to undermine longstanding commercial trade and impact hundreds of thousands of jobs.
“What we’re looking for now is certainty,” said Ben Thomas, director of the Montana Department of Agriculture. “We took for granted five or 10 years ago the relationship we had with Canada and Mexico that we just don’t have right now.”
Every year, Thomas travels on a trade mission to Mexico to boost Montana barley exports, a key ingredient in crafting Mexican beer. He recently sat with one Mexican brewer who bought 100 percent of his malt grains from Montana until 2016, about when President Donald Trump set out to overturn established trade agreements, injecting uncertainty into the market.
The Mexican brewer, in Thomas’ example, now buys half of his barley from Europe.
“Due to the uncertainty that’s been introduced in our relationship, he started diversifying his sourcing,” Thomas said. “That means our producers, particularly in Montana, North Dakota and Idaho, are losing out. It’s in the best interest of agriculture to get that certainty back by ratifying USMCA as quickly as possible.”
Experts on Tuesday’s panel, hosted by the Montana World Trade Center in Missoula and joined by affiliates in Denver and Kansas City, agreed the North American Free Trade Agreement played a key role in establishing mutually beneficial trade networks among the three nation partners.
But in 2016, Trump called NAFTA “the worst deal ever” and moved to renegotiate the agreement, raising doubt about its future. New trade talks began in 2017, resulting in USMCA in the fall of 2018, though it has never been ratified.
Sander Lurie, a public policy expert at Denon’s Law Firm in Washington, D.C., said given the political discourse in the nation’s capital, ratification isn’t expected any time soon.
“There’s little intensity on both sides of this debate,” said Lurie. “One of the problems with the stalled process here in Washington is that nobody views it as a must-do, must-have thing.”
Trade experts believe the resulting uncertainty threatens to undermine longstanding trade agreements, including those with Montana’s biggest buyers.
Canada alone buys more U.S. exports than China, Japan, the United Kingdom and South Korea combined. In 2017, that included $674 billion in U.S. goods, amounting to $1.3 million in trade every minute.
Add it up and it sustains 25,000 jobs in Montana and 141,000 jobs in Colorado, according to Jerome Pischella, the senior trade commissioner with the Canadian Consulate General in Denver.
“What we want through an agreement is stability,” said Pischella. “If a Canadian company is going to invest in the U.S. or Mexico, we want to make sure that five years from now, that investment still makes sense. If somehow the new USMCA was to go away, you’ll lose stability and stifle investment.”
Pischella also expressed concerns with the tariffs slapped by the Trump administration on longstanding U.S. partners, including Canada and Mexico. That includes steel and aluminum, both key components in the manufacturing, aerospace and auto industries.
Montana is home to both the manufacturing and aerospace industries, including others impacted by steel and aluminum tariffs.
“Supply chains have been established for years and cannot be changed overnight,” said Pischella. “Right now, what’s happening at companies on both sides of the border is they’re absorbing the costs, and eventually they’ll have to put those costs back on the clients or lay off some of their employees. We’re hurting ourselves and we’re hurting both of our economies with those tariffs.”
Tariffs and disruptions in the supply chain also have risen as concerns at the World Trade Center in Denver, said Katie Pagano. The state is home to a wide number of industries that rely heavily on trade with Canada and Mexico.
“A lot of things we’ve been hearing in our office is just more of the uncertainty,” said Pagano. “We’re not sure what’s going to happen with these changes. The biggest concern is what if UMSCA doesn’t go through, and what happens to NAFTA?”
Montana’s economy has traditionally been driven by agriculture and resource extraction, though other industries are catching up, including technology and manufacturing. Questions from certificates of origin and the protection of intellectual property could be implicated by the future of the USMCA agreement.
“We believe strongly in prosperity for all through trade,” said Brigitta Miranda-Freer, executive director of the Montana World Trade Center. “We know trade is built one business relationship and one deal at a time.”