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Pennsylvania’s Evolving Economy Benefits From Free Trade

Edward R. Hamberger
May 23, 2018
PennLive.com

A new report from the National Association of Manufacturers shows two of Pennsylvania’s key economic sectors – makers of motor vehicle parts and electrical equipment – have doubled exports to Canada and Mexico in the past ten years.

While these two countries represent just 4 percent of the global economy, the report notes that Pennsylvania manufacturers sell nearly 17 percent of their products to these North American neighbors.

All told, more than 42,600 manufacturing jobs in the state depend on trade with Canada and Mexico, all of which occurs under the framework of the North American Free Trade (NAFTA) agreement, which allows for the free flow of goods largely without the imposition of tariffs.

The privately owned freight rail industry, which moves billions of tons to market for just about every part of the U.S. economy – including many of the inputs for manufacturers, as well as their finished products to industrial or consumer purchasers – hope the Trump administration and elected leaders in Congress will consider these powerful figures as they negotiate NAFTA and continue to work with other nations to ensure agreements put the U.S. economy and workers on the best possible footing to succeed.

Limiting commerce for U.S. consumers and businesses abroad is not only unnecessary, but counter to the continued growth of a rather healthy United States economy.

Abandoning NAFTA, the trilateral pact enacted in 1994, was never a wise or realistic idea, as it is simply too important to our daily lives. We are all too used to the immense benefits the deal has had, namely through lower costs for everyday goods.

Private freight railroads, such as CSX and Norfolk Southern in Pennsylvania, have played a major role in this transformation and believe strongly in the positives of the deal. Alongside trucks and barges, we serve as the conveyor belt for key products and commodities moved across the continent.

Industry data show that at least 42 percent of railcar loads and roughly 50,000 quality U.S. rail jobs are directly associated with international trade — much of which occurs in North America. Without NAFTA, some of our biggest customers, from coal miners to steelmakers, would very likely leave the continent altogether.

More broadly, economists estimate that more than 41 million U.S. jobs today depend on trade. NAFTA alone has boosted the U.S. economy by $127 billion annually. And since the deal took effect, trade between Canada, Mexico and the U.S. has nearly quadrupled, reaching $1.3 trillion in 2014.

The aforementioned report demonstrates the fact that many established sectors exist in today’s economy precisely because of this trade agreement. For instance, in 2016, 13 major automobile companies manufactured 12.2 million vehicles in the U.S. — 1 million more than in 1992 before NAFTA was created. These companies have also launched 15 new plants, leading to 50,000 direct and 350,000 indirect auto jobs.

Yet according to the American Action Forum, a NAFTA exit would impact $1 trillion in North American trade and expose businesses to $15.5 billion in new tariffs. The analysis shows that this would cost consumers at least $7 billion collectively per year — money that could otherwise be spent or invested.

Ultimately, while agreements can always be improved, and must put domestic workers first, lawmakers should avoid policies that hinder U.S. participation in the global economy. Future economic prosperity in Pennsylvania rests on access to more markets and consumers – not less.

Edward R. Hamberger is president and CEO of the Association of American Railroads. He writes from Washington D.C.

To access the op-ed, click here.

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