President Trump's long-standing beef with the North American Free Trade Agreement (NAFTA) gets aired out this week as the fourth round of scheduled renegotiations of the landmark trade deal begin today, Oct. 11, in Washington.
South Dakotans, who've been watching our agriculture-driven economy flounder for the past few years (for data wonks, 2017 statewide taxable sales were down almost 2 percent from a year ago and five-year per capita GDP growth is less than 1 percent compared to a national increase of more than 6 percent) should keep a wary eye on the talks. The agriculture sector doesn't need another hit.
That NAFTA has been a very good deal for South Dakota is self-evident. On a national scale, the numbers are eye-popping. In 1993 when NAFTA came into being, the U.S. exported about $9 billion worth of corn and soybeans to Canada and Mexico. Thanks to NAFTA, that number jumped to nearly $40 billion. About 30 percent of U.S. agriculture sales go to our North American partners. The top three products are corn, soybeans and pork.
Even one of Trump's most consistent friends in Congress, Sen. John Thune, has weighed in on the importance of NAFTA, telling KSOO radio last summer that "open markets lower tariffs and uniform regulation means more money in the pockets of South Dakota farmers, particularly from livestock." Thune singled out NAFTA as being particularly "positive for South Dakota."
And then there's the rest of the country. Considering that Trump's well-known hatred of NAFTA is hanging over these negotiations, South Dakotans have every reason for concern about the future of the deal. But what's interesting is that "the worst trade deal ever signed," as Trump often puts it, has important supporters in parts of the country where the president thinks his protectionist agenda is most helpful.
A piece last summer in the Detroit Free Press notes that Michigan would be at risk in a drastically revised or entirely ditched NAFTA, claiming that it "has more to lose than any other state" if NAFTA's terms are changed according to Trump's wishes. Credit-scoring giant Fitch Ratings says Michigan would be the most affected state because "its economy is the most interconnected" with our NAFTA partners.
As it turns out, the uniformity of regulations and the openness of our markets create those "interconnected" supply and distribution chains that have helped advance the agriculture and industrial sectors of the three trading partners.
A 2016 study by President Trump's alma-mater, The Wharton School of Business, notes that NAFTA-driven advances in the U.S. economy have been steady, if modest, and that job re-distribution, not net job loss, is the result of the agreement over the past quarter century. A study in the Washington Post last August reinforced that conclusion.
Trump's politically shrewd tirades against NAFTA played well in the industrial belt around the Great Lakes, where job losses and shuttered factories affected enough voters to give him the wafer-thin electoral victories that took him to the White House. But the rest of the country, South Dakota and now Michigan in particular, stands to lose much as the president continues to focus on that relatively narrow base of support.