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NAFTA: Observers urge reform, not end, to free trade deal

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The talk of ending or updating NAFTA is expected to intensify late in January, a debate whose result poses high stakes for manufacturers, truckers and farmers in Central Pennsylvania.

The North American Free Trade Agreement, which deepened trade among the United States, Canada and Mexico, took effect on Jan. 1, 1994. From the start, experts debated whether it would be a positive or negative for the United States. But there was consensus that open global economies and markets were the future, so trade barriers should be reduced if not eliminated.

President Donald Trump shook up the consensus with campaign promises to amend if not end any trade deal that wasn’t in the U.S.’s best interest. In particular, Trump has been vocal about agreements that have been detrimental to American workers.

In the mid-2000s, The Hershey Co. in Derry Township was at the center of the NAFTA debate when company leaders closed plants in Central Pennsylvania and moved operations to Monterrey, Mexico, laying off in the process more than 1,000 workers here.

Similar job losses around the country have Robert E. Scott, an economist with the Economic Policy Institute, arguing that NAFTA has not been good for the U.S. or its workers. In a 2011 paper “Heading South: U.S.-Mexico Trade and Job Displacement after NAFTA,” Scott found that 682,900 U.S. jobs had been lost because of NAFTA. He said last month that the paper found that about 26,300 jobs were displaced in Pennsylvania.

Scott, who defines the Economic Policy Institute as a liberal-leaning public policy group, said such statistics mean that frequent updates and revisions are warranted. He said a thorough review by the Trump administration makes sense.

“I think it is a reasonable thing to do,” Scott said.

Last month, his institute identified six priorities that should be considered when renegotiating NAFTA, including adding provisions to protect workers’ rights and wages and their right to form unions and bargain collectively. Another priority would be to restrict the ability of foreign companies from bidding on U.S. contracts, a practice that the institute says costs U.S. jobs.

The institute isn’t the only outside observer interested in changes to the treaty.

“The management team at Hershey recognizes that NAFTA is more than 20 years old and supports efforts to modernize the agreement,” said Jeff Beckman, a spokesman for the company. “However, withdrawing altogether will disrupt markets and supply chains and negatively impact U.S. growth, competitiveness and jobs.”

Beckman didn’t provide details on what Hershey would like to see changed or tweaked but said the talks make sense.

“Renegotiating NAFTA enables the United States to improve the existing agreement and set a new standard for U.S. trade agreements going forward,” he said.

The talks started last summer and are set to resume late this month in Montreal. Two main issues include a U.S.-floated idea to add a sunset clause to the agreement and details that may need to be tweaked, such as the definition of “American made,” when it comes to how much of a part is made in the U.S. and how much of it is made elsewhere, according to Reuters news service.

Canadian and Mexican negotiators have opposed a sunset clause, fearing it would mean an eventual end to the agreement. But if a better deal can’t be reached, Trump has threatened to end the agreement with the six-month notice currently required.

“A withdrawal from NAFTA would negatively impact not just our company, but companies across the United States and the overall economy,” Beckman said, when asked whether Hershey has weighed in on the sunset clause. “This trade agreement matters to The Hershey Co. because Mexico and Canada are important markets for the company and withdrawing from NAFTA could threaten our ability to sell our iconic products in those countries.”

NAFTA also forever changed the trucking industry, which has a strong presence in Central Pennsylvania because of the region’s numerous interstate connections, trucking companies and warehouses. The American Trucking Associations, along with its counterparts in Mexico and Canada, released a statement in October urging sensible changes to NAFTA that do not disrupt the good the agreement has done for the industry.

Bob Costello, the trucking group’s chief economist and senior vice president, said last month it is imperative that the U.S. not end NAFTA. Any changes must be carefully weighed and considered, he said.

He estimates that NAFTA supports more than 46,000 U.S. trucking jobs, including 31,000 U.S. truck drivers, generating $6.5 billion for the trucking industry annually.

Another group urging caution is farmers.

In a statement issued in November, the Pennsylvania Farm Bureau in Camp Hill said farmers have been “alarmed” at Trump’s repeated calls to withdraw from the agreement. Since NAFTA, exports from the U.S. to Canada and Mexico increased by more than $29 billion, from just $8.9 billion in 1993 to $38 billion in 2015, the bureau reported.

“Complete withdrawal from NAFTA is not a desirable option for American agriculture or Pennsylvania farmers, especially when you consider that 37 percent of all Pennsylvania agriculture products exported to foreign countries goes to Canada and Mexico,” Rick Ebert, president of the bureau, said during a news conference in November and later released as a statement. “We’re encouraging President Trump and his trade negotiators to continue working toward an agreement that protects NAFTA’s strong agricultural component, while creating new opportunities for businesses across the nation.”

While farm groups oppose an end to NAFTA, there are areas that could be improved, said Mark O’Neill, media and strategic communications director for the Farm Bureau. For example, farmers would like to see Canada open up to more imported dairy products, such as milk. It would lower prices for Canadian consumers, while alleviating an oversupply issue in the U.S.

“We generally support trade agreements of all kinds,” O’Neill said. With reduced tariffs, “it typically makes it easier for others to buy our products.”

As important as NAFTA is, Scott said, people are missing the bigger picture: trade issues with other countries that are more detrimental to the U.S. economy. For example, he said the U.S. should focus on China and issues of dumping products, such as aluminum and steel.

NAFTA “should not be the top priority,” he said. “It should be China and Japan and Germany.”

“Mexico is much, much smaller,” he said.

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