Utah is a trade state. Nearly 1 in 4 jobs is tied to international business. Utah is one of only a handful of states with a trade surplus, and Utah was the only state to grow exports throughout the recession. This is a testament to the competitiveness of the more than 3,500 Utah business (85 percent of which are small businesses) that are exporting.
As an export state, there's no doubt that Utah’s economy, Utah consumers and Utah businesses have benefited from NAFTA. In just 10 years Utah exports to Mexico have grown over 300 percent, making our neighbor to the south our third-largest trading partner. The success of Utah companies selling to Mexico is surpassed only by their success selling $3.3 billion to Canada. That revenue from abroad translates into real jobs at home, at an estimate of nearly 80,000 jobs from trade with Canada alone.
At over 20 years old, there's also no doubt that NAFTA needs updating. As one example, consider how many e-commerce companies existed when NAFTA was created. Hint: It's a trick question. The internet as we know it today did not exist when the trade agreement was created.
Rather than modernizing NAFTA, however, the president has threatened to scrap the whole deal. This course of action would hurt Utah consumers. It would hurt the thousands of Utahns employed by Canadian and Mexican firms with operations in Utah. It would hurt Utah manufacturers. It would hurt Utah farmers, ranchers and thousands of small businesses that export to these markets.
Nixing NAFTA is particularly harmful to Utah’s economy because the companies most at risk of higher tariffs are in industries where the state produces the highest exports, including agriculture, transportation equipment and building materials. For example, pre-NAFTA tariffs on turkey were 45 percent, an amount that would effectively price out central Utah turkey growers from these markets. Ending NAFTA would disrupt the intricate cross-border logistics and manufacturing network and put Utah transportation manufacturers at a disadvantage in competing with European and Asian companies.
Trade agreements set the rules of the game that provide the predictability and stability Utah companies need to successfully compete in the global marketplace. When rule-based trading disappears, these companies are left with the equivalent of playing Monopoly with the annoying kid down the street who makes up rules as he goes along.
With so much at stake, let's hope Trump’s threats are just that, negotiating bluster designed to extract more concessions. If Trump is successful in that gamble, then more power to him. But if he does pull the U.S. out of NAFTA then Utah companies will pay the price. Utah is not known as a gambling state, but we are in the middle of a poker game not of our making, and the stakes are high.
There is no doubt our leaders should negotiate the best deal possible for U.S. companies. There is no doubt free trade should also be fair trade. There is no doubt that rules are only as good as far as they are enforced. But let's hope our elected leaders pursue modernization of NAFTA in a way that will accomplish those goals without killing the goose laying the golden egg for international business in Utah.
Derek B. Miller is the president & CEO of the World Trade Center Utah. Previously he was chief of staff to Gov. Gary Herbert and managing director of the Governor's Office of Economic Development.