While the hosts and attendees will surely cheer progress in 2017 on making our tax code more competitive globally and removing unnecessary, anti-business regulations, the President will undoubtedly hear from farmers on the need to preserve the North American Free Trade Agreement (NAFTA). America’s privately owned freight railroads – a major means for getting agricultural products and equipment to market – stand united with the agricultural community in this critical debate.
While railroads and farmers once served as the link between rural communities and urban centers, the two industries now link America to much of the world – particularly Canada and Mexico. One in every ten planted acres feeds people of these countries.
Much of this is due to railroads’ scale of operations – one railcar can haul enough wheat for 258,000 loaves of bread, enough soybeans for 415,000 pounds of tofu or enough barley for 94,000 gallons of beer – but also due to a deeply entrenched supply chain formed in large part by NAFTA.
The connection between railroads and agriculture is exemplified by the ability to link fertilizers to farmers and foods to producers. I often see a line of tank cars moving raw goods for input into chemical manufacturing. These trains are going from Canada to Florida, where their contents will help create agricultural fertilizers. Those materials will then move by railroads to the U.S. Heartland, helping America’s farmers generate yields. Their food products will then go by rail to ports for sale on the global market.
A dinner in Mexico is made possible, in part, by the very train cars that started in Canada and that I see in the East.
In 2016, railroads delivered 15.3 million tons of fertilizers and related agricultural chemicals. In the same year, despite fierce competition from trucks and barges, major U.S. railroads originated 1.54 million carloads of grain, or 5.6 percent of all carloads. Farm and food products – including grain – along with automobiles and auto parts, are among the three largest rail commodities shipped to Mexico.
Much this occurs across borders, tariff free. Continued economic gains for both industries, however, hinge on policies that encourage such movements.
In 2018, this starts with maintaining the benefits of NAFTA, which for railroads accounts for a large portion of the rail industry’s business. Industry data shows that at least 42 percent of rail carloads and intermodal units and roughly 50,000 U.S. jobs are directly associated with international trade. We agree with economists who predict a steep decline of North American trade without NAFTA in place, a major problem for our industry, which customers rely on to traverse the northern and southern borders every day.
While almost all observers agree that NAFTA must be modernized, it should not be abandoned altogether. “The conversation we need to be having is how do we enhance the NAFTA trading bloc’s capability of competing globally and specifically America’s ability to compete globally,” says Union Pacific CEO Lance Fritz.
Indeed, outright abandonment would not only disrupt the $1.2 trillion in goods traded among U.S., Canada and Mexico annually, but it would hinder the sectors this administration particularly values.
This includes not only manufacturing, as I explained recently alongside the Auto Alliance, but the agriculture sector that exported nearly $43 billion worth of goods to NAFTA partners in 2016 (a 450 percent increase since NAFTA’s formation). From corn to produce to rice to soy, NAFTA has overwhelmingly benefited farmers. Exiting could cost the U.S. at least 50,000 agriculture jobs and a drop of $13 billion in GDP from farming alone.
Controversial changes, such as the possibility for mandated renegotiation every five years, will only cause market uncertainties to the detriment of the U.S. economy. As Kansas City Southern CEO Patrick J. Ottensmeyer says, “If the White House pulls out of NAFTA, it could lead to the reimposition of higher tariffs on North American-produced goods. This would effectively be a big tax increase on all U.S. production.”
Put simply, less trade means less jobs and less revenues for a host of industries, which means less investment to serve customers and a weakened U.S. economy. This would be an unfortunate twist following the passage of major tax reform for businesses.
The railroad industry stands united with the continued efforts of agriculture advocates to preserve the benefits of NAFTA. We hope policymakers hear our calls.
About the Author: Hamberger is President and CEO of the Association of American Railroads.